Wow! Prices are dropping like flies! 

It's a Buyers Market in Orange County CA. To find your dream home at a great price and Search Orange County MLS Yourself !! Go to

Deborah Shane Orange County Realtor for Real Estate in Orange County, San Clemente CA Homes, Dana Point CA Homes, Talega Homes, San Juan Capistrano Homes and all Orange County MLS Listings.

It's A Buyer's Market - So, Should You Be Buying?

ORANGE COUNTY, January 2008

A buyer's market is traditionally defined as: A market condition characterized by an abundance of goods available for sale.

The more in-depth Economics 101 definition is: When a buyer's market exists in any given commodity, the buyer is able to be selective in purchasing, as there are many individuals wishing to sell.

Furthermore, these buyers will generally be able to purchase at lower prices than those that were previously prevalent.

The simple version is: when no one else wants a product of value - buy it, because the price will be lower so you'll be able to maximize your investment for future gain. In essence - buy low, sell high. It's not rocket science!

When it comes to purchasing real estate, it's not as easy as investing in your 401K or savings account. Those are simple. You can select as little as $1 to invest each month or as high as the law will allow - thousands per year.

Most people really don't worry about how the stock market ebbs and flows as they are using the practice of dollar cost averaging to invest. Dollar cost averaging is the practice of investing or saving money at specific times, regardless of market conditions or your personal financial outlook. The idea is that if you keep investing over the market levels (low and high) you will, through the law of averages, make money in the long haul.

The challenge with that type of practice in real estate is that you can't slip into real estate investing. We don't buy our housing investments month after month with prices up and down. Instead, we slap down the down payment when it's time to buy. And wherever the market is, is where we start.

The best strategy for any real estate purchase and the best way to make money in real estate is to buy low, when the conditions are in the favor of the buyer to buy. Your start-up purchase is where you "begin" your investment growth - and that's why I submit to my buyer friends the above headline question, again: "It's a buyers market. So when are you going to buy?"

Today in many markets you can buy a house for 5 to 10 percent below asking price. For a $500,000 purchase, that's between $25,000 and $50,000 off your mortgage. On a 30-year fixed rate mortgage at 6 percent, that reduction in mortgage amount would save about $300 per month (or more than $3,600 per year).

In addition, many sellers are willing to help with closing costs just to sell their house. This includes builders selling brand new homes as well as homeowners selling re-sale homes. For example in a random sampling of San Diego County re-sale homes, half of the 4 bedroom 3 bath single-family homes sold in the last 60 days included a seller subsidy ranging from $1000 to $15,000 (the average seller subsidy was $8,790). These subsidies are in the form of carpet allowances, painting credit, seller-paid closing costs and more.

Then there are the relatively low current home prices. While San Diego County housing prices have been flat or decreasing slightly over the last eighteen months or so, they are starting to level off. This is where your research on the housing market must turn local. The national numbers mean nothing to you when it comes to investing in real estate. Where are your average prices? Are they flat, deflating or appreciating? In San Diego County, the answer to that important question can depend on exactly which neighborhood you're looking at.

For any neighborhood, the question many are now asking is, "Have housing prices hit bottom yet?" Everyone wants to buy at the bottom of a price cycle. The problem is that we usually don't know we've hit bottom until after the fact - after prices have started to rise again. No one knows for sure when the current housing price downturn will hit bottom - or if it already has - or even when the market will start its inevitable upward swing again. But a lot of economic forecasters are weighing in anyway.

There are a lot of factors at play right now in the local economy and the local housing market. Sorting out their long-term and short-term impact is not an easy task. Any forecast is made with more doubt than certainty.

What we do know for certain is that there are too many homes for sale and too few buyers.

This is impacting the homeowner who has a real need to sell, and also the region's new home builders who are dealing with an excess inventory of unsold homes. Add to that the credit crunch of recent months - the so-called sub-prime loan crisis - and you find fewer buyers able to obtain mortgage financing.

That same credit crisis has also resulted in a record number of foreclosures, and the foreclosed homes only add to the excess inventory of homes for sale.

The housing market is not a unique market. It moves up and down somewhat in sync with the economy as a whole. It has been a healthy local and national economy that has fueled the record growth in the housing sector over the past five or so years, and a robust economy will be the key to any future recovery in the housing market.

The leading economic indicators for the local economy have been falling for the past year, implying that the economy will remain weak at least through the first half of 2008.

But a careful look at the factors that make up the index of leading economic indicators reveals that the biggest drag on the economy is, in fact, the housing slump. When you factor out the loss housing-related jobs, i.e., construction, home improvement, real estate sales, escrow, title and mortgage company jobs the remaining indicators are healthy.

It's the old Catch-22: the health of the housing market depends on a healthy economy, and a thriving economy depends on a thriving housing market.

So what is the state of the economy? It's not bad, all things considered. Just last month employers reported adding almost twice as many jobs as forecast in October, and the national index of leading economic indicators moved up.

Additionally, last month's second recent cut in interest rates by the Federal Reserve was directly aimed at stimulating the economy as a whole, and the housing sector in particular.

The rate cuts have resulted in a decline in mortgage rates, with the 30-year-mortgage rate dropping to its lowest level in six months. Fees and points charged have also dropped. Any increase in the availability of lower-cost mortgage financing will ultimately stimulate the housing market as well as the broader economy.

Locally, there is an interesting asterisk looming on the horizon: the San Diego region is poised for at least something of an economic boost next year as homeowners who lost houses in the recent spate of wildfires set about rebuilding. Initial estimates of insured losses fall in the range of $1 billion to $2 billion - insurance dollars that will be pumped back into the area's housing economy in many ways. The fires will have a slight disruptive effect on the county economy in the near term, but the destruction of approximately 1,500 homes points to a local building boom over the next year as burned-out residents rebuild homes with payments from insurers. The region saw this same impact after the wildfires of 2003 consumed 2,600 homes and the local economy rebounded the following year.

Let's review - you have plenty of housing inventory from which to choose. Sales are slow, so sellers are offering thousands of dollars in incentives to tempt you to buy. Prices are flat. Mortgage Interest rates are still historically low. The economy is basically healthy and poised for a bit of an upturn in the first quarter of the New Year.

Sounds to me like the buyer who has been waiting on the sidelines needs to get off the fence and pull out his checkbook. No one wants to be telling his neighbor years from now that he could have bought "back then," when the market was perfect - but he didn't!

Deborah Shane reports that "the homes that are selling in this difficult market are those that are the 'cream-of-the-crop,' so to speak and that show well and are priced right."

If you're even thinking of buying or selling your Orange County area home this year, the first step should be to phone Deborah Shane, your South Orange County area Realtor, today, at 949-521-3512 for a free market evaluation. 

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 Big Changes Since 1979 

1. From 1945 to 1979, incomes increased at the same rate for all tax brackets. Since 1979, a larger percentage of the population is continuing to become more and more affluent! From 1980 to 2004, the median income rose by 18% but...

Ø      the top 20% of incomes grew by 59%

Ø      the bottom 20% of incomes grew by only 7%

Ø      the top 1% of incomes grew by 200%

2. Today the top 10% of wage earners receive 45% of all household cash income, and 85% of the nation's wealth resides in the richest 15% of Americans! (note: the bottom 50% hold only 2.5% of the nation's wealth)

3. Over the next decade, there will be a 25% increase in the population who are over 50 years of age. They have more money than any preceding generation, due to having duel incomes, equity growth, and record inheritances! This age group is spending $1.7 trillion dollars annually!

4. This helps to explain why, last year, 27.7% of all sales (2.3 million) were for investment purchases while 12.2% of all sales (1.0 million) were for 2nd homes!

5. The Federal Reserve reports that consumers have $5 trillion dollars in liquid cash sitting in banks or savings and loans. By April of 2006, they had $53.83 trillion dollars of household net worth!

A Strong National Economy

1. June marks the Federal Reserve's 17th straight rate increase and yet they still cannot slow this economy down! This should be the end of rate hikes for the rest of the year.

2. Since 2003, the U.S. has created 3.9 million new businesses and 5 million new jobs.

3. Business spending is growing at its fastest pace in six years, (1st Qtr. earnings were $1.65 trillion dollars), which helps explain how the GDP for the 1st quarter expanded at an amazing 5.6%! That makes 12 out of the last 13 quarters (4th Qtr. ‘05 was 1.7% due to the hurricanes) in which the GDP has exceeded 3%! Corporate cash is at a historical high of $2 trillion dollars due to 15 straight quarters of double digit (year to year) earnings.

4. Personal income has been growing at twice the rate predicted by economists. So with consumers making up 70% of the economy and business spending growing, these forces are propelling the economy upward with a "one-two punch". The economy should continue to grow at a rate between 3.0% to 3.5% for the rest of the year.

5. Since1980, the Gross Domestic Income has risen 66% and is now at $12.6 trillion, helping to shrink the federal deficits – although you hear only about record deficits! Today, debt is only 2.7% of the GDP, compared with 6.0% in ‘83 and 4.7% in ‘92!

6. Increased tax revenues have the Budget Office reducing the deficit by $320 billion this year. In April, the U.S. Government had a budget surplus of $119 billion and all but 4 states in the nation are running state budget surpluses.

7. As of June, we have employed 1.8 million new workers over the past year. We have averaged over 2 million for the last two years – all adding tax receipts to the Treasury. If you add in the self-employed, we added another 1 million workers last year!

8. June's unemployment rate of 4.6% is the lowest since 2000, and since 3% of the population won't work even if you give them a job, we are at nearly full employment.

9. In the U.S, incomes exceeding $100,000 (+) are growing 6 times faster than the population. For the first time, there are over 1 million people living in $1 million dollar homes and 1/3 of them own a 2nd home!

A Strong California Economy 

1. California produces 15% of the nation's GDP. One out of every eleven workers in the U.S. is employed in this State - 16,874,000 workers!

2. Our employment growth is at 1.5%, adding 223,000 jobs last year. However, our self- employment growth rate is 11.1%, which added another 218,000 jobs.

3. California has one of the most diversified economies in the world, serving the Pacific Rim through trade, a growing service sector, and expanding electronics and manufacturing. Add high-tech, the financial sector, bio-tech, tourism, agriculture and government, and it is easy to see why California is one powerful state!

4. In southern California, there are over 10 million people employed, plus another 1.5 million that are self employed. May's unemployment rate for southern California's six counties was only 4.01%!

Ø    Los Angeles has the highest at 4.9% while "The OC" has the lowest at 3.2%.

Ø    San Diego was at 3.7%, Ventura was at 3.8% while Riverside came in at 4.2% and San Bernardino posted a 4.3% unemployment rate.

5. High employment numbers have allowed the state to post record surpluses! As of May, the State had a $7.5 billion dollar surplus – above budget projections.

6. In southern California, 95% of companies employ fewer than 50 people! Today's technologies enable companies to become highly productive with fewer people, ending the boom-bust cycle and its massive lay-offs.

7. This helps to explain the following:

Ø    48,666 million-dollar homes were sold in California last year, which was a 47% increase over last year! That's 1 out of every 13 sales in the State!

Ø    There are over 450,000 million-dollar homes in California! Last year in Orange County, there were 7,342 homes sold, which represented 15% of the real estate market. In Los Angeles, just over 10,700 million dollar homes sold!

Ø    Think of the cities of Inglewood, Compton and Watts. Now think of housing prices appreciating 30% to 40% yearly in those cities!

A Strong Orange County Economy 

1. There is a great demand for living and working in Orange County.

Ø    OC ranks #5 (in the U.S.) in the number of jobs (1.5 million); in addition, approximately 300,000 additional jobs are held by the self employed.

Ø    OC ranks between #5 and #9 in the nation (year after year) in creating new jobs! Growth is expected to pick up the latter part of this year, totaling 26,000 new jobs.

Ø    Ranks # 1 in the state, #2 in the U.S., with an unemployment rate of 3.2% because of the Triple Endowment – entrepreneurial culture access to capital educated talent.

Ø    Since 2000, it is the 8th fastest growing county in the nation. It ranks #7 as the most dense county in the U.S. and 2nd with the most population (1% of the U.S.)

Ø    Ranks # 8 in the nation in manufacturing, with 184,800 jobs. With all the new commercial construction, the vacancy rate is at a 5-year low!

Ø    There are currently 42 high-rise condominium towers under construction or in various stages of pre-development in Orange County.

Ø    OC ranks #3 in the U.S. in Asian business and #3 in Asian population in California.

Ø    In the past 20 years, Orange County developers built 260,000 homes, condos, and apartments. In the next 20 years, OC will build 56,000 units, then all the land will be gone!

2. OC has a dynamic economy in one of the most desirable locations in the world. Most of the was developed under strict zoning guidelines and our population growth should continue to keep upward pressure on the housing market!

Ø      43 miles of beautiful shoreline and 51% dedicated open space.

Ø      14th largest market in the U.S. and ranks #3 in retail sales (per household).

Ø      A magnet for tourists, attracting 44.7 million visitors spending $7.7 billion dollars.

Ø      The median age is 34.2, and the county has one of the highest household incomes in the U.S.

Ø      11% of the households in OC have a new worth exceeding $1 million dollars!

OC ranks #3 in the U.S. with 113,299 millionaires, and there are 5 billionaires!

Search the Orange County MLS Yourself !!