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Sunday, May 5, 2013


If you are a natural pessimist, or from Missouri, and you want to see it for yourself, you may want to pick up this month's Money magazine.  Inside, they prove their four points: 10 In the last year, home prices increased in 92 of the country's 100 largest metro areas.  2) Homes are more affordable than any time in the last 40 years.  3) The number of houses for sale is the lowest in a decade and possibly a generation.  4) Price increases are projected for most of the country in 2013.

Bank of America and Merrill Lynch's analysts had the following statement, "We believe that the gain in home prices can persist despite subpar economic growth this year...The combination of low interest, high affordability, and improving expectations for home prices, provide powerful momentum for the housing sector."  Finally, the National Association for Business Economics reported in HousingWire, "While Gross Domestic Product (GDM) is expected to be negatively impacted by all the uncertainty surrounding the nation's impending debt ceiling debate and risks of sequestration, the housing market is expected to continue its upward trajectory."

These reports and analysis of the current housing market may explain why so much cash is flooding the real estate market.  Many economist deem it the safest bet for growth in the coming 3-5 years.  This newsletter always touts the benefits of home ownership and real estate investment.  The leveraging of your cash is the best feature.  But return on investment is always a reason to look to the market.  Many who study the real estate market are beginning to see signs of the start of the next upward cycle.  Don't expect it to be a 2002 through 2006 phenomenon.  Hopefully, we will never see that kind of bubble again, fueled by improperly documented and ridiculous loan programs.  But real estate has always been cyclical and this time around is no different.  Many people try to figure out the exact moment it hits its low and the exact moment to sell high.  Applause to you if you get it right, but for the rest of us, the question is, "Do current market conditions benefit a buyer?  Low interest rates, a bottomed out prices, would evoke a positive yes from this author.  Sellers too, can begin to see their equity returning and be motivated to sell now as well, to take advantage of lower prices on their next purchase.  Overall, you'd have to give a thumbs up to at least considering a real estate investment, either a owner occupied home, a second home, or an investment.


The numbers were pretty good, if you like to see the median price rise in Orange County.  The prices jumped again as the February median price rose to $477,000, a whopping 22.3% change from February 2012.  The change from the previous month, January, was 6.7%  The total number of homes sold was 2,252.  The break down was 1,424 single-family resale, 679 condominiums and 149 new homes.  The new homes is where Orange County and all of So Cal is lacking.  Building permits are just starting to find a more robust number, to indicate that housing starts are making their comeback.  Unfortunately, the new homes don't go up over night, so it may be another year, before the market gets help there.  And it is helpful, because many sellers who wish to move up, currently have no place to move up, new homes typically provide that niche.  It is predicted here that the housing recovery will get even hotter as new homes hit the market in bigger numbers.  Fourth quarter foreclosure filings, Notices of Default plummeted to its lowest level in 6 years.  According to DataQuick, the quarter produced 38,212 NoD's, which is a 22% decline in those filings.  OC was down 70% in February of their filings of the same period a year ago.  Not only are economic times better, but lenders have shown their preference for short sales over foreclosures; along with more stringent loan qualifying guidelines and fewer lenders in the market, there has been a natural progression towards a healthier market.


Economists say employment will grow modestly in 2013 led by construction.  As was just stated in the previous section, construction is on the rise.  Builders are starting to build again and hopefully, there will be financing available not only to the big builders, but to a lot of the smaller ones that were forced out of the market during the housing collapse.  Hopefully, they may be lured back into the market, because it provides more jobs and more choices to the prospective buyer.  California has a higher unemployment rate than the nation at this moment.  However, it is expected to grow at a faster rate as well.  No doubt California was one of the hardest hit states, but California has weather, educated work force, and a diversified economy.


People have to live somewhere.  This seems such a simple statement, but it is true.  The pessimists who say it is too expensive to live here, work here, own a business here, need to truly think about life without California.  No ocean, no desert, no local skiing, no UC college system, the arts and diversity of Los Angeles, the Lakers, Nokia, concerts, in short, the lifestyle.  There are many intangibles that go into where a person or a family lives.  No one place can have them all, but California comes close.  At the end of the day, where would an investor or homeowner realize their biggest gain on a home?  El Paso or Irvine?  Dallas or Los Angeles?  Amarillo or Fullerton?  Well, you get the idea.  It's hard to beat So Cal for housing appreciation.  

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