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Housing Market Update

Orange County, CA Housing Market Update – Though not much of a surprise, it was another sub-par month for home sales per The October Housing Report.  Data included in this report evidenced much of what we’ve already been feeling in Orange County’s housing market.  Constrained inventory, lack of seller equity and/or confidence to repurchase continue to be the culprits of today’s stagnant housing market.

As a region, foreclosures ticked up but the increase was insignificant.  Distressed property sales continue to fade.  Purchases by big money investors appear to be slowing, too.  “[With slowed home sales, they’ve] moved toward funding their purchases with debt. That means they have to do rental-based securitizations first to raise cash, before buying more properties. Cash flow is good on the properties they’ve already rented, but they still have a big backlog of homes to renovate and rent, which cuts into profit. Smaller investors are now buying some of these properties in both small and large portfolios.”  More here

Southern California housing market highlights from October 2014:

  • Absentee buyers, mostly investors and some second-home purchasers, bought 23.6 percent of the homes sold last month.

    Total October Home Sales in Selected Southern California Counties Source: CoreLogic DataQuick. Data available at DQNews.com

    Housing Market – Total October Home Sales in Selected Southern California Counties
    Source: CoreLogic DataQuick. Data available at DQNews.com

  • Buyers paying cash accounted for 23.5 percent of October home sales, down from a revised 24.2 percent the prior month and down from 28.6 percent a year earlier.
  • In October, Southern California home buyers committed a total of $4.12 billion of their own money in the form of down payments or cash purchases.
  • Jumbo loans, or mortgages above the old conforming limit of $417,000, accounted for 31.3 percent of purchase lending in October.
  • In October, 12.9 percent of home purchase loans were adjustable-rate mortgages (ARMs).
  • All lenders combined provided a total of $5.58 billion in mortgage money to Southern California home buyers in October.
  • The typical monthly mortgage payment in Southern California was $1,574 in October 2014.

Looking to 2015

Inventory, capital and the ownership restriction may be indications of what is to come for the housing market in 2015.  With smaller investors stepping in to purchase, renovate and re-sell these properties, one might not expect such stagnant figures.  The truth is, home values are rising and large investors are either exiting the housing market or short on capital.  Mortgage applications are down and if you remember, the FHA Flip Waiver expires December 31, 2014.  That means, any investors picking up properties will be required to hold the properties for a 90-day minimum.  This is likely to tie up even more investor capital.

In terms of the 2015 housing market forecast, I try not to pay attention.  Mining through data and reacting to daily economic news has given me enough to work with.  Take for example the rumors of the Fed raising the rate “just to see” how it affects the housing market in 2015.  While this may have some affect on consumer confidence, my gut tells me it won’t have a large impact on consumer behavior.  Inventory and price, in my opinion, will continue to be key factors.

Bottom line:  Though the October Housing Report shows less than optimal figures, keep in mind that they are all but unusual for this time of year.  The silver lining exists in the opportunity created by housing market shifts.  For instance, inventory may continue to act as a road block.  Affordability, however, does not have to.  Check out last week’s blog where I wrote about how the CalHFA Down Payment Assistance Programs might help new and repeat buyers.  Next week, I will share more about PrimeLending’s non-QM Jumbo PLUS program and it’s non-warrantable jumbo financing for condos.  Until then, if you have any questions, please contact me with any questions you may have.  And, if you’re ready to get your mortgage review started, now has never been a better time!

 

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