Sweet Orange

Cash-in-hand converts to house-in-hand in current market

MDA DataQuick had the following to report on the number of Southern California homes that are bought but do not end up being occupied by the owner:

Absentee buyers - mostly investors and some second-home purchasers - bought 18.9 percent of the homes sold in February. Buyers who appeared to have paid all cash - meaning there was no indication that a corresponding purchase loan was recorded - accounted for 29.3 percent of February sales. In January it was a revised 29.7 percent - an all-time high. The 22-year monthly average for Southland homes purchased with cash is 13.8 percent.

As would be expected, some of these absentee buyers are flippers. According to DataQuick’s DQNews, 3.4% of Southern California homes were flipped* last month (February 2010). This is up 1.6% from February 2009.

This brings up the question: What is the optimum percentage of homes that should be owner-occupied versus rentals? Urban Land Institute (ULI) predicts that homeownership levels in the U.S. will stabilize at 62% to 64%.** Whether or not that is the optimum level is a discussion that I’ll leave for another time.

*Flipped is defined as bought and sold within a three-week to six-month period.

**The U.S. homeownership rate is currently approximately 67% and was approximately 45% between 1900 and 1945. I’ll have more on this in an upcoming post. You can also read more about this in the ULI report “Housing in America: The Next Decade,”

Orange County Housing Graphs Courtesy Redfin: inventory, house price per square foot, condos price per square foot

According to DataQuick, the most recent housing numbers for Orange County are as follows:

• Sales are up 5.7%: 5034 homes sold in February 2010 vs 4590 homes sold in February  2009.
• The median selling price was up 11.2%: $417,000 in February 2010 vs $375,000 in February 2009.

For comparison here are some Redfin numbers:

• Redfin reports that the number of Orange County homes that sold in December 2009 was 3401, up 30% from December 2008.
• The median selling price in December 2009 was $415,000, which is up 7.7% from their December 2008 number. Redfin also reports that the December 2009 median price per square foot was $270, which is also up (1.5%).

Note that the price per square foot suggests less of a price increase for Orange County housing than does the overall price.

According to a report from the Urban Land Institute (ULI), when the economy picks up, the demand for housing will increase, However, this does not mean that ULI sees a return to “normal” for the U.S. housing market in the coming decade:

Workforce housing will remain a challenge. The age of suburbanization and growing homeownership is over. The outer suburbs will have the least expensive housing but the cost in time and money of long commutes will eliminate any savings. Many who live there will do so not by choice but by necessity.

An article in Time magazine gives another twist on what the new normal for housing will be:

“The housing that has been built doesn’t fit the market any longer,” says Berkus [Barry Berkus, president of B3 Architects]. Which is part of the reason that, even with so many existing homes sitting unsold, we keep building.–”Downsizing: Today’s Home Buyers Are Thinking Small,” Barbara Kiviat, Time

The ULI report goes on to say that four groups will have the most influence on the housing market in the coming decade. And the report states that the circumstances that these four groups will encounter will affect their buying power.

These four groups are as follows:

• Older Baby Boomers who will become seniors in unprecedented numbers
• Younger Baby Boomers many of whom will be unable to sell their current suburban homes to move to new jobs
• Generation Y who will be renting far longer than past generations
• Immigrants and their children who will want to move to the suburbs but may find them too expensive even after current drop in housing prices.

What do you think? Are we just in a down phase of a cyclical housing market? If so, when the upswing occurs, will it look like the traditional housing market of the last fifty years? And if not, what will the new normal be for the U.S. housing market? The ULI report and Time magazine article provide some thoughts on this.

According to Redfin, the median selling price in December 2009 of all Costa Mesa homes was $467,000 (up 8.6 y-o-y) or $294 per square foot (down 1.8% y-o-y). It is interesting to note that, although the overall price is up, the price per square foot is down from last year.

Here are some other numbers that will enlighten us of what has been happening with the Costa Mesa housing market over the last year or so.

DQNews–median sales price of all Costa Mesa homes
(resold condos, resold detached homes, and new construction homes)

• January 2010: $438,000 (up 2.1% from January 2009)
• January 2009: $426,000 (down 21.11% from January 2008)

Trulia

Average listing price

• week ending March 17, 2010: $569,789 (-0.3% w-o-w)
• week ending May 27, 2009: $587,398 (+12.3% w-o-w)

Median Sold Price

• December 2009 to February 2010: $485,000 (+9.7% y-o-y)
• February 2009 to April 2009: $465,000
• January 2008 to March 2008: $579,000 ($359/SF)

Number of Sales

• December 2009 to February 2010: 181 (-8.6% y-o-y)
• February 2009 to April 2009: 204

% Costa Mesa homes that are in distress*

• week ending March 17, 2010: 41% (358 homes for sale, 251 homes in distress*)
• week ending May 27, 2009: 56% (351 homes  for sale, 438 homes in distress*)

*Distressed homes are defined as those that are in pre-foreclosure, trustee auction or bank-owned stage of the foreclosure process.

Altos Research Market Action Index (single-family homes only)

• March 21, 2010: 20.74
  (Altos Research also shows that the current median list price for single-family homes in Costa Mesa is $573,346 or $331/SF, and the average DOM as 191.)
• March 20, 2009: 15.04

Note: The Altos Market Action Index shows the balance between potential buyers and sellers, in other words, the balance between supply and demand. Above 30 is a sellers’ market; below 30 is a buyers’ market.

Also, note that the Altos numbers are for detached homes only (condos are not included) and that the Altos median sales price and median price per square foot are for the list price, not the sold price.

Tomorrow is the first day of spring, and according to Robert Frost, it is time to stop and smell the flowers, live in the moment, and appreciate what we have:

Oh, give us pleasure in the flowers today;
And give us not to think so far away
As the uncertain harvest keep us here,
All simply in the springing of the year.
–”A Prayer in Spring,” Robert Frost

What’s blooming in Southern California? Contact the Theodore Payne Foundation Wildflower Hotline, a 24-hour service, at 818-768-3533 or theodorepayne.org. Or read the OC Parks Wildflower blog.

Enjoy!

Photo Courtesy Desert USA–Wildflower Report 2010, Southern California

Note: In addition to tomorrow being the first day of spring, it is also the one-year anniversary of this blog. Happy Birthday to the Sweet Orange!

126 Tangerine

Public notices in the Irvine World News showed the following homes in Orangetree were set to go on the trustee auction block in January and February of last year. I don’t have the information handy on whether or not these homes were actually auctioned at the designated time, but I will provide you with information on the date and amount that these homes last sold for.

Orangetree, which includes mostly condos (although a few detached homes do exist) is one of Irvine’s more affordable areas. The low prices are due to the limited square footage, not necessarily the price per square foot.

To see what is currently available in Orangetree and to compare current prices with the selling prices of the homes listed below, see the Refin Orangetree map.

126 Tangerine, Irvine 92618: 1976 condo, 2 beds/2 baths, 1154 SF

• Scheduled auction date: 2-5-09
• Approximate amount owed plus interest and fees: $511,649.62
  (previously sold for $495,000 on 08/31/2004)
• Sold for: $395,000 ($343/SF) on 04/17/2009
  (Most recent Zestimate: $403,000)

426 Orange Blossom #202, Irvine 92618: 1977 condo, 1 bed/1 bath, 662 SF

• Scheduled auction date: 1-28-09
• Approximate amount owed plus interest and fees: $265,535.07
  (previously sold for $315,000 on 02/20/2007)
• Sold for: $180,000 ($272/SF) on 08/07/2009
  (Most recent Zestimate: $166,000)

102 Tangerine, Irvine 92618: 1976 single-family, 3 beds/2 baths, 1445 SF

• Scheduled auction date: 2-4-09
• Approximate amount owed plus interest and fees: $508,545.07
  (previously sold for $211,000 on 06/22/1999)
• Sold for: no recent information showing
  (Most recent Zestimate: $460,000)

See if you can figure out the logic of the roller coaster pricing for a recently sold Costa Mesa home:

In October 2008. the asking price for the home at 920 Crocus Circle rose from $750,000 to $830,000. Later the same month, the price fell to an asking price of $800,000. Then, for about six months, the price did a roller coaster ride with repeated increases to $830,000 then fall backs to $800,000.

Next a series of falls: In May 2009, the price fell to $750,000; in August 2009, the price fell to $739,000; in September 2009, the asking price fell again to $700,000. After taking this roller coaster ride for over a year, this home in Costa Mesa’s South Coast Metro area sold for $700,000 in December 2009.

Considering the long ride this home took to reach a sale and the repeated price drops, here is an ironic quote from the online listing: “NO OFFERS BELOW LIST CONSIDERED.”

920 Crocus Circle, South Coast Metro, Costa Mesa 92626

• Selling price; $700,000 ($289/SF)
• What: 1973 detached house
• Size: 5 bedrooms and three baths with 2420 SF
• HOA fee: none

This home was listed under MLS P653661 and P685670.

According to Pulitzer Prize-winning columnist Thomas Friedman, one of the main problems facing the U.S. is an “I’ll-Be-Gone, You’ll-Be-Gone” attitude about our economy–and the environment. For example, he states that we have been using the same unsustainable accounting practices for both: We have been underpricing risk, privatizing gains and socializing losses, and this is why Bear Stearns and the polar bear are becoming extinct at the same time.

As Friedman sees it, the root of this problem isn’t solely with current government policies:

We don’t just need better government, we need better citizens….We need to make leaders understand you can ask me to something hard.

Friedman see much of the anger at our current predicament as “unfocused” and an unwillingness to make a shift away from the familiar but unsustainable practices that have lead to the current difficulties. Friedman says we are following situational values instead of sustainable values.

Goldman has been the poster boy for banks behaving by “situational values” - exploiting whatever the situation, or rules that it helped to write, allowed.–NY Times News Service

Now brace yourself, because here is an example of the type of immediate change that he thinks we should be willing to make for the long-term benefit: A dollar gas tax.

Forty cents would go to deficit reduction, 40 cents to health care (which would also help to reduce the deficit), 10 cents to subsidize those who can’t afford health care, and 10 cents to those who have to drive long distances.

As Friedman sees it, these measures would help to reduce the deficit, improve the health of the dollar because we won’t be sending $250 billion overseas, and correct an energy policy that is currently empowering some of the most corrupt leaders in the world.

OK, I know that a gas tax is a third rail in politics, and I imagine some of you are muttering some unpleasant words just at the mention of a gas tax. But as Friedman sees it, we cannot continue with an economy based on the expectation of continuous withdrawals without deposits.

Here are some other solutions that Friedman thinks will help our economy:

• Health care reform will allow us to compete globally.
• Investment in energy technology will allow us to compete in the predominant job markets of the not-to-distance future.
• Education in energy technology will allow us to build a better economy.

Sources:

• http://www.nytimes.com/2009/11/22/opinion/22friedman.html?_r=1&em
• http://www.charlierose.com/ (under Web Exclusives)

Portola is one of the three districts into which the Irvine police department has divided the City for its geopolicing program.

To see pricing, inventory and additional information for the various villages in Irvine’s Portola district, click on the links provided below. This will bring you to Redfin’s Community Overview Page for that village (if you prefer, you can also enter zip codes or city names).

The Portola Area includes the following Irvine neighborhoods, or as they are called in Irvine, villages:

• Northwood (includes Northwood Point)
• North Park (includes North Park Square)
• Oak Creek
• Orangetree
• West Irvine (92602 ZIP code includes West Irvine and North Park)
• East Irvine
• Old Towne Irvine
• Woodbury
• Woodbury East
• Great Park Neighborhood-Heritage Fields
• Portola Springs
• Orchard Hills

Note: The Irvine Spectrum is also in the Portola geopolicing district.

Here is another venture into my quest to compare and contrast Irvine and Costa Mesa:

Earlier this week I wrote about a home in Irvine’s El Camino neighborhood that sold for about $22,000 more than the asking price. Following is a similar home in Costa Mesa’s Eastside that went the other way: It sold for approximately $22,000 under the most recent asking price. However, the Irvine home is smaller and sold for $358 per square foot, where as this Costa Mesa home sold for $302 per square foot. Both homes sold in October 2009. One more caveat: The HOA fee is approximately $100 more for the Costa Mesa home than it is for the similar Irvine home.

317 Alta Lane 92627 (Eastside Costa Mesa)

• 3 beds/2.25 baths
• 1441 SF
• Condo built in 1975
• HOA: $284
• Asking price: $457,500 ($339/SF)
• Selling price: $435,000 ($302/SF)

Current estimates for this home:

• Cyberhomes: $404,505
• Eappraisal: $344,489
• Zillow: $449,500