Buy or Sell, You Decide: Some Fresh Real Estate Data to Keep You Thinking

Leslie Appleton-Young

Nov. 23, 2009 — On a day when the Mortgage Bankers Assn. reported that one in seven U.S. home loans was past due or in foreclosure (as of Sept. 30), compared to one in 10 at the beginning of the year, California Association of Realtors (CAR) Chief Economist Leslie Appleton-Young was addressing a group of Realtors in Northern California last week.

BREAKING NEWS:  

The National Association of Realtors said home sales rose 10.1 percent in October to the highest level in two and a half years, spurred by a tax credit for first-time homebuyers. Analysts had been expecting a 1.4 percent increase. The credit, which was due to end at the end of the month, was subsequently extended into 2010.

Here are some highlights or low lights, depending upon whether you’re a seller or a buyer:

·         Building permits in California this year are down 48.8%.

·         California median home prices have fallen from a peak of $594,530 in May 2007 to $296,090 today (-50.2%). In Los Angeles County, prices have fallen from a peak of $605,300 in August 2007 to $351,680 (-41.9%)

·         California’s inventory of unsold houses has fallen from a peak of more than 16 months in January 2008 to 4.2 months in 2009 (good news for sellers).

·         As of August 2009, 58% of all home sales in Los Angeles County were “distressed.” For Riverside and San Bernardino Counties four of every five sales were distressed.

·         Sixty-nine percent of all homes are selling below their original sales price (bad news for sellers).

·         A third of all home sales in 2009 have resulted in a net cash loss to the seller.

·         Only 39.4% of sellers are planning to purchase another home, the fewest number since CAR began collecting this data.

·         Forty-seven percent of all buyers are first time buyers. That’s the highest percentage since 1995.

·         About one-third of all home buyers in California are FHA home buyers. From 2004 – 2007, it was about 1 to 2 percent.

·         Over half (55.4%) the homes sold in 2009 have received multiple offers (good for sellers).

·         Only 3.7% of first-time buyers today are putting nothing down; in 2006, 40% of first-timers bought homes with nothing down.

·         Today, in California, 19.6% of all purchased homes are all-cash sales. That compares with a little more than 8% in 1998.

·         Of all California home sales, 67% are occurring because the buyer is motivated by falling prices.

Summing up, the current market is great for home buyers and horrible for home sellers. Having looked at some of her charts, I feel the market didn’t just fall off a cliff from its high; it’s more like it jumped out of an airplane and is still in free-fall.

The NAHB judges a home to be affordable if a family making the metro area’s median income could buy it if they devote no more than 28% of their take-home pay toward housing costs.

Affordability is highest in the industrial Midwest, where home prices have been kept down by slow population growth — even population loss — and wages that remain relatively high.

The second most affordable metro area found by NAHB and Wells Fargo was Youngstown, Ohio. The median home price there came in at just $72,000 last quarter and the median income was $54,300. That meant some 93.9% of homes sold were affordable.

As for La Verne, there are deals, too.

“The new dynamics of this marketplace is dependent on the continuation of low interest rates and other important factors,” said Ann Krauter, broker of La Verne-based Dilbeck Premier Properties.” Local data is crucial in order to understand both the neighborhood in which a buyer is interested and the seller’s initial sales offering to the marketplace.”

Before you can live in the right place, you have to look in the right place, and that’s what real estate has been and will always be about. Schedule time with your Realtor to discuss the possibilities available to you.”

Suggested books from Ms. Appleton-Young’s reading list:

Hot, Flat and Crowded by Thomas L. Friedman

The Ascent of Money by Niall Ferguson

Chain of Blame by Paul Muolo and Matthew Padilla

Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street