Check out Laguna Beach turnover rate – With 4% turnover in 2015 (410 homes sold out of 9,300 homes in Laguna) It’s is taking 23 years to sell all the homes in Laguna
Gone are the days of homeowners moving every 7 years.
So, why aren’t homeowners moving like they did a decade ago? There are a number of factors that illustrate why they are staying put. The homeownership rate for 18 to 34 year olds has been dropping since reaching a height in 2005, and about a third of all millennials live with their parents. Ultimately, that delays would-be empty nesters from downsizing. Also, there aren’t as many new homes being built in Orange County, especially below the $1-million mark. This used to create a lot more real estate activity as many locals bought new, but had to sell their existing homes first. With the county running out of vacant land, this will be an ongoing issue.
Another factor that helps explain why homeowners are not moving as often as they used to is that owning a home long term and paying off the mortgage is now in vogue. The severity of the Great Recession rattled our collective psyche and people now look at home ownership a bit differently. As is typical in the Midwest, people want to hang onto their homes and dig in their roots.
One of the biggest factors, that is talked about in the real estate trenches on a daily basis, is that homeowners are afraid to sell their home only to turn around and find nothing available to buy. Essentially, the low inventory is preventing would be sellers from coming on the market, which only exasperates the problem. Yet, there are ways around this dilemma. A double move is a solution, where a homeowner sells their home, moves into a monthly rental, and then takes their time to isolate the most ideal home for their family. Moving companies work with the double move scenario often and can crate and store whatever will not be used at the short term rental. Another solution is for a seller to accept an offer to purchase with the condition that they are able to find a replacement property within a specific time period, 30-days being most common. If they are unable to find a replacement home within the given time period, then the contract is cancelled or additional time may be negotiated.
The current trend of an underwhelming annual inventory and a low housing turnover rate is not going to change anytime soon. With that knowledge, buyers and move-up (or move-down) sellers need to approach the market with realistic expectations and plan accordingly, utilizing the expertise of a professional REALTOR®.
Just when the January ‘going into escrow’ numbers for Laguna showed a potential slowdown in demand it bounces back with a 50% increase in February.
That’s right, the largest bank heist in U.S history, of $30m (the equivalent of $100m today), happened in our own Monarch Beach in 1972, at the United California Bank located in the shopping center at the corner of Coast Hwy and Crown Valley. It is currently a vacant store next to Chase Bank.
The story has a whole cast of characters, from the mob to the President of the United States, very interrogate planning and execution and a quirky ending with the burglars being caught by dirty dishes.
In 1972 Monarch Beach was a sleepy, low key part of the OC Coast right next to South Laguna. Many of the current communities were just being built or not built at all at that time.
There was one patrol officer covering a 20 mile radius, and the banks weren’t open on the weekends like they are today.
Meanwhile, back East, in Youngstown, OH, which was the cradle of the mafia at that time, a criminal mastermind, named Amil Dinsio, heard of a great opportunity to steal from what he thought was another crook.
Amil had heard, through his den of thieves, that President Nixon had a $10 million dollar campaign slush fund in a bank located near his summer White House in San Clemente. He was told that the dairy lobby was buying his influence, as the administration was considering discontinuing the cash subsidies to the dairy industry.
Amil assembled a gang of six proven specialist, put together a detailed plan, and flew off in March 1972 to LAX. He and his gang took a taxi to his sister’s house in South Gate and Amil tipped big with a $100 bill. This would later come back to haunt him.
They hired a realtor to find them a condo to rent in the East Nine just off the El Niguel golf course along Crown Valley that had a vantage point of the bank.
They were extremely meticulous in their planning, having previously done this type of robbery back home, and bought a used car and went throughout the county to buy their tools at different locations so they wouldn’t be to obvious.
They started their operation on Friday night by blowing a hole in the bank’s reinforced cement roof with dynamite. No one even reported the resulting loud boom. They compromised the alarm and dropped down into the bank.
But they didn’t find it since Nixon’s money was at Bank of America in San Clemente.
Since they didn’t find it they decided to come back the following night. They put a mirror on the covered hole that reflected light up to the condo. Only after seeing the mirror’s reflection the next day did they go back on Saturday night and then again on Sunday night till just before opening on Monday.
When bank employees tried opening the vault on Monday morning, they were unable to. The bank called for the police, who called for the vault experts to get the door open. Upon examining it, it was found that the timing mechanism of the vault necessary to open it was jammed from the inside. Upon opening the vault door was a mount of cement and gray dust; safety deposit boxes, stocks and bonds, bonds, and photographs were scattered all over the floor.
While it’s hard to say exactly how much they got since it was undeclared jewels and cash, it is estimated at about $30 million (100 million by today’s standard).
They did a magnificent job of trying to make a clean get-away. They scrubbed the condo in great detail with the exception of one thing – they forgot to wash the dishes and their finger prints were found. The car with their robbery tools in the trunk was also found.
But the thing that put the huge team of FBI agents in the right direction was they interviewed all the taxi drivers at LAX and the driver remembered them due to the $100 tip and took them to the sister’s house.
For his role in the crime, Dinsio is sentenced to 10 years in prison.
The stock market was taking a beating, driven by low oil prices and worldwide economic turmoil. The start of 2016 had everybody, including the Orange County housing market, on pins and needles. It seemed that the Holiday Market slowdown was not going to thaw like it typically does starting in mid-January.
Right after the Super Bowl’s clock winds down to zero, housing’s Spring Market begins. However, an important step needs to occur first, a cyclical thaw in January with an increase in the inventory and the number of homes coming on the market followed by an increase in demand. All of the holiday trappings of eggnog, family gatherings, the exchanging of gifts, and New Year’s resolutions were now in the rearview mirror. It was time to move on and for the Orange County housing market to awaken. But, it was not happening.
Both inventory and demand were off during the first couple weeks of the year. It appeared as if homeowners and buyers were all taking a wait and see attitude before jumping into the housing market. After the first three weeks of 2016, there were 8% fewer homes coming on the market compared to the start of last year. Demand actually dropped from the start of the New Year to the second week of January, something it had never done in the last decade.
Had the recent Fed hike in the short term rate slowed housing? Did the worldwide economic turmoil and the collapse in financial markets and Wall Street infect Orange County housing? It may have seemed like it, but it’s just not the case. As it turns out, interest rates are actually lower today than when the Federal Reserve hiked the short term rate for the first time in nine years in December. Long term interest rates for housing are not directly tied to the short term rate. Instead, those rates are more closely tied to treasury bonds. Because of all of the international turmoil, worldwide investors have flocked to treasury bonds as one of the safest investments on the globe. As a result, interest rates have actually dropped despite the Fed increasing the short term rate. However, if they continue to increase that rate, it will eventually spread to long term rates and have an effect on housing.
At first, it seemed as if the Orange County housing market’s slow start was tied to Wall Street and the worldwide economic turbulence. Regardless of the reason, it doesn’t matter now. The housing market has turned the corner and revved its powerful engine. In the past two weeks, demand jumped 22% with more buyers and sellers signing on the bottom line. The active inventory has been climbing as well, despite more pending transactions (when homes are changed to pending, they no longer count as part of the active listing total). More homeowners are taking advantage of the low, anemic inventory levels and entering the fray.
With interest rates so low, it is a great time to purchase and cash in on the historically low interest rates. The average interest rate since 1990 is 6.6% (since 1972 it is 8.5%). Today’s rates are unbelievably low. And, it looks as if the Federal Reserve has paused their rate hikes for now due to worldwide economic instability. So, it appears as if these low rates will be around for at least the first half of 2016, making it extremely advantageous to be a buyer. Despite Orange County home values inching its way closer to its prior peak set just prior to the Great Recession, the current interest rate environment has made homeownership much more affordable.
The monthly payment for the detached single family residence median sales price in December of $670,000, at today’s rate of 3.75% and 20% down, would be $2,482. When rates eventually rise to 4.75%, and they will (Freddie Mac forecasted 4.7% by the end of 2016), the payment would rise to $2,796 per month. That’s an increase of $314 per month or $3,768 per year. The bottom line: it makes sense to take advantage of today’s rates. Down the road, today’s buyers will be thrilled that they did.
For sellers in Orange County, the current inventory is extremely anemic and there are buyers waiting for new product to hit the market. The Spring Market officially begins next week after the Super Bowl and there is less competition today than there will be in the middle of spring. While April through May is typically the peak for the year in terms of demand, it is also a peak in the number of homes coming on the market, more competing homes. Waiting in anticipation of more appreciation makes sense in markets that are appreciating rapidly, but buyers today are not overly excited to stretch much more than the most recent sale. Instead, they are looking to purchase at or near a home’s Fair Market Value. Homes are no longer appreciating rapidly. The bottom line: it makes sense to take advantage of today’s low inventory and less competition.
Active Inventory: the inventory has increased by 10% thus far this year.
The active inventory increased by 265 homes, or 6%, in the past two weeks and now sits at 4,841. That’s the largest increase in the inventory since July of last year. With interest rates being so low coupled with a low inventory, today’s hot demand may keep the inventory from growing rapidly until the Summer Market. That remains to be seen and depends upon how quickly seller adjust their prices closer to their Fair Market Values. Last year, 10% of the active inventory reduced the asking price each and every week. Overzealous sellers will have to reduce this year as well until they are in alignment with the Fair Market Value.
Last year at this time the inventory totaled 5,331 homes, 490 more than today, with an expected market time of 2.6 months, or 78 days, a slight seller’s market. Today’s expected market time is similar at 75 days, also a slight seller’s market. A slight seller’s market means that there is not much price appreciation but sellers get to call more of the shots in terms of negotiating the finer details of a contract.
Demand: in the past two-weeks demand skyrocketed and increased by 22%.
Demand, the number of new pending sales over the prior month, increased by 343 homes in the past two-weeks, and now totals 1,936. That’s the largest increase since February of last year. During the same two-week period in 2015, demand actually increased by 454 pending sales and it totaled 2,053, or 6% more than today.