What to Expect in the Fall Real Estate Market in OC

Many buyers mistake the end of the year as THE best time to purchase. They know that it is no longer the hottest time of the year for real estate, so they believe they can get a “deal” during the slower months. That is not the case. Instead, the market will remain the same until ringing in 2022. With both the inventory and demand dropping at similar rates, the overall feel of the market, will not change. This results is a Market Time that remains almost unchanged.

In looking at the 5-year average from 2015 through 2019 (excluding 2020 due to COVID-19 skewing the data), the supply of homes has decreased by 16% from the end of August to the second week of November. On average, demand dropped by 16%, and the Expected Market Time increased by 1 day. That would be a decrease in the supply of available homes from 2,528 two weeks ago to 2,123 homes by mid-November. Demand would drop from 2,694 pending sales to 2,253. With both supply and demand falling, the Expected Market Time would rise from 28 to 29 days, the highest level since the start of February.

An Expected Market Time below 40 days is nothing short of insanity. It is when there are plenty of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. With the Orange County housing market stuck well below 40 days through the end of the year, what you see is what you get. Even with demand falling along with inventory, the overall feel of the market for buyers will not change much at all. 

For sellers, the only perceivable change will be slightly fewer showings and slightly fewer offers due to a smaller number of buyers in the marketplace. A home that may have garnered 100 showings in a few days back in the Spring Market could see 50 during the Autumn Market, 10 offers compared to 20. The result will still be the same, homes that sell fast with plenty of offers and sales prices above their asking prices.

For buyers, there may be fewer buyers participating in the marketplace, but there are diminished opportunities with not as many homes coming on the market. With fewer choices, the remaining buyers will still be bumping into each other when something new hits the market. Buyers should not expect anything to change anytime soon, especially with interest rates that remain at record low levels.

Now that the Autumn Market is here, there will be fewer homes coming on the market, demand will decrease, and housing will not change much. The calm of autumn means less activity and a cyclical change to housing.

Foreclosure Wave Due to Forbearance? Numbers Say No

Everyone has heard of the vast number of homeowners who have turned to forbearance during the pandemic amidst economic shutdowns and slowdowns. Forbearance allowed borrowers to pause their payments. Repayment of the missed payments can be done all at once, with a payment plan, or often deferred to the end of the term of the loan.

Everyone seems to jump to the plight and struggles of the Great Recession and believe that the housing market is about to repeat itself. Yet, in August 2008, 9.2% of all U.S. mortgages were either delinquent or in foreclosure. By September 2009, it had risen to 14.4%. Today, 3.4% of all mortgages are in forbearance, which amounts to 1.7 million homeowners. The vast majority of those that remain in forbearance will perform and not become a foreclosure or short sale statistic. Why not? It is important to dive a bit deeper and take a look at the huge number who have already exited forbearance

A total of 7.2 million homeowners have taken advantage of the forbearance program, according to Black Night ®. Over 5.2 million have exited as of mid-June. The vast majority, 90% are either current and paying on time or paid off the balance of the loan in full. Incredibly, 3.4 million, or 65%, are current and paying on time. Another 1.3 million, or 25%, paid off the mortgage through a refinance or the sale of a home. Only 333,000, or 6%, are delinquent and working with the workout department of their bank to come up with a solution. That leaves 195,000 or 4% that are delinquent and on the road to be coming either a short sale or foreclosure statistic. That is 195,000 across the U.S. out of the 5,200,000 that exited forbearance.

Today, 1.74 million homeowners remain in forbearance. Thanks to the screaming hot housing market and skyrocketing home appreciation, most of these homeowners have plenty of equity to sell their home. 87% have at least 10% equity, more than enough to sell and walk away with net proceeds. The 13% remaining amounts to 221,000 homeowners. Many of them will work out some sort of loan modification with their lenders. Lenders have learned many valuable lessons from the Great Recession and are not at all eager to foreclose. But, even if all 221,000 become a foreclosure along with the 195,000 delinquent that exited forbearance and are not coming up with a solution with their bank’s workout unit, the 416,000 total foreclosures nationally pales in comparison to the nearly 9 million households that lost their homes to a foreclosure or short sale after housing crashed in 2007. The probable number of foreclosures is most likely less than 400,000, which would be easily swallowed up in today’s ferociously hot housing market.

At the start of the Great Recession, the supply of available homes to purchase was way too high, over 6 times where it stands today with only 2,520 homes currently available in Orange County. Placing homes on the market, even foreclosures, when housing is starved for more inventory like it is today, will be easily snapped up in an instant. Buyers would welcome the relief of any additional inventory right now and into the foreseeable future. The plight of not enough homes will linger for the rest of the year and throughout 2022 as well.

It is also important to note that there are currently only 13 foreclosures and short sales available in all of Orange County, representing 0.5% of the current inventory. Demand (the last 30-days of pending sales) includes only 6 foreclosures and short sales, 0.2% of total demand. When forbearance ends, the numbers will increase from their all-time lows, but the slight rise will be undetectable within the marketplace.

The bottom line: there will be no wave of foreclosures due to forbearance. The sky is not falling. Instead, everyone should expect more of the same. The ultra-low, anemic inventory will remain, and demand will be juiced due to historically low mortgage rates.

Return on a Kitchen Remodel

I recently spoke with a long-time client of mine about a kitchen remodel they were contemplating. She wanted to know what kind of return she would get on her investment of a complete kitchen remodel. I told her she could expect about 98%, but it could be more!

If you were able to do some of the work yourself or maybe refurbish the cabinets rather than replace, you most likely would get that 100% return.

I also think it has a lot to do with size of home, and even the area where the home is located. If you have a larger home, and live in a more upscale area, you would most likely get more than the 98% return on your complete kitchen remodel, in my opinion. Buyers of those larger, more expensive homes, expect a beautiful updated kitchen. And they are usually willing to pay extra for it.

Naturally, the remodel has to be functional as well as beautiful. Installing a small range in a large chef’s kitchen won’t make sense. Likewise, you would want to install a vent/hood that will definitely do the job over a large six-burner range. And don’t skimp on cupboard and storage space! Making mistakes like this in a remodel can be costly when it comes time to resell.

Nothing is wrong with style or adding personal touches in a kitchen, but it must be functional first! The kitchen is usually the heart of the home, and being functional is key to longevity in your remodel. Trends and styles can come and go, but function and usability are forever.

Talk About Color

As an artist, I have been working with and playing with color all of my life. I have really gotten to know each color, and I love them all! They each have their own personality and unique voice, too. You can use color to express yourself or to create a space that makes you happy just to be in it. You just need to choose the right colors.

In my latest podcast, I go into what I think colors have to say and also describe some of their personalities! Yes, I think colors have personalities or MOODS that you can use to your advantage to express exactly what you want to say in your home decor. Colors are your friends!