ORANGE COUNTY
Market Overview a monthly real estate report | March 2010
Move-up Buyers Benefit From Affordability
One of the bright spots of the economy is
the rise in economic indicators for the last
ten months. But in January 2010, five of the
ten indicators that rose weren’t the ones the
economy is watching most closely. Jobs, money
supply, building permits and capital goods
ordered all declined.
The home building industry posted its first
production gains in years in January, but new
home units are still 75% below where they
were at the peak of the housing market. Further
hampering construction recovery are the
rising costs of lumber and any goods derived
from oil.
That’s a good thing for California home sellers,
whose properties don’t need more competition.
Foreclosed homes are being dumped on the
market and selling at an average 28% discount
(according to research by Zillow.com). This has
driven housing prices to pre-boom levels.
What’s changed? Jobs – 8.4 million have been
lost in a little over two years.
Among the key concerns is tight credit. Banks
that benefited from the Troubled Asset Relief
Program and repaid their loans no longer
have to report how much they loan to small
business. Consequently, banks have cut small
business loan balances more than $2.3 billion,
according to Treasury reports.
Tight credit slows hiring, and jobs are exactly
what the economy needs right now. The Federal
Reserve released notes on February 17, 2010
that it expects the jobless rate to fall, but not
by much. Currently, the unemployment rate
is 9.7% and expected to fall to 9.5% by the
end of the year, to 8.5% in 2011, and to 7.5%
in 2012.
While the market has choked down most of the
bad loans from sub-prime lending, now prime
loans are going into default due to job losses.
Out of all FHA-guaranteed loans made in
2007, about 25% are in claims by lenders. And
data from the Center for Community Capital,
University of North Carolina at Chapel Hill
found that the number of loans in the process
of foreclosure increased 52%, or 252,000 loans,
between October 2008 and October 2009. The
Analysis of Mortgage Servicing Performance,
Data Report No. 4, January 2010, found that
the number of prime loans accounted for 71%
of the increase in the total number of loans in
the process of foreclosure.
Jumbo loan defaults (loans above conforming
ranges – $729,750 in high-cost areas) have risen
32 months in a row, according to Fitch Ratings.
Two-thirds of delinquent “jumbo” loans are
concentrated in five states – California, New
York, Florida, Virginia and New Jersey.
The Federal Housing Agency is tightening
standards to make sure that participating
banks give FHA-guaranteed loans to borrowers
who are less likely to default. Fees to obtain
government-guaranteed loans are higher, and
so are credit score minimums. But at least more
loans will be available.
Mortgage lenders are expanding their loan-to-
value criteria to 95% on conventional loans.
This will provide more options to borrowers.
“Prior to this change, FHA/VA was the only
option for loans with less than 10% down,”
explains Danny T. Valentini, SVP-Regional
Manager HomeServices Lending, San Diego
County. “But despite the expanded criteria for
conventional loans, borrowers must have FICO
scores of 720 for single-family homes and 740
for condominiums to qualify.”
In addition, the FHA has suspended the 90-day
anti-flipping rule, allowing borrowers to resell
homes they’ve bought at a discount (such as
foreclosures) and improving them to command
more on the market.
While these changes will clearly help home
buyers with good credit, the question may still
remain: what does housing have going for it?
The answer is unprecedented affordability.
After four years of falling prices, the typical
American family making the national median
income of $64,000 can buy any of 70.8%
of homes being sold on the market today,
according to the National Association of Home
Builders and Wells Fargo. That’s a little off
the high of 72.5% reached in Q1 2009, but
far better than the 55% affordability seen in
Q2 2008.
Another indication of affordability: the
percentage of households able to buy an entry-
level home in California reached 64% in Q2
2009, according to the California Association
of REALTORS®.
Affordability is even more appealing for move-
up buyers.
Here is an example, provided by David
Deisinger, a REALTOR® with Prudential
California Realty www.prudentialcal.com in
Carlsbad, California.
*The sellers of a 1,600 square-foot, 2-bedroom,
2-bath condominium want to move up. They
have $200,000 in equity and an outstanding
loan amount of $200,000 at 6%. The move-up
seller’s monthly payment is $1935.77 including
principal and interest, $1,199 .10; property tax,
$366.67; and homeowners fee, $370.
For only a few hundred dollars more a month,
these move-up sellers can purchase a newer
2,200-square-foot, 4-bedroom, 3-bath home for
$550,000.
Here’s how. Putting the $200,000 in equity from
the condo down, the move-up buyers borrow
$350,000 at 6%. With a principal/interest
payment of $1878.88, plus taxes, $504.17, and
$130 a month in homeowner association fees, costs $250 per square foot. The move-up more important than ever to make your
the move-up sellers can have a larger home home at $550,000 and 2,200 square feet home stand out from the competition in
with more bedrooms and baths for $2,513.05 – single-family, updated with granite, and terms of both price and features. Make
– a difference of $577.28 per month. lower in HOA fees for similar amenities – is sure your home is immaculate and move-
also $250 per square foot. in ready, with no repairs or critical work
They’ll also get a tax refund of up to $6,500, left undone.
in essence reducing the cost of buying the new Advice for Buyers: Do the math with your
home another .01%. real estate agent and loan officer. Be prepared *Loan and purchase terms are examples only
with income and asset documentation before and any seller and buyer’s particular costs will
The example works well even without the you shop for a home, so you can make a be dependent on their credit scores, income
large down payment – because the prices of solid offer the seller will accept. Time is of information, and loan programs available at
homes in the entry-level ranges are rising the essence – shop early! Tax incentives end the time of their sale or purchase. Prudential
faster than those of higher-range homes. April 30, 2010, and the last-minute crush California Realty makes no promise or
Move-up inventory is more attractive by will cause lender pipelines to clog, slowing guarantee regarding the costs of any particular
comparison, because the less expensive closings. You must have an accepted contract purchase or loan. See your local Prudential
inventory is priced as high as the move-up by the April deadline, and occupy your new agent for examples in your area. Prudential
inventory in terms of square footage. home by June 30, 2010. strongly recommends that all buyers and sellers
consult with their tax and loan professionals
At a sales price of $400,000 and 1,600 Advice for Sellers: With FHA rules regarding real estate transactions.
square feet, the condo in the example above minimizing seller incentives to buyers, it’s

ORANGE COUNTY

Orange County is enjoying a *seller’s market in homes priced under $1 million, but the market is still sensitive
after the snubbing it received for the last few years. As prices hit bottom in Q1 2009, sales volume returned,
but both sales volume and price strength ebbed when they surpassed the numbers in late 2008. Buyers and
sellers should pay close attention to inventory levels as they list their homes and make offers to purchase.

*A balanced market is widely accepted as having six months of inventory on hand with market conditions favorable to both buyers and
sellers. A buyer’s market is characterized by conditions such as high inventories, falling prices, concessions by sellers, and incentives among
other indicators. A seller’s market has low inventories of homes for sale, escalating prices, and keen competition between buyers, including
multiple offers. Detached homes stand alone and share no common walls with any other neighboring home. Attached homes share at least
one common wall with another home. The type of home ownership is determined by whether or not it is a condominium, townhome, duplex,
co-operative or other.

Listings Sold by Calendar Quarter

All residential properties in SoCalMLS-Orange County
9 quarters List Price Range (Less than $1 million) through December 31, 2009

Listings Sold by Calendar Quarter

Average Sale Price (Thousands) Homes Sold

$600 8,000
Avg Sale Price Listings Sold Units
6,862
As prices rose, sales volume leveled off in 2009 for
6,625 6,598
homes priced $1 million or less. Sellers should be wary
$500
6,090
5,565 6,024
6,000
$400 of overpricing – buyers may not want to see prices any
5,073

$300
3,201
4,000 higher than they were a year ago.
2,993

$200

$529 $489 $476 $445 $411 $393 $412 $429 $434

2,000
$100
1-year avg. price trend: Up 5.8 % 1-year sales trend: Up 1.1 %
2-year avg. price trend: Down 17.8 % 2-year sales trend: Up 103.5 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are October 1, 2007 through December 31, 2009. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.
 Inventory in Months’ Supply – February 3, 2010
Detached properties in SoCalMLS-Orange County

Detached Properties - Inventory in Months

Under $300K 1.6
Detached homes are enjoying a heated seller’s market.
$300K - $399K 2.0
Only homes priced $900K and above have sluggish
$400K - $499K 2.3
inventory levels.
$500K - $599K 2.4
$600K - $699K 3.1
$700K - $799K 3.0
$800K - $899K 3.4
$900K and over 7.9
Inventory in Months’ Supply – February 3, 2010
0.0
Attached 2.0 in SoCalMLS-Orange
properties 4.0 6.0County 8.0 10.0

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Attached Properties - Inventory in Months

Under $300K 2.5
Attached homes are also selling briskly under $1 million,
$300K - $399K 2.4
but attached homes priced $900K and above are in
$400K - $499K 2.8
danger of languishing.
$500K - $599K 4.0
$600K - $699K 4.9
$700K - $799K 6.8
$800K - $899K 9.1
Pricing Reality – February 3, 2010
List prices per square foot by MLS status
$900K and over 10.8
Detached
0.0
properties
2.0 4.0
in SoCalMLS-Orange
6.0 8.0
County
10.0 12.0

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Detached Properties - Pricing Realty for Sellers, per square foot

Sellers should carefully consider current buyer
demand when pricing their home for sale.
ACTIVE $511 The disparity between active listings’ price per square foot
When list prices per square foot of Backup
and Pending status properties are below that
and that of solds underscores the heated seller’s market
of Active properties, sellers should ask for
pricing counsel from their Agent.

BACKUP OFFERS $319 in affordable homes.

CLOSED SALE $328

HOLD DO NOT SHOW $304

Pricing Reality – February 3, 2010

PENDING SALE $292
List prices per square foot by MLS status
Attached properties in SoCalMLS-Orange County
$0 $100 $200 $300 $400 $500 $600

Attached Properties - Pricing Realty for Sellers, per square foot

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.
Sellers should carefully consider current buyer
demand when pricing their home for sale.
ACTIVE $327 When list prices per square foot of Backup
Like detached homes, attached properties are selling
and Pending status properties are below that

much faster in the affordable ranges, but lower

of Active properties, sellers should ask for
pricing counsel from their Agent.

BACKUP OFFERS $254 pending prices per square foot than solds suggests
that attached home buyers have more leverage.

CLOSED SALE $260

HOLD DO NOT SHOW $247

PENDING SALE $232

$0 $100 $200 $300 $400

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.
 Monthly Listings Taken and Absorbed
Detached properties in SoCalMLS-Orange County
12 months through January, 2010

Detached Properties - Monthly Listings Taken and Absorbed

12 Months through January 2010
2,500 2,000
New Listings Listings Absorbed 2,250
As inventories depleted toward the end of 2009,
2,000
1,783
1,500 sellers decided to test the market in January,
1,664 1,706 1,634 1,656
1,442 1,567 1,533 1,586 1,542 increasing new listings by 31%. Absorption rates also
1,500 1,339
1,000
rose in January, but only by 14%. If sellers flood the
1,000 market, prices could be impacted.

500
500

0 0
2009/02 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01

New Listings 1442 1567 1533 1586 1664 1706 1634 1656 1783 1542 1339 2250
Listings Absorbed Monthly
1217 1470Listings
1573 Taken
1537 1648and Absorbed
1575 1657 1619 1491 1466 1336 1687

Attached properties in SoCalMLS-Orange County

12 months through January, 2010

Attached Properties - Monthly Listings Taken and Absorbed

12 Months through January 2010
1,600 1,500
New Listings Listings Absorbed 1,426

1,155 1,200
Optimistic attached home sellers also increased new
1,074
1,200
1,087 1,081
1,009
listings on the market in January 2010 (+38%) over
983
967 1,002 1,019
920 927 900 December 2009, to the highest inventory levels in two
800 years. Absorption rates increased only by 5% month-over-
600 month, so sellers should beware of flooding the market
400 with new inventory if absorption rates don’t pick up.
300

0 0
2009/02 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01

New Listings 920 1087 983 967 1002 1074 1019 1081 1155 1009 927 1426
Listings Absorbed 757 982 978 925 1096 1075 1051 1060 1068 906 943 1320

Listings Sold by Calendar Quarter

Detached properties in SoCalMLS-Orange County
9 quarters through December 31, 2009
Detached Properties - Listings Sold by Calendar Quarter
9 Quarters through December 31, 2009
Average Sale Price (Thousands) Homes Sold

$1,000 6,000
Avg Sale Price Listings Sold Units

Detached home sales prices remain well below where

$800 4,621 4,573
they were in Q4 2009, yet buyers still appear reluctant
4,392
4,079 4,060
4,000
$600
4,077
to allow more gains to take place. Sales volume fell in
3,300

2,184
2,279 Q4 2009, even though it is still well ahead of Q4 2008.
$400

2,000
$935 $825 $758 $679 $632 $586 $629 $688 $685
$200

1-year avg. price trend: Up 8.5 % 1-year sales trend: Up 0.4 %

2-year avg. price trend: Down 26.7 % 2-year sales trend: Up 86.7 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.

Listings Sold by Calendar Quarter

Analysis dates are October 1, 2007 through December 31, 2009. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.

Attached properties in SoCalMLS-Orange County

9 quarters through December 31, 2009
Attached Properties - Listings Sold by Calendar Quarter
9 Quarters through December 31, 2009
Average Sale Price (Thousands) Homes Sold

$500 3,500
Avg Sale Price Listings Sold Units

2,903 3,000
With greater inventory as competition and slower
2,692
volume for the year, attached home sellers have only
$400 2,635
2,409
2,571 2,500
2,190

$300
2,000
been able to manage marginal price gains in 2009
2,071

1,358 1,381 over 2008.

1,500
$200

$448 $404 $396 $354 $312 $293 $309 $327 $331 1,000
$100

1-year avg. price trend: Up 6 % 1-year sales trend: Up 6.7 % 500

2-year avg. price trend: Down 26.1 % 2-year sales trend: Up 89.3 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are October 1, 2007 through December 31, 2009. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.
©2009 Prudential California Realty Independently owned and operated. Objective data used in this report provided by Real Data Strategies. Inc. Our company’s mailing materials are printed on paper certified by the
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