Staged and Sold in Irvine

I love helping folks buy and sell their homes here in Orange County. One thing I truly enjoy is helping them stage their home as needed.

Earlier this year, a past client called me to help sell this home. This was the third property I would sell for them! It was a wonderful, newer home, three bedrooms and three baths and nicely updated! But they wanted to move out during the selling process, so the home would be empty. I knew it would sell for more if it were staged, so I went to work staging the entire home and the patio.

You can see that before there was no dining table, so I added a dining table. And there was plenty of room to spare for ample seating in the living area. Living plants add life and a wonderful feel to any home. Bright, happy colors like orange also make a statement. In almost all my staging, I add orange!

There were MANY showings, and we received over a dozen offers, all over the asking price of $835,000. It sold for $880,000, higher than any home like it in the neighborhood had sold before!

When I listed this home for sale in April of 2021, it was a strong seller’s market in Irvine. I could have just listed and sold it empty, but the extra effort ALWAYS pays off. My staging is offered as part of my agent services package to the seller.

See the virtual tour of this beautiful home below.

OC Housing Market – Still Strong

When housing is surging with seemingly no end in sight, society cannot help but flashback to 2001 through 2006. In 2004 and 2005, the Case-Shiller U.S. Home Price Index showed red-hot home price appreciation between 10% and 14.5%. Everybody knows what happened next, the housing bubble eventually popped and led to double digit home price depreciation in 2008 and 2009. In May of this year, U.S. home price appreciation reached 14.6%, its highest level since tracking began in 1988. Yet, today’s housing market is glaringly different than the run-up to the Great Recession. That housing stock was built on the backs of easy credit, pick-a-payment plan, subprime lending, zero-down loans, easy qualifying, and fraudulent lending. Prior to the bubble deflating, there were obvious signs of a pending housing collapse: way too much supply of available homes to purchase and diminished year over year demand. The simple Econ 101 principle of supply and demand painted the inevitable housing plunge.

Today, it is completely different. There is no credit bubble like before. It is not easy credit that is the catalyst to the highest appreciation on record. Buyers cannot merely fog a mirror to obtain financing. Instead, they must qualify for loans, prove that they can afford the monthly payment. The process is intentionally cumbersome to prevent a repeat of 2007 to 2011. The current housing boom is quite simply due to supply and demand. Everyone is acutely aware of the current plight of the housing market: there just are not enough available homes to purchase. Supply is low. Recently the supply has been rising, up 14% in the past 4 weeks, but still at historical lows. At 2,528 homes, it is 46% less than last year’s level of 4,645, which was muted due to COVID-19. In comparing it to the 5-year average from 2015 to 2019 of 6,820 homes, it is 63% less. There are just not enough homes to satisfy the immense buying demand. That is the real issue, the supply side of the equation. For comparison purposes, in 2008 there were 18,000 available homes in Orange County. In 2006, a year before the start of the Great Recession, there were 16,000.

How about the demand side of the equation? It is elevated due to the historically low mortgage rate environment. After COVID-19 hit, mortgage rates achieved 17 record lows, starting with 3.29% in March 2020. It dropped to 2.65% during the first week of January this year. The record prior to last year was achieved in November 2012 at 3.31%. Last Thursday, July 8th, according to Freddie Mac’s Primary Mortgage Market Survey®, rates dropped to 2.9%. Prior to COVID, rates were hovering around 3.75%. Combine today’s low rates with a strongest demographic patch of First-Time home buyers in decades, and it is easy to see where all the demand is coming from. Even as values rise, homes are still affordable when factoring in rates and incomes.

Recently, demand has been dropping, shedding 10% in the past 4-weeks, but it remains elevated compared to prior years. Demand, the last 30-days of new pending sale activity, is at 2,761. It is 9% less than last year’s 3,050 pending sales, but last year’s numbers were skewed because of COVID. In comparing it to the 5-year average from 2015 to 2019 of 2,699 homes, it is 2% more. And, today’s level is being achieved with a muted supply and a lot fewer homeowners placing their homes on the market. There are 1,910 fewer FOR-SALE signs this year compared to the 5-year average between 2015 to 2019, 8% less. More homes would have translated to higher demand readings.

It is important to also mention that there is not going to be a wave of foreclosures that will hit the market as soon as Forbearance comes to an end for a variety of sound economic reasons. Many doomsayers point to Forbearance and simply state that there will be a flood of foreclosures, and values will plunge like the Great Recession. The facts do not support this claim. There have been 7.2 million homeowners who have taken advantage of Forbearance. Of the 5.2 million homeowners who have exited Forbearance, 90% either are currently paying on time or paid off their loan. Of the 2 million homeowners with an active Forbearance, 90% have at least 10% equity, enough to sell their homes if they remain in a financial pickle.

In Escrow! 102 Plateau in Aliso Viejo

Barely had time to blink before we got this wonderful property into escrow.

This single family detached home located at the end of a cul-de-sac features three bedrooms, three baths and 1439sf of living space. Super floor plan that has great flow, spacious rooms bathed in light, and nicely updated and maintained throughout. Super private yard and garden, beautiful curb appeal and views from the serene master bedroom. Great home has so much to offer and at a great price! Listed at $722,000.

Call for more info or if you are ready to buy or sell 949-525-5905.

In escrow! 102 Plateau in Aliso Viejo

Orange County Real Estate – the Distressed Market

Foreclosures and short sales make up less than half a percent of the listing inventory and demand.

Parents worry about their kids all the time. Often, their minds jump to the worst-case scenario. As their newly licensed teenager drives down the street solo for the first time, mom and dad are concerned that their inexperience could result in a devastating accident. Hiking as a family on one of Southern California’s many hilly trails often leads to unexpected sheer cliffs just feet away. Many parents visualize the potential for one of their children to lose their footing and slip to their peril. Parenting is full of anguish. To keep their kids safe, they, unfortunately, must consider the most severe outcome that can reasonably be projected to occur in every situation. Similarly, due to the recession, everybody is jumping to the worst-case scenario for housing, the inevitable wave of foreclosures to come.

It is crucial to immediately point out the simple fact that just because the economy is in the midst of a recession does not mean that the housing market will tank, values must go down, and many homeowners will lose their homes due to foreclosures or short sales. In fact, in the past five recessions, only two have led to declines in real estate values, the recession that began in 1991 and the Great Recession that started in 2008. Both were fueled by asset bubbles in housing that eventually popped. The recession in 1991 was powered by the savings and loan crisis. The Great Recession was driven by subprime lending and risky investments in mortgage securities. Thus, a wave of foreclosures ensued.

Today, there are only 11 foreclosures and 7 short sales to purchase in all of Orange County, that is 18 total distressed listings, the lowest level since initially tracking distressed listings began back in 2007. It represents only 0.4% of the active listing inventory and 0.4% of demand. Compare that to January 2009 when there were 5,104 distressed listings, 44% of the active listing inventory, and demand (the last 30-days of pending sales) was at 1,428 pendings, 67% of total demand.

That meant that two-thirds of all escrows were distressed. Lenders were in control of the market, either through bank owned listings, foreclosures, or short sales where the lender (or lenders) needed to approve taking less than the outstanding loan balance.

Today, the supply of homes to purchase is low, demand is high, and home values are on the rise. Multiple offers are once again the norm. Homes are flying off the market and into escrow. And, tight lending qualifications continue to be the bedrock and strength of housing.

Even with the strength, many homeowners are worried that the housing market will tank again, and a wave of foreclosures will inevitably follow. This stems from remembering the burn from the Great Recession. Everybody was either burned or knew someone who was hurt by the collapse in housing prices. The economy ground to a halt and unemployment grew to levels last seen at the beginning of the 1980’s. With COVID-19, the economy stopped and unemployment spiked to levels not seen since the Great Depression. As a result, everyone is jumping to the worst-case scenario in their collective minds: housing must suffer.

The current recession is unprecedented. Recessions occur due to a weakness in one area of the economy that is preceded by an implosion of an asset bubble. However, the current COVID-19 recession was instigated by a forced stop of the economy, which allowed United States citizens the ability to hunker down and flatten the curve in the spread of the Coronavirus. It was the pandemic that caused the recession and not a single sector of the economy. This is precisely why the recovery has been distinctly different than a customary recovery. Housing has seen a “v-shaped” recovery, and so has manufacturing and retail sales.

A closer look at unemployment illustrates that it is affecting the lower wage earners. According to the Wall Street Journal, Bureau of Statistics, employment has only dropped 2% since December 2019 for those with bachelor’s degrees. For 16 to 24-year old’s, employment has dropped by 20.6%. Restaurants, movie theaters, amusement parks, and many retail stores have been hit hard. Younger workers have been hit the hardest. Younger, lower wage earners are not homeowners.

There are about 4 million homeowners in active forbearance, which is 7.5% of all active mortgage. Of all current forbearances which are past due on their mortgage payment, 77% have at least 20% equity in their homes, and 90% have at least 10% equity. Upon exiting forbearance, homeowners can negotiate a payment plan to pay back the missed mortgage payments or defer the payments to the back end of their loans. If they are continuing to experience a hardship and are forced to sell, most will have plenty of equity to tap into that will allow them to sell, avoiding the short sale or foreclosure route.

With about 10% of homeowners in forbearance with less than 10% equity, those owners are vulnerable to becoming a distressed sale if they experience a financial hardship. That amounts to approximately 400,000 homeowners. But not all 100% will suffer this fate. Also, with values on the rise, their equity positions will increase in time. Some will not be able to avoid becoming a foreclosure or short sale statistic, but that is a 2021 story. It will be more of ripple in the market than a wave.

The bottom line: do not count on a wave of foreclosures or short sales due to the economic fallout of the COVID-19 recession. While there may be a bit more distressed in 2021, a slight rise, it will pale in comparison to the Great Recession. Nobody should expect any type of a deal anytime soon, especially with mortgage rates that dipped below 3%, reaching yet another record low.

from Steven Thomas’ latest Orange County Housing Report