Housing Market Report 2011 - Irvine, CA

If you need 13,000 sqft in Irvine, only $18 million separates you :)
This thing is crazy, click here to take the tour

 Irvine is a unique real estate market in that it has a very large amount of mid-level homes, quite a few upscale areas, and another very large amount of entry-level townhomes and condos. We can tell you first hand that these entry level units in areas like Woodbridge, North Park, Woodbury, etc were very popular with the first time buyers in 2010. Because of the number of sales in this lower price points (where the avg price per sq ft is normally higher) the stats might be a little higher per square foot than what actually happened.


Overall, it was a very volatile year for Irvine real estate but one that actually ended up very close to where it started. The coming 2011 we expect to be a continuation of the late 2010 market and what most would term as a buyers market.


Inventory vs Average Days on the Market

The end of the tax credit era (tax credits to home buyers) came to an end early summer of 2010. Leading up the this, the city of Irvine, along with many other areas of Orange County saw a market revival out of the 2008 and 2009 doldrums. Inventories increased while time on the market decreased; meaning that houses were selling and homeowners were listing them in order to take advantage. With the end of the era, the inventory levels have been decreasing while the average days on the market continues to climb. To us, this means that the market has taken a turn back towards a very buyer friendly state.




Sales Volume

The graph below will also show the dramatic affect of the tax credits on home buyers. The most Irvine home sales were made in late spring as the deadline approached, ultimately climaxing in 800 homes sold in May. Since this time, the sales numbers for homes in Irvine have come down to about under 500 by years end. In essence, the number of home sales dropped, increased, and then decreased by about 38% all within the same year. 


Average Price Per Sqft

The average cost per square foot for a home in Irvine has also come down a bit in 2010.  During the peak season of the year we averaged $351 per square foot and are now down around $330; meaning your average 1800 sqft home in Irvine has been selling for just under $600,000. 
 


One unique component of Irvine's real estate market has to do with the overall affluence level. While Irvine has definitely seen its share of foreclosures and short sales, the average homeowner would still not be deemed as "distressed". Because of this, when the market slows, the majority choose not to sell and are not in the category we'd call "have to sells." This is evidenced by inventories coming down (people taking homes off market/choosing not to sell) while time on the markets simultaneously goes up (fewer buyers).

What all this tells us is much like the rest of the County, Irvine experienced a slower market in '08-09, had a nice bump in 2010, and has again leveled off to a buyers market. We expect to see more of this in 2011, making it a great year for buyers to get some good deals (although they may not have as many options as they are accustomed to) and sellers had better be real motivated in order to sell their Irvine homes.

Housing Market Report 2010 - Newport Beach, CA

Really Cool Newport House $31,750,000
click here to see slideshow

While Newport Beach saw cooler Spring/Summer temperatures than most are accustomed to, the hot time to sell in 2010 was definitely during these months. There are normally more homes on the market during the warm seasons, but it will sometimes just mean more competition among sellers. Interestingly enough, the other sales statistics were also up in favor of the sellers (when compared with the rest of the year).  The best time to buy a home in Newport Beach, CA might just be these last months of the year with prices more reflective of the beginning of 2010 but with more inventory to choose from.

Sales Volume

After a brutal Winter season, Newport's home sales rebounded strongly through the Spring and Summer seasons.  After the peak of roughly 75 homes selling each month, Newport Beach's volume has slightly slowed to roughly 70 homes per month. (Note: The sales stats below are indicative of the combined sales volume for the previous three months.)





Avg Days on Market vs Inventory

With the Spring pickup in sales activity, word spread among homeowners that things were starting to sell again. What we then saw was a 30% increase in inventory! In other words, more options for buyers but more competition for those toying with the idea of selling. The last quarter of the year has seen inventory levels drop off slightly which is pretty typical for the coastal market in the cooler months.

Also of interesting note, the Average Days on the Market for Newport Beach homes was very high at the beginning of 2010, taking nearly 9 months on the average to sell. This came down with the upswing in sales activity to an average of about 6 months to sell. Since then, we've noticed the average starting to get longer and the graph below will show what we mean.




Average Price Per Square Foot

This statistic is always a tricky one because it can really fluctuate based on what size homes are selling. If its larger homes, the avg can actually go down, and vice-versa with smaller homes. Still, what we have seen is a spike in the average during the hot selling season Newport had in the Spring. Since then, it has dropped quite a ways down from over $900 per square foot to almost $700 per square foot. This can be a big deal if all other things are equal. For example, take your average 2,000 square foot home, it is $1,800,000 at $900/sqf and only $1,400,000 at $700/sqf. This is definitely a trend buyers are hoping will continue down and homeowners want to see climb back up.




We're always open to questions and encourage comments.

Housing Market Report 2010 - Fullerton CA

With the end of the year, we thought it'd be a good time to post updates on the home sales market so people can start planning for 2011. We picked the 5 cities in our service area that are typically the best indicators for the overall health of the market: (Fullerton, Irvine, Newport Beach, Long Beach, Whittier). This will be a 5 part series, here is part 1 of 5 "Fullerton, CA" In the new year, these type of statistics will be available monthly on our website.

The Summary

2010 had a few periods of exceptional market health. In particular, the spring period leading up to the end of the tax credits actually had very good number of homes sold in Fullerton. Since then, the market has softened and we are seeing an increase in numbers of days on the market while simultaneous seeing a drop in number of homes on the market. To us, this means pricing is staying low not from a large number of home options, but from an overall lack of buyer interest. For these reasons, we'll probably see the continuation of the current buyers market over the next few months.

Inventory vs Avg Days on the Market

Inventory (# of homes on the market) peaked in September, but has been decreasing to approx 450 homes on market. This is still quite a few homes on the market and usually indicates a buyers market in Fullerton.

Average Days on Market is coming up as well from the August low of 120 days on market. Now were heading past 150 days and climbing.




Median Home Price

The median price was lowest over the summer at $530,000 and is not much changed since that time. Don't worry though entry level home buyers, this is a little misleading, there are still many Fullerton homes available in the $300,000 to $400,000 price range.





Sales Volume

The graph below depicts sales from previous 3 months at any given date. Sales peaked in at about July meaning the best months were April, May, and June with approximately 146 homes being sold each month. Sales volumes have been decreasing since this time to the approx 100 homes per month current level. In a nutshell we're selling 25-35% of the available inventory every month...and yes that's pretty indicative of a buyers market.



These are all just averages and approximates. If you have specific questions, please don't hesitate to contact us.

Gov Talks of Eliminating Mortgage Interest Deduction

This is a huge deal to current homeowners and anybody who will need a loan in order to ever buy a home. For roughly 100 years, Americans have been able to receive tax deductions for the interest charged on their home loans as a measure to reward the middle class and encourage the American dream. Now, some members of our government are proposing an end to that!


The Federal Deficit Commission has incorporated the elimination of the Mortgage Interest Deduction into a few of their proposals to reduce the deficit. While most of us can recognize that the deficit is a big issue, almost nobody who owns, or plans to own, a home will like this proposal. While I really don't feel it will ever get off the ground, we really need to nip this in the bud early as the potential damage to the housing markets and overall economy are overwhelming.


I really hate "talking points" and I wish I had an easier way of calling into our Senators, but for now, this National Association of Realtors Call to Action should work for you. It worked for me. Please excuse the "talking points" guy and just say whatever you feel, even if its just "I want the MID, I thought that was one of the reasons to buy a house?"  or "How about you congress folk waive your deduction and leave us alone"  link is below   


-Todd

http://www.realtoractioncenter.com/realtor-party/click-to-call-mid-senate.html  







 






http://www.realtoractioncenter.com/realtor-party/click-to-call-mid-senate.html

Fed's Home Loan For Fixer Uppers - FHA 203(k)

Many home buyers have heard of the FHA loan program; however, most are not aware of a secondary loan specificially designed for all home buyers who want to purchase "fixers" and need a loan for the purchase and the rehabilitation. This loan, known as HUD's FHA 203(k) is a great program and one that buyers who aren't afraid of taking on a fixer should seriously consider.

Here is a summary of the program:

- FHA 203(k) is a program that provides loans for the purchase and renovation of fixer properties.

- The program allows for downpayments of as low as 3.5%.

- "Fixers" can range from simply dated to uninhabitable.

- Eligible properties can be between one and four units.

- Can be used to convert single family homes to two-, three , or four units if legal.

- Can apply to demolished homes provided some of foundation remains.

Here's the limitations:

-Investors can't utilize this program.

-Property will need to appraise under market value before the repairs and at market after the repairs.

-"Luxury" upgrades aren't covered but many modernizations like roofs, heating, paint, flooring are considered completely acceptable.

-Buyers must use HUD approved appraiser, lender, and repair contractors.

-Property must be in FHA approved project if property is a condo or has an HOA.

-Interest rates typically run 1% higher than conventional loans and have a little higher closing cost.

Here is our thoughts on who this will benefit:

Overall, the FHA 203(k) program is an amazing program and one that can offer consumers a chance to build equity in a home, beautify a neighborhood, get in with a low downpayment, and obtain a very cheap rehabilitation loan for the repairs. There are many guidelines that buyers will need to be familiar with if they would like to utilize this program. Still, the rules are fairly clear and easy to follow and we think this loan program is just another great gadget in the home buyers toolbelt.

 

2331 Huron Circle, Placentia CA 92870 - Home For Lease

Single Story 3 Bedroom, 2 Bath Spacious Attached Home with Laundry and Garage! This Beautiful patio home in the Woodfield community of Placentia, CA has been upgraded and includes Granite Counters, Tile Floors, Fresh Paint and New Fixtures. Convenient features include Laundry Hookups (Gas or Electric), Fireplace, Enclosed Patio, 2 car garage with direct access, master bedroom with on suite upgraded bath, gas stove, vaulted ceilings in living area, and private atrium. Placentia CA is near the cities of La Habra, Fullerton, Brea, Yorba Linda, Diamond Bar, and Anaheim. Woodfield community is right across the street from Tri-City Park and a short drive from major shopping centers, Brea Mall, and freeway access. Tenant pays all utilities. Pets would be considered but owner would prefer no pets.

Rent - $1999

Security Deposit - $1999

Pet Deposit - $400

2331 Huron Circle
Placentia CA 92870
Home For Lease

Renting Out Your Home - An Owner's Guide for Orange County CA

After the nice little bump in sales activity during the tax credit era of 2009 and 2010, the end of the year has seen slowing sales across most of the country. Here in Orange County, CA many homeowners are once again left wondering what they are going to do with their property. Many homeowners who would like to move on, but don't want to sell in a down market, are exploring the option of leasing out their homes. Leasing out your home can be a great option for many, but most people currently exploring this option will be first time landlords. As such, renting your home to strangers is not something you should carelessly jump into. The following should serve as a good starting point in deciding whether this option will work for you.

Will Your Home Make a Good Rental?

Do the Numbers Work? - The first thing to analyze is the amount you spend on the property per month (mortgage, tax, insurance, hoa, mello roos, etc) vs. how much rent money your property will bring in the current market. Much of this depends on how much you owe but you will also find homes in some areas just make better rentals and bring in more rental revenue per dollar in expenses.

Ideally, you will want your rental income to be well in excess of your expenses but these days we are seeing many people completely happy with rental income that lets them break even or even take a small loss each month. To them, it is often a better alternative to selling and losing a couple hundred thousand dollars.

Fragility - To us, this means how easy it will be for a tenant to cause damage. Very fragile homes would contain things like priceless painted frescoes while the most durable would have concrete floors and rock landscape. Most homes fall somewhere in the middle and it is worth noting that durability is a desirable trait for rentals and time should be taken to reduce your properties vulnerability.

Finding Good Tenants

There are many ways to find tenants these days, some people utilize the traditional methods like newspaper ads and yard signs while many modern landlords post their homes for rent on classified sites like Craigslist. Many more will enlist the help of a real estate agent to post their home for lease on the local multiple listing service. So which of these work? The answer is: they all can! The biggest issue lies though in how fast will they work and what kind of tenants they will draw.

Yard Signs - Yard signs are aimed at drawing the attention of passers by. The upside is that most inquiries from this source will already be interested in the area. The negative is that you are limited to only people who happen to drive by the property.
 
Free Online Classifieds -There are many of these today, the largest being Craigslist, and there are also many people that use them to find rental homes. The great opportunity here is that the ads are free and gain exposure from a large online audience, the downsides are that everybody else uses them and your ad can get buried in just a few hours. Also, the classifieds have many "tire kickers" with an uncanny knack for wasting your time and missing appointments.

Friend of a Friend - This is one of the most popular ways that new landlords experiment with leasing their property. We've seen it work, however, more often than not the landlord will have uneasy situations where the risk of ruining a friendship always lingers. When renting your home we recommend treating it like a business and if a friend just happens to be the best tenant for your business, that's fine. Just exercise extreme caution and avoid doing this if you have any doubts.

MLS - The MLS is the local REALTOR database of homes for sale but it also includes homes for lease. There are very few apartment community listings on the MLS and a large percentage of the tenants viewing homes on the MLS are also working with an agent. The pluses are that most tenants with an agent have already been qualified, the users are usually just looking at homes (not apartments) for lease, it offer a wide net of online exposure, and hosts a very large pool of prospective tenants. The downside is that you as a landlord will need to offer compensation (money) to the agent bringing a tenant that leases your home. This ranges anywhere from a few hundred bucks to a few thousand depending on the price of the rental.

Showing The Home

There are two types of showings. Those done by licensed real estate agents using a lockbox keysafe and those done by appointment with prospective tenants. The agent showings are usually not a problem, but for whatever reason, we have many more "no show" appointments in the rental market than the sales maket. For this reason, we prefer to book consecutive blocks of appointments (maybe 2 hrs at a time) and confirm with all interested prospects via phone call ahead of time. All the phone tag and no shows can be very draining and time consuming, but with rental showings, it is just part of the process.

Screening Tenants

Fees? - We recommend collecting a reasonable screening fee. Screening is labor intensive as you must call from 4 to 6 people/business for each applicant and the resulting phone tag can be very consuming. Many will require all questions to be faxed over in writing. Then, you'll need to run a full tri-merged credit report (*Please note that "free credit reports" are only free because they are incomplete) on the prospective tenants and this will cost you $20-$30 for each tenant. Finally, when when you've decided on a prospective tenant, we'd advise a full background check looking for bad check writing history, evictions, and criminal convictions. This alone ranges from $30-$50 so in reality the $35 screening fee doesn't even cover your expenses, it simply shows you who is serious enough to spend your time screening.

Be careful with the screening - The fee and screening procedure are things you need to advertise and have written permission to collect. Many areas have maximum amounts permissible by law. We would also advise "Pre-screening mandatory minimum requirements" be set forth and delivered to prospects in writing prior to accepting their fees. Landlords should be familiar with these in order to prevent being falsely charged with discrimination for not leasing to a prospective tenant.

Another thing to be cautious of is the questions you won't get answers to. When calling references, you should be able to get answers to questions verifying their employment, tenancy dates, and current status. The details though can be tough. Past landlords and employers will usually not say outright that the applicant was "bad." There is major liability in saying so. Employers aren't the only ones who need to be careful with what they say. It is also a very bad idea for a landlord to do or say anything that can be seen as discriminating against a tenant based on age, race, religion, marital status etc. For example, asking "Do you have children?" is out of bounds while asking "How many are in your party?" is seen as as acceptable and relevant. Knowing how to ask the appropriate questions to get the answers you need is such an important skill, it could be the subject of an article all by itself.

Security Deposits - We always recommend security deposits to protect not only against damage but also against unpaid rent. Typical security deposits will be equal to one months rent and are generally refundable at the end of the lease term provided no damage is done.


Pets or no pets - You as the landlord have the decision to allow as many and the type of pets you'd like, however, you also have to power to say no to pets. Saying yes runs the risk of damage to your home so many owners will require an additional pet deposit or increased rent rate with pets. The downside of not allowing any pets is that you will be limited to only those that do not own pets. You'll be surprised how much of the tenant market owns pets!

Section 8 - This is what's known as subsidized low income housing. The good part is that the government pays all or a significant portion of their rent and it really is the closes thing to a guaranteed rent. The downsides are that it can be difficult to evict a Section 8 tenant,  they often still have to pay a portion of the rent, and your home will have to become Section 8 approved housing.

Foreclosures/Bad Credit - Particularly in today's market landlords are running into many tenants with poor credit scores, short sales, and foreclosures on credit history. While ideally you'd want a tenant with zero negative credit history, the fact is that a very large segment of the renting population lost their home to foreclosure. We have successfully leased many properties to people both with poor credit and foreclosures. If you come across this scenario, the real important thing is finding what kind of payment history they have with other bills and what type of references they can provide from past landlords.

How to Make a Decision


Deciding to lease out your home should not be taken lightly but, if the numbers work for you and you have a home that isn't fragile, it can be a very good option in the current market.
When renting your home, it should be noted that time is not your friend. Missing just one months worth of rent can be very costly. Still, jumping too fast into a deal with a tenant you don't know enough about can be even more expensive. When we lease homes for our clients, we like to go with a method that will generate the largest amount of quality tenants in the shortest amount of time. This keeps the landlord from making unnecessary payments without compromising long term happiness with their tenant. To do this, we really have to do almost everything, a healthy mix of proven traditional media as well as top performing modern ones.
Not only is it of paramount importance to find prospective tenants, but based upon conversations with some of our clients, we also find landlords value professional leasing services in helping them evaluate their home as a rental, handle all showings, screen applicants, make tenant recommendations , as well as provide the owner with a fully executed lease contract which will be enforceable in court.

Hopefully this has helped answer some questions about renting out your home in Orange County, you can ask us up some more questions here or just leave a comment.

**Be sure to catch the follow up to this article which will detail the Rental Realities and Property Management Horror Stories. It will be a must read if you are even considering renting out your home.