R.E.D.(Real Estate Diversion) Alert.
We’re number One! We’re number One!
According to the recent DataQuick June homebuying report, residential real estate located in 5 out of 11 Santa Ana zip codes experienced the steepest price declines in Orange County. While this might not be good news for anyone who bought a home last year or for anyone who wants to sell a home this year, the good news is that Santa Ana real estate just got a whole lot more affordable for potential home buyers. Which six local ZIPs made the dirty half dozen list? Would it suprise you to learn that brand new homes have declined an average of -50% this past year?
Ouch, Willowick!
| Rank | Santa Ana ZIP | Price | Vs. ‘07 | Sales | Vs. ‘07 |
|---|---|---|---|---|---|
| 83 | 92701 | $248,000 | -51.8% | 10 | -65.5% |
| 82 | 92707 | $280,000 | -49.5% | 42 | 82.6% |
| 81 | 92703 | $300,000 | -48.1% | 33 | 32.0% |
| 77 | 92704 | $350,000 | -35.2% | 38 | 40.7% |
| 73 | 92705 | $600,000 | -31.8% | 23 | -45.2% |
| 41 | 92706 | $500,000 | -19.4% | 7 | -58.8% |
| Slice | Price | Vs. ‘07 | Sales | Vs. ‘07 |
|---|---|---|---|---|
| House | $550,000 | -24.7% | 1,554 | -7.7% |
| Condo | $367,500 | -18.7% | 505 | -22.4% |
| New | $499,000 | -17.5% | 165 | -50.0% |
| All | $490,500 | -23.4% | 2,224 | -16.5% |
Comments and more at the Orange County Register’s Lasner column.
A couple of houses on my street, one was be auctioned starting bid 160,000 for a 4 bedroom house , plenty of yard space. But real estate agents are taking the auctions because not even a month after a real estate was taking people through the yard, I don’t think she had a key.
I asked her how much they were selling it for she said 280,000. I thought they get all the deals.
For those with available credit and a good score this market will be a good one to make money in if you can guess right on where the bottom of the market is. If you guess wrong or if the market doesn’t bounce back and instead stays low and affordable these speculators will lose out just like the speculators with the ARM’s lost out when the market dropped.
For those who just want to own a home the drop in price may mean that you can get a loan with payments that you can finally afford.
20% down will be back in practice. The numbers of no-down loan holders just walking away* are breathtaking. In the current climate of no savings at all, that will be a tough order for the average wanna be home buyer.
I will make a prediction here. I think that Real Estate prices will continue to decline for several more years. Many analytic sites predict that prices will eventually climb again, but after 2015-2020.
The more organized cities will fare much better than the neglected cities with poor leadership. People will be much more cautious and picky about where they will put their hard earned money, once this thing is near resolve.
There should be a fairly large watershed event coming up in the spring of 2009 when a massive amount of resets occur. Expect a lot more real pain and angst for at least two years. Wages are stagnant, jobs are insecure, inflation is eating up incomes and people no longer can count on their homes as an ATM machine by refinancing frequently to extract the equity for daily living expenses and luxuries of recent years, gone by.
*Known fondly as “jinglemail” where a homeowner literally sends the jingling home keys back to the bank in the mail and then walks away from the failed “investment”.
Lisann,
There is still a lot of hopeful speculation out there in the market. I don’t doubt that RE agents are determined to flip homes, still. What else are they going to do out there in these tough employment times?
Rents are at a standstill and many predict that they will continue to decline. This is excellent news for the average worker who needs more affordable housing, but it is going to really put pressure on speculators who think we’ve hit bottom and who have jumped back in the market for a quick buck. It takes years to unwind a bubble of this size and if you examine the RE bubble that has happened in Japan, you’ll see that we’re not even close to having this real estate bubble resolved.
I saw some auctioned homes/ multiple properties bought up and the RE agents started a fix-up project, which has apparently stalled out. No one is yet living in any of the units and I fully expect to see another forclosure/REO/Bank Auction sign back up on the property in the coming months.
Red Vixen,
I really appreciate having someone with real estate experience post information on this current RE Market or lack thereof.
I recently had to refi my home to buy out my partner and saw that my home value had dropped about 20% from the previous refi a couple of years earlier. I was able to secure financing at 74% of appraised value with a conventional loan so I still have some cushion to ride out this downturn.
I’d like to get in there and flip a house or two when the market turns around but it seems from what you said that I will have to wait another 5-10 years before that will be a winning strategy again.
I dont want to get into ‘jinglemail’ and walk away with a ruined credit score.
Anonyms #5,
I am glad that you enjoy the posts on real estate. I am happy to be able to post it as a diversion and have some discussions with others who are also interested in the trends and opportunities of real estate 😉
Right now there are large numbers of people who are being forclosed on as well as having to declare personal bankruptcy. Either or both of these actions will result in these consumers taken effectively OUT of the RE market for at least 7 years to come before acceptable lending credit can be restored. During that time they’ll have to learn to live within their means and they’ll have to have the discipline and good fortune to make enough money to meet their cost of daily living expenses, stay out of financial trouble, as well as save up that 20% for the down payment they’ll need if they are to become homeowners again. That’s going to be a tall order. And in the meantime, they are effectively removed from participating as buyers in the RE market for YEARS to come.
The resets next spring are expected to be unprecedented as far as impact on real estate. So, while we’ve seen some hefty pain, there will be more to come. The employment numbers have been suspect for a number of years (about 7 years, really) and many analysts have stated that the government spokespeople have been directed to misrepresent the truth -which is to say that workers are underemployed and unemployed in great numbers that simply are not tracked with accuracy.
Just consider for a moment the massive layoffs of the classified staff at SAUSD. Many of them will be offered jobs that will pay about HALF of what they have been earning per year. They will also lose their health care benefits or have to bear the bulk of the burden of health care insurance that has covered those workers and their families. Many can get employment in the new re-classified jobs that HR will offer. However, do you have a sense of how much this underemployment situation will negatively affect the household income of the ex-SAUSD workers? This type of downsizing is happening everywhere now. And of course, state and city workers are carrying on as if everything is 1999. But I think that those state and city jobs will have to be trimmed as the remarkable dip in state revenues will bleed the coffers further.
Look around Santa Ana and you’ll see small shops and restaurants closed and gutted. But the bigger picture is that many of the top companies that call Santa Ana home are lending and escrow outfits that will suffer badly as this bubble plays out.
Most market speculators “keep the powder dry” for the good opportunities that will present to those who have the Ca$$$$$$$$h ready. When affordability returns to the market, you’ll know we are on the right track.
To echo the sentiments of #5, thanks for the posts.
Hey thanks guys! Very sweet and encouraging of you.
I guess I might have to do another post or two on the subject for y’all 😉