orange county
Market Overview a monthly real estate report | May 2010
Favorable News For The Economy And Housing
Consumers turn positive
The improved job outlook was accompanied by
improvement in consumer attitudes:
• A March 2010 Move.com survey found that
one in five potential home buyers plan to buy
a home in the near future, and 17% want to
buy an investment home — three times the
investor interest of a year ago.
• A Fannie Mae National Housing Survey
conducted between December 2009 and
January 2010 found that 65% of respondents
believe it’s a good time to buy a house, and
nearly 31% say it’s a very good time. 44% say
they expect their personal financial situation
to improve in the next year.
• The National Association of REALTORS®
Pending Sales Index was up 8.2% in February.
Pending sales are calculated by the number of
signed purchase contracts.
• The NAHB/Wells Fargo Housing Market
Index rose four points in April, a significant
improvement after six months of no
movement.
• Building permits were up 34.1% in March
2010 from a year ago — the biggest annual
gain since February 1992.
• Housing starts are up 1.6% to a seasonally
adjusted annual rate of 626,000 units, and
February housing starts were revised to
show a 1.1% increase, which was previously
reported as a 5.9% decline. This is the biggest
improvement in 17 months.
The impact of consumer sentiment is critical
to metrics such as household formation. As
the NAHB points out, “Household formations
slowed from a 20-year average annual growth
rate of 1.3% to less than 1% in 2008 and to
a post-World War II low of 0.34% in 2009.”
That means we’re about 1.2 million households
short of normal. If people return to the normal
rate of household formation, we could actually
have enough demand for housing to reignite a
housing boom.
The housing market turns positive
While there’s no question that pressure is still
intense from the distressed end of the housing
market – short sales, foreclosures and home
price declines – one benefit is undeniable.
Homes are more affordable than they’ve been
in a decade.
The average household can afford more than
70% of the homes that have been recently sold
on the market. During the housing peak in the
mid-2000s, the typical household could afford
only 40% of homes sold, says the NAHB.
According to the National Association of
Realtors’ Affordability Index, in 2009, a
median income family had 171.6% of the
income necessary to qualify for a mortgage on
a median-priced home, assuming a 20% down
payment and principal and interest totaling less
than 25% of household income. At that time,
the median existing-home price was $172,100
and the median income was $61,845.
The reason buyer interest is growing is that
prices have fallen to pre-boom levels — and
that has attracted the attention of renters.
According to Move.com, nearly seven in ten
renters (67%) plan to buy a home at some
point in the future.
It’s no coincidence that the home ownership
rate is also 67%, a sustainable, practical number
for both sides of the market — home owners
and renters.
Federal Reserve Chairman Ben Bernanke was
cautiously optimistic enough to tell the Joint
Economic Committee of Congress in mid-
April that he believed consumer demand
would be sufficient to replace the government
stimulus efforts of the past two years in keeping
the economy growing.
The withdrawal of government support is
already impacting the housing market, with
mortgage interest rates beginning to fluctuate.
This may cause some home buyers to jump
in before rates go much higher, or it could
temporarily cool the market. However, with an
improving economy, it’s unlikely that buyers
will be too deterred by higher interest rates in
the short term, knowing that housing prices
might also go higher.
The Mortgage Bankers Association has
predicted that mortgage rates will rise, possibly
near 5.8% to 6.0% by the end of the year; but
that’s not likely to impact sales. The Associated
Press Economy Survey of 44 leading national
economists found that while sales prices will
lower in 2010 by a minuscule 0.1%, they’ll
rise 2.3% in 2011. It also predicted that home
sales volume will rise in both 2010 and 2011,
perhaps as new households start forming
again.
Employment turns positive
Because employment and housing are lagging
indicators in a recovery, April may have seemed
worse than it actually was. For example, the
Bureau of Labor Statistics announced that
March 2010 showed the first rise in monthly
employment since December 2007, and
revised earlier estimates to show that jobs were
more stable than had been previously reported.
But that cheerful news didn’t arrive until mid-
April, while the nation was busy preparing its
tax returns. The upshot is that 162,000 non-
farm jobs were added in March, reversing an
average 200,000 monthly loss in Q4 2009.
(Editor’s note: About 48,000 of those jobs
went to temporary census workers.)
California Outlook
According to a joint report by the California
Association of REALTORS® and DataQuick,
230 out of 357 cities in California showed an
increase in median home prices over a year ago.
The state median price was up 20.8% year- Furthermore, only a few California cities are anticipated to be exhausted in the first
over-year, to $301,790. Unsold inventory is saw large price reductions in April 2010. 30 days of offering.
now strongly in the seller’s court, with only Of the top 50 cities in the U.S., Long
five months of supply on hand. Homes that Beach, California, had 23% of listings with Buyers: Don’t assume that waiting will get
sold were on the market a brief 39.2 days, reductions in April 2010, with an average you a lower price. With inventories at an
compared to 48.2 days a year ago. reduction of 10%. Los Angeles reported average five-month level or less, it’s not
20% of listings with reductions, with an likely the home you have your eye on will
Among other reasons for sellers to celebrate average 11% off the list price. Sacramento linger on the market very long. In some
is the fact that price reductions are halting. had 18% of listings with reductions, with price ranges, sellers are receiving multiple
At the end of April 2010, Trulia.com an average 10% off the list price. offers within days of putting their home on
announced that 20% of its listings have been the market. Make your best offer, and look
reduced in price, compared to 27% a year Others include Oakland (16%, 12% off forward to building your own equity.
ago. This represents a 26% improvement in list), Fresno (15%, 10% off list), San Diego
asking prices. (12%, 9% off list) and San Jose (12%, 7% Sellers: Do not anticipate the market
off list). by setting asking prices above recent
California metros were among the most comparables. Lending guidelines require
improved in holding the line on listing It’s a great time to buy a home. While no that sales comparables go back as far as a
prices. San Diego, for example, showed a one can predict the future, it does appear year, which may not reflect the current
52% improvement, from 25% of homes the market has stabilized. Mortgage interest seller’s market as much as you might like.
with price reductions in April 2009 to 12% rates, despite recent spiking, are still nearly While lenders have discretion, they don’t
in April 2010. San Francisco reported a three points below “normal.” Home prices want to take risks on rising prices without
45% improvement, from 30% of homes have turned the clock back to 2004 in many seeing several months of sustained price
with at least one price reduction to 17% of areas, and as national incentives are expiring, growth.
homes reduced in April 2010. Los Angeles California tax incentives will pick up
improved 40% year-over-year, from 33% through the end of the year. Note: California
of homes reduced in April 2009 to 20% of tax credits take effect immediately following
homes in April 2010. the conclusion of federal tax benefits, and

ORANGE COUNTY

Like other areas of Southern California, Orange County is in a blistering seller’s market in homes priced under
$1 million, but supply starts to build when prices rise above $3 million. However, upscale and unique homes
aren’t expected to sell at the same pace as more affordable homes. When upscale supplies approach two
years on hand or more, then the market is sluggish or stagnant.

*A balanced market is widely accepted as having six months of inventory on hand with market conditions favorable to both buyers and
sellers. A buyer’s market is characterized by conditions such as high inventories, falling prices, concessions by sellers, and incentives among
other indicators. A seller’s market has low inventories of homes for sale, escalating prices, and keen competition between buyers, including
multiple offers.
Detached homes stand alone and share no common walls with any other neighboring home. Attached homes share at least one common wall with
another home. The type of home ownership is determined by whether it is a condominium, townhome, duplex, co-operative or other.

Listings Sold by Calendar Quarter

All residential properties in SoCalMLS-Orange County
9 quarters List Price Range (Less than $1 million) through March 31, 2010
All Properties - Listings Sold by Calendar Quarter
9 Quarters through March 31, 2010
Average Sale Price (Thousands) Homes Sold

$600 10,000
Avg Sale Price Listings Sold Units
Orange County homes under $1 million gained 8.9%
$500
8,000
in price between Q1 2009 and Q1 2010, and are still
6,625 6,598
$400
5,565
6,026
6,865
6,000
12.5% below first quarter prices in 2008. Sales volume
6,377
$300
5,075 5,136
has tapered off for the same period, after skyrocketing
3,201 4,000 60.4% from two years ago.
$200

$410 $393 $429 $434 $428

$489 $476 $445 $412 2,000
$100
1-year avg. price trend: Up 8.9 % 1-year sales trend: Up 1.2 %
2-year avg. price trend: Down 12.5 % 2-year sales trend: Up 60.4 %

$0 0
2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are January 1, 2008 through March 31, 2010. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.
 Inventory in Months’ Supply – April 5, 2010
Detached properties in SoCalMLS-Orange County

Detached Properties - Inventory in Months

Under $300K 1.9
Detached homes are selling nearly as fast as they can
$300K - $399K 2.3
close in the affordable ranges. Only when prices rise
$400K - $499K 2.4
above $900K do supplies start to build toward a buyer’s
$500K - $599K 2.9
market.
$600K - $699K 3.2
$700K - $799K 3.8
$800K - $899K 4.0
$900K and over 8.6

0.0 2.0 4.0 6.0 8.0 10.0

Inventory in Months’ Supply – April 5, 2010
Attached properties in SoCalMLS-Orange County
Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Attached Properties - Inventory in Months

Under $300K 2.5

Attached homes are selling nearly as quickly as detached
$300K - $399K 2.6
properties, but supplies start to build once prices leave
$400K - $499K 2.9
the conforming loan ranges.
$500K - $599K 4.2
$600K - $699K 5.4
$700K - $799K 7.7
$800K - $899K 8.1
$900K and over 10.1

Pricing
0.0 Reality
2.0 – April
4.0 5, 2010
6.0 8.0 10.0 12.0
List prices per square foot by MLS status
Detached properties in SoCalMLS-Orange County
Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Detached Properties - Pricing Reality for Sellers, per square foot

Sellers should carefully consider current buyer
demand when pricing their home for sale.
ACTIVE $499 The gap between active listings prices per square foot
When list prices per square foot of Backup
and Pending status properties are below that
and that of closed sales underscores the heated seller’s
of Active properties, sellers should ask for
pricing counsel from their Agent.

BACKUP OFFERS $320 market in the affordable price ranges. Higher backup
offers suggest that sellers have pricing strength.
CLOSED SALE $332

HOLD DO NOT SHOW $306

PENDING SALE $300

Pricing Reality – April 5, 2010

List$0
prices$100 $200foot $300
per square by MLS $400
status $500 $600
Attached properties in SoCalMLS-Orange County

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Attached Properties - Pricing Reality for Sellers, per square foot

Sellers should carefully consider current buyer
demand when pricing their home for sale.
ACTIVE $333
The gap between active attached home list prices and
When list prices per square foot of Backup
and Pending status properties are below that
of Active properties, sellers should ask for
solds is not as vast as that of detached homes, possibly
pricing counsel from their Agent.

BACKUP OFFERS $255 due to the greater availability of near-same comparables.

CLOSED SALE $264

HOLD DO NOT SHOW $246

PENDING SALE $235

$0 $100 $200 $300 $400 $500

 Monthly Listings Taken and Absorbed
Detached properties in SoCalMLS-Orange County
12 months through March, 2010

Detached Properties - Monthly Listings Taken and Absorbed

12 Months through March 2010
3,000 2,500
New Listings Listings Absorbed 2,711
Detached home sales volume and inventory levels
2,500
2,000
2,100 2,095
reached their lows in December 2009. For the next
2,000 three months, new listings expanded 54%, along with
1,658 1,500
1,611 1,647
1,503 1,550 1,542
1,509
absorption rates up 48%.
1,500 1,406
1,237
1,000
1,000

500
500

0 0
2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03

New Listings 1503 1550 1611 1647 1542 1509 1658 1406 1237 2100 2095 2711
Listings Absorbed Monthly
1567 1527 Listings
1627 1553Taken
1618 and
1559 Absorbed
1423 1342 1158 1298 1569 2223

Attached properties in SoCalMLS-Orange County

12 months through March, 2010

Attached Properties - Monthly Listings Taken and Absorbed

12 Months through March 2010
1,800 1,800
New Listings Listings Absorbed 1,560
New listings of attached homes also hit bottom in
1,500 1,500
1,348
1,291 December 2009. Since then, sellers have released
1,200
1,071
1,200 46% more inventory to the market. Fortunately for
976 1,031
1,005
960 943 954 945 them, absorption rates are up 50% for the same
900 851 900
period.
600 600

300 300

0 0
2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03

New Listings 960 943 976 1031 954 1005 1071 945 851 1348 1291 1560
Listings Absorbed 966 916 1078 1052 1000 999 987 825 802 1046 1118 1586

Listings Sold by Calendar Quarter

Detached properties in SoCalMLS-Orange County
9 quarters through March 31, 2010
Detached Properties - Listings Sold by Calendar Quarter
9 Quarters through March 31, 2010
Average Sale Price (Thousands) Homes Sold

$900 6,000
Avg Sale Price Listings Sold Units
Detached home prices are up 18.9% in the year between
4,621

4,079
4,392
Q1 2009 and Q2 2010, flattening sales volume along
4,574
4,000
the way.
$600

4,061 4,272

3,301
3,308
2,279

$300
$682 2,000
$825 $758 $679 $632 $586 $629 $688 $697

1-year avg. price trend: Up 18.9 % 1-year sales trend: Up 0.2 %

2-year avg. price trend: Down 15.5 % 2-year sales trend: Up 45.2 %

$0 0
2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1

Listings Sold by Calendar Quarter

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are January 1, 2008 through March 31, 2010. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.
Attached properties in SoCalMLS-Orange County
9 quarters through March 31, 2010
Attached Properties - Listings Sold by Calendar Quarter
9 Quarters through March 31, 2010
Average Sale Price (Thousands) Homes Sold

$450 3,500
Avg Sale Price Listings Sold Units
$400
2,905 3,000
With prices up 11.1% between Q1 2009 and Q1 2010,
2,692 2,681
$350
2,410
2,500
attached home sales volume held its own – up 10.6%
2,190 2,635
for the same period.
$300

2,291
$250 2,000
2,072

$200
1,500
1,381
$150

$404 $396 $312 $293 1,000

$354 $309 $327 $329 $326
$100

1-year avg. price trend: Up 11.1 % 1-year sales trend: Up 10.6 % 500
$50
2-year avg. price trend: Down 19.4 % 2-year sales trend: Up 65.9 %

$0 0
2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1

Based on data supplied by SoCalMLS / Orange County and its member Associations of REALTORS, who are not responsible for its accuracy.
©2009 PrudentialAnalysis
California Realty
dates are January 1, 2008Independently owned
through March 31, 2010. Does not reflectand operated.
all activity Objective
in the market place. data
Copyright © 2010, used
Real Data in this
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