My New Blog

Finally a little relief to our market- Jumbo Rates, rates for loans in our local Orange County market up to $729,750, have come down to earth!

Rates as of this writing (5/9/08) are currently offered at 5.75% with no points.

That is down nearly a full point from a month ago!!

The market locally in Costa Mesa has already started moving swiftly with sales at a brisk pace for homes under $500,000 and moving moderately well for homes in the 600k-700k range.

December is notoriously slow for the real estate market most years, and for good reason- holidays, shopping, and a time for family get togethers.

It gives me time for pause, a time to work on preparing for next year, and to review the market in general. Do you know what the one thing I just can't wrap my arms around?  I see deals- great deals like have not existed in more than three years. And what about those deals? They are just sitting there, with little to no interest.

It's surprising, but I think people have forgotten about the fundamentals...low interest rates (6% and less), good employment, a stable local economy, and a chance to build equity in the best tax break money can buy.

I think a lot of what's happened is people have turned into value thinkers- but unfortunately are reacting to the news and not paying attention to the real market.  The value thinkers have certainly overreacted to news, both good and bad. They are not taking a long-term view of an investment (or simply a place to live), and dig into price disparities as we scan for foreclosures and bank-owned homes thinking the prices will come falling by a hundred thousand dollars overnight. If you could think of the Costa Mesa real estate market like a stock trader looks at a value stock, a good working definition of a value stock is one that can be bought for a price that offers a big enough margin of safety that if you are wrong in your analysis or if there are fundamental shifts in a company's strategy, you are protected from losing much money.

Well, from that approach there are a ton of million dollar homes for half price currently on the market today.

Look past the news- there are some super deals out there!!

One of the greatest benefits of living in Costa Mesa is the close access to great thaeater and arts and the Performing Arts Center.  Right now you can see Jersey Boys which is absolutely, without a doubt one of the most entertaining Broadway shows currently touring the country!! I wondered what all the hype was about when one of my friends had gone 3 times, so I had to induldge!!

There's just something about that era, the music, and an amazing story about Frankie Valli and the Four Seasons.

It was fantastic- don't miss it - definitely worth the price of admission!! 

Rightnow, interest rates are still at historic lows, conventional financing is available, and a home's value historically will double every 10 years.

That’s a return most investments can’t match. During the past three decades, home values have increased an average of 6.6% per year. And because most buyers invest only a small part of their home’s total value in a down payment, their return on that initial investment is much greater, thanks to the power of leverage.

Did you know that the average homeowner today has 36 times the wealth of the average renter? Homeownership is key to climbing up the economic ladder. When you own a home, you’re essentially paying yourself and building up equity. Not to mention the tax deductions only owners can claim, such as property taxes and mortgage interest.

Of course, a home is much more than a way to accumulate wealth.

The best way to evaluate your situation and options is to contact a Realtor and look into the local market.

Self directed what?

It's a little know tool, but if you have one of the common types of investment vehicles (Roth IRA, SEP-IRA, Traditional IRA, Individual(k), and other special options), you have the ability to purchase investment real estate directly from your IRA.

How would you do this? Allocate a piece of your IRA to cash, find an investment property with a knowledgeable Realtor®, and let your real estate investment work as an asset in your portfolio. Why does this make sense? If you have a knowledgeable agent working to find you a good property, especially in this down market, your investment should return a higher percentage than a traditional rate of return in stock and bond funds in a relatively short period.

It would be easy to do this type of investing selling the property every few years, and moving the self directed IRA funds up the ladder to higher value properties.

So here's the truth of the matter- currently, Realtors® and real estate investors are buying in a soft market, and many are doing it with self-directed IRAs, anticipating the market will return in the next few years. When Realtors® are buying, you know we're near the bottom of this market cycle.

Am I currently looking for an opportunity to invest? You bet. It's a great market to find great deals!

Curious?? I've got financial companies that will consult with you with regards to the self directed IRA, give me a call (714-743-9882) or shoot me an e-mail at colin@verandahomes.com.

I had a situation recently that points out why you should even use a real estate agent in the first place, or should I say a good real estate agent.

One of my clients is currently selling their home in Costa Mesa. We did a good job marketing the home, and within a couple of weeks found a buyer. The buyer hired a professional home inspector, who did a great job. One of the issues uncovered was the fact that the roof was defective, and in fact had been the subject of a massive class action lawsuit over the last 5 years.

The buyer wanted a credit for a new roof, and of course they have that right. What is misfortunate in this case is that the current homeowner had only owned the home a couple of years, and upon going back to their home inspection report, the inspector called out the fact that the roof had damage and was in need of repair, and was of a questionable type.

OK. So what's the issue? The problem was never dealt with when the current owners purchased the home- it is the agent's duty to take the evidence found in the report and deal with it. Unfortunately for these owners, the agent never showed up at the inspection, nor did either of the agents' assistants.  I suppose the question then becomes why the agent didn't bother to read the report? It's laughable because this agent in question has a tremendous amount of experience, but clearly was just interested in "getting paid" and making everything go smoothly.

There is a lot of value in hiring a Realtor, especially one that puts their interests in line with their clients interests.

Advice: Hire a good Realtor, hire a good home inspector, and be sure you know what you are getting.

Will the subprime loan fallout effect me?

Well it depends- where do you live? Locally speaking, and I mean Costa Mesa, the subprime fallout will effect some of our values, but not to the level the media is hyping right now.  Why not? Because the trends as of this writing tell us that as a city, Costa Mesa has one of the lowest default rates county wide.  I monitor the foreclosure activity locally, and Costa Mesa tends not to see much activity in this category.

The greater effect locally is the rate at which houses are sold in terms of time on the market. Homes for sale in Costa Mesa that have been on the market longer than three months will typically have to reduce their price to find and attract new buyers.

Why is the subprime area such a focal point right now? I hate to say "it's the media" digging for a story again, but yes, it's the media. And remember how the media's focus is much larger than ours is locally. Our local news is for suburban Southern California, not just Costa Mesa.

Will some of this fallout effect me? Probably a little. But remember, your house is much more than an asset, it is a home. And when you do need to sell your home, do the right things to fix your home and make it attractive for buyers. If you live in a good Costa Mesa neighborhood, don't worry, there are always people who want to live here!!

To borrow from the oft quoted phrase(and put a home selling spin on it!), we have a home market that is moving somewhere in between the two.

The market had a great balancing last year, and now inventory for condos (98) and homes (233) in Costa Mesa is at a very normal level. Homes are selling- contrary to conflicting media reports- and local economists have forecasted a 5-7% gain for the 2007 year here locally in Costa Mesa.  The homes that seem to be moving quicker are the ones that are priced well compared to other inventory, homes in good locations, and homes that are decorated and improved beyond comparable homes on the market. People will always pay for the right improvements.

Are there deals to be had? Absolutely!! There are fixers that are currently on the market well under the highs of early 2006, some as of this writing that are more than $100k under neighborhood highs.  Could a buyer expect to get 5-10% off of an asking price? It depends, but a good agent can negotiate prices to this level.

Thinking of selling? It's still a good time, but you will have to do a little more to properly prepare your home for the market than you might have had to a year ago.

Thinking of buying? It's a good time for that as well- it isn't hard to find a nice house at a good price.

January 9th, 2006 - Interesting National Perspective, Should Apply to California As Well

NATIONAL DATA SHOWS STEADY HOME SALES WILL CONTINUE
The decline in pending home sales from year ago levels continues to narrow, a sign that market stabilization will continue in the months ahead, according to a recent report from NAR. The Association's Pending Home Sales Index (PHSI), which gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed, stood at 107.0 in November. A PHSI of 100 or more generally indicates a high level of home sales activity. Over the last five months, year-to-year declines in the PHSI have gradually fallen from 16 percent in July to 11.4 percent in November.

"Because there is a stronger parallel between changes in the index from a year ago and the actual pace of home sales in coming months, the index is pointing toward fairly stable home sales in the near future," said NAR Chief Economist David Lereah. "That is another indicator that home sales likely bottomed-out in September."

The PHSI declined across the nation in November compared with the readings a year ago. On a regional basis, the PHSI was highest in the South, where it declined 8.9 percent to 121.6. In the West, the index fell 15.9 percent to 106.6. The PHSI also declined in the Midwest and Northeast regions, falling to 101.7 and 85.5, respectively.