This month’s Real Estate Minute provides a snapshot of the real estate market as a whole and specifically our local market conditions for the month of October. This article distills authoritative data, information and reports to provide you with highlights affecting our local real estate markets. This month’s local highlights and information are as follows:
30-Year fixed mortgage rates continued their downward trend that began in September and reached a 16 month low of 4.01 percent in the second week of October. By months’ end, a combination of reported “refinance hysteria,” normalization of stock and bond activity and the end of Quantitative Easing (QE3) by the Federal Reserve pushed rates slightly upwards to 4.1 percent this past week.
Many economists believe rates will remain within the 4.0-4.25 percent range for the remainder of the year absent any drastic change in the U.S. economy, or global political situations. These are still extremely attractive rates for Buyers in the market.
After roughly two and a half years, the Orange County housing market has begun its transition this month from one favorable to Sellers to conditions which are neither favorable to Sellers nor Buyers. Throughout 2014, the demand throughout Orange County has been slipping slightly. The supply of homes has increased through September and into October, only to see a slight pull-back in inventory as the month of October came to a close.
Listed properties are averaging between 5-13 weeks on market locally (varying by specific neighborhood).
The price per square foot of single family homes locally has remained essentially flat over the last couple months.
Locally, about 60 percent of listed properties have undergone at least one price reduction, while the percentage of properties re-listed due to contract expiration is roughly 15 percent.
Mortgage applications dropped 6.6 percent with the uptick in interest rates toward the end of October. This reflects a 5 percent decline in purchase applications and a 7 percent decrease in refinance applications. Both can be largely attributed to a 41 percent decrease in applications from jumbo mortgage borrowers.
So what does it all mean?
Despite the end to the Federal Reserve’s two-year quantitative easting program, (the purchase of Treasuries and mortgage-backed securities to keep interest rates low), there has been little effect on interest rates. This is largely due to the current self-sufficiency of the secondary market.
The most influential factor on interest rates is the Federal Reserve and their monetary policy. The Federal Fund Rate remains around zero as it has for the past five years. When the Federal Fund Rate increases, we will see an increase in interest rates. The increase in the Federal Fund Rate will be as a reactionary measure to prevent any threat of inflation. The Federal Open Market Committee recently maintained its expectation to keep the Federal Funds Rate low for a “considerable time” which many economists forecast as being for the next 6-8 months. This however will be highly dependent on incoming economic data, which if displaying weak or slow growth could push out this projection.
At this moment, the market implied inflation rate over the next 5 years is around 1.5 percent whereas the Federal Reserve’s forward expectation rate over the same period is around 2.4 percent.
As a result of the transition in market conditions, we are moving from a market of rapid appreciation to one where growth has plateaued and the market has become more balanced. While Sellers may still be able to control the terms of the sale to a certain extent; overpricing of properties in attempts to anticipate the market is no longer an option. Buyers no longer wish to overpay and/or become involved in bidding wars.
On average we continue to see market times for properties in our local communities move towards the 3-4 month mark which is consistent with balanced market conditions. These balanced market conditions are expected to prevail through the remainder of the year due to homes being pulled from the market resulting in a drop in inventory and offsetting the drop in demand.
Breaking market times down by price range and extrapolating where market advantages lie, market conditions for properties priced between $500k-$750k remain Seller favorable, those between $750k-$1M favor neither Buyers nor Sellers and those between $1M-$2M favor Buyers. Market conditions for properties in excess of $2M significantly favor Buyers. It is important to note that in higher priced markets, even though conditions may favor Buyers, few Sellers are hard pressed to sell and tend to hold out longer in expectation of achieving their desired sales price.
The transition towards a more balanced market (and even in some instances a Buyer favorable market) is already been seen in upper price range properties. This is attributed to sufficient inventory and lukewarm demand.
Rossmoor properties in October saw a sharp decline in days on market numbers. Inventory levels however have remained relatively flat and months of inventory increased into ranges that would indicate more Buyer favorable market conditions. The combination of these market figures suggest a relatively balance market.
Los Alamitos properties in October saw a slight uptick on the days on market figures. However, there’s been a decreasing trend in available inventory. There were 50% fewer listings in October than in May. This coupled with few new listings and months of inventory remaining very low has produced generally Seller favorable conditions.
Seal Beach properties in October have seen a decrease in the days on market. Inventory and the number of new listings remain stable while the months of inventory levels continue to suggest Seller favorable conditions.
Keep in mind that Seal Beach and Los Alamitos have a variety of properties in different price ranges. The net result is that these communities tend to have a greater pool of perspective buyers compared to Rossmoor.
As the holiday seasons approach, the market usually produces serious and committed Buyers looking to relocate as the New Year approaches. If you are contemplating selling, data shows that proper pricing and implementation of a comprehensive marketing campaign during this period are critical to a quick and advantageous sale.
If you have a specific question you would like to have answered privately contact me at michael@obradovitchrealty.com, I’ll be happy to help.
Tip of the Month: 5 Tips in Preparing Your Home for Sale
When selling your home, preparing your home for sale is just as important as its pricing and marketing. If your home is not prepared to shine and show in its best possible light, you will ultimately end up with a lower sales price. Before its first showing, take these necessary steps to have your home speak to Buyers for a quick sale at the highest value possible:
1. Conduct a Pre-Sale Home Inspection – Be proactive and conduct a home inspection (including a termite inspection) prior to putting your home on the market. This way you can identify issues that may turn away Buyers and have the opportunity to make repairs from the onset. Fix as many of the small repairs and problems as possible so that you do not give Buyers the impression that your home is not well maintained. For repairs identified in the inspection you are unable to complete, obtain quotes for the repair work which can be provided to Buyers for their consideration.
2. Hire a Gardener – The first thing prospective Buyers see is the exterior of your home. Hire a gardener and with the direction of your Agent/Broker clean up the exterior of your home to enhance its curb appeal.
3. De-Clutter or “Edit” Your Home – Pack-up and store all unnecessary furniture, appliances, clothing and personal effects throughout your home. Your goal is to “re-package” your home for sale to appeal to the greatest number of Buyers.
4. Enlist the Support of a Designer and Organizer – Designers and Organizers can help tremendously in “re-packaging” your home to create a narrative and story the appeals to perspective Buyers. Ask your Agent/Broker if they include the consulting services of Designers and Organizers as part of their service to you.
5. Deep Cleaning – I mean a DEEP cleaning. If you can, hire a cleaning service to clean your home from top to bottom. This helps make a strong first impression to Buyers that your home has been well cared for.
Michael M. Obradovitch II, Esq. is a local Attorney and Real Estate Broker. He is a Rossmoor-Los Alamitos native and founder of Obradovitch Realty and Obradovitch Law – both based in Seal Beach.
He brings a decade of experience as a Green/Sustainable engineer-consultant and sales professional with major corporations and government agencies. This experience coupled with a legal practice that emphasizes in transactional and real estate law makes him one of relatively few uniquely qualified real-estate professionals. He is a former CA EPA Registered Environmental Assessor and is a GREEN Certified Realtor® — one of only two Real Estate Professionals with the certification in our local communities. You can visit his local-focused website at www.obradovitchrealty.com for answers to many of your real estate questions.
