Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Home Prices Rising – Bouncing off the Bottom in Orange County, CA

The Federal Housing Finance Agency reported this week that home prices rose 0.6% in the first quarter of 2012. This is very positive news considering that home prices across the country were down 5.5% in 2011. In California, a positive trend in home pricing has been developing since the 2nd quarter of 2011. Each quarter the home price decrease has been smaller and smaller. In the first quarter of 2012 home prices across the state were down only 1.26%.

What does all this mean? It means that the housing market is at (or near) the bottom in most cities. Of the 9 U.S. Census divisions that report to the Federal Housing Finance Agency only 1 reported a decrease in home pricing in the 1st quarter. A majority of cities across the country have hit bottom. And prices are beginning to rebound.

3 Reasons For Home Price Increases

1. Low Interest Rates – Mortgage backed securities continue to set new lows. Last week Freddie Mac reported that the average 30 year fixed mortgae dropped to 3.78%!! 

2. Positive Domestic Economic Data – Positive data for unemployment, manufacturing and inflation and consumer sentiment shows that the U.S. is heading in the right direction. The quagmire in Europe will hinder the growth domestically. But the overall opinion is that things are now turning for the better.

3. Lack of Housing Supply – From 1978-2008 the average number of new homes built each year was 1,523,000. Since then that average has dropped dramatically to 583,000 new homes built per year. The last time that so few homes were built was in 1933 when the U.S. population was 133,000,000. Today the population is over 300,000,000 and growing. All of these people need a place to live.

Since the downturn in the economy, many families have doubled up. College grads have moved back home. The existing home supply has been acquired. This pent up demand coupled with the lack of supply is putting upward pressure on home prices.

For home buyers and sellers this will have a big impact on how you position your properties. The buyers market is gone…or going in many neighborhoods here in Orange County, CA. As I’ve mentioned before, supply and demand here are at levels not seen since June, 2005. Steven Thomas reports that “the expected market time for all Orange County is 1.5 months.” For homes priced below $500,000 the average time on the market is 4 weeks. Multiple offers are back again and competitive bidding is the norm for these properties as well.

There are fewer homes to choose from and multiple, competitive offers on many of them. With rates and prices at or near their bottom this is definitely the time for Orange County home buyers to purchase a home.

The alternative is to wait. But wait for what? Home prices to increase? Which they are. Wait for interest rates to go up? Which they will. The homes on the market are not getting better or cheaper. The banks aren’t holding a glut of properties for later release. That’s simply not the case. This shadow inventory is a myth. The same home you’re looking at today WILL cost more and come with a higher payment in the future.

The increase in rates and pricing could put home ownership here in Orange County back into dream status once again for some local residents. Remember that a 1% increase in interest rates will boost your payment roughly 11%!

So stay tuned for home appreciation over the coming years. To take advantage now by seeing what you can qualify for, I invite you to contact me.

Happy Memorial Day Weekend! Memorial Day is a day set aside to honor all Americans who have given their lives in war.  For every veteran and every active duty soldier and individual in military uniform — thank you.  Thank you for the sacrifice you continue to make every day on all of our behalf.  To every family who has lost a soldier due to service to their country — thank you.  Thank you for your family member(s) who made the ultimate sacrifice for our country.  No words can ever express the debt we owe these brave men and women.

Scott Storace

 

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