Laguna Market Update as of June 15,2016

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What does it mean to be “priced out of the market”?

In a nutshell, it means that while a few months before, you could afford the type of house you wanted (more or less), but prices have risen so fast that now you feel that you cannot buy anything at all. You feel that it’s no longer worth it to buy – so you continue to rent. And you continue to watch prices rise, both for the home you wish you had bought but also the rents over which you have no control. The gap between what you could have bought (but didn’t) and what you can buy now can mean the difference between feeling able to buy a home and not.  When the gap gets too big, you are “priced out of the market”.

Have you been patiently waiting for just the right house to come on the market?  It may not be forthcoming.  It is very possible that while you watched the market last year, prices were getting primed for a rebound of sorts. It’s now underway and guess what?  What you could afford a year ago is no longer possible today!

This is one time when waiting does not pay off!

Why do buyers wait when they might do better to jump in?

  • they may be unrealistic as to what the market will bear (sometimes despite the statistics)
  • they are cautious to the point of being unable to move forward
  • they are listening to bad advice (at work, from friends etc.)

This is no time to fiddle and watch Rome burn. If you want to buy a house in Orange County and have been sitting on the fence, this may be the time to get off and dive in.

While I’m not a ‘pushy’ agent but an informational one this argument is an important one to pass on.

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What your cold feet to buy could be costing you?

Almost every one of my clients says at one time or another – ‘I really blew it not buying that house years ago’.  The reason they didn’t buy was they thought the market or house couldn’t go up any higher and there has to be a correction.

I remember when I first moved to Laguna in the 70s and people were saying I can’t believe that place sold for $200k, a perceived ridicules high price. Probably worth a couple million now.

But everything increases in price (even after a correction) and a new ‘price bar’ is set. You name it – stocks, cars, gas, tickets to ball games, meals at restaurants and much, much more – they all go lower during tough economic periods and then they bounce back with a vengeance, way past the level they were during the good times before.

And a new ‘normal’ price level is set and people get used to it and move forward. Hopefully, there’s a new ‘normal’ in pay as well.

The following is an example of what it could cost you in a year’s time if you waited another year to buy with rates going up:

Today vs Buying in the future

Uploadedby Sean McCracken of Laguna Beach california


It remains a strong seller’s real estate market in Orange County, with many properties selling quickly and at full price, but there’s an undercurrent of concern that we are the near the peak of pricing.  That has some buyers nervous even with the local economy is strong.  For those who are a little nervous, sometimes it turns into cold feet – and it’s costing them.

Oh yes there will be a correction sometime in the future but real estate economist say that it won’t be anything like the last one since mortgages are being written at a much higher standard.

Lastly, in an appreciating market, as we have right now, it should be noted that often the next house or townhouse or condo will be more costly or in worse shape than the one you could not decide to get serious about.  Stay nervous too long, and you could ultimately really impact how much home you can buy at all.  Worse yet, take too long and you may price yourself out of the market entirely.

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OC Housing Awakens: Inventory and demand improved dramatically in the past couple of weeks.

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.


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The Miracle Baby of Laguna Beach

By Amy Wilson

The Orange County Register

LAGUNA BEACH, Calif. – Sometime after midnight, a baby asleep on Donald Duck sheets was swept out of her house, out of her crib and into the night. That she was found at all is a miracle.

That she was alive is whatever is better than a miracle.

Nine-month-old Tiffany Sarabia rode the mudslide yesterday in Laguna Beach that smashed three homes and killed two men. (one was a British fellow who barely escaped the mud that destroyed his residence and he went over to a friend’s house only to be killed when the slide destroyed that house as well)

The man who found her was likewise swept away. Gary Segraves, 51, had come to Laguna Canyon Road to help his daughter, Jenifer, who had been stranded in an earlier slide. He was staying the night when the second slide hit, slamming him into the side of an animal shelter. When Segraves stopped rolling, he realized there was a baby with him on a pile of rocks and twigs and living-room furniture.

Segraves had lost his glasses, and at first he thought she was a muddy doll.

“I pinched its fingers to see if it was alive,” he said.

Shaken, tired and hurt, Segraves handed the mud-swaddled baby to a stranger named Todd Tingley. The baby’s brown eyes were open. She looked up at Tingley, who told her she was safe now.

Tingley took the baby and jogged toward the road, to firefighter Frank Ybarra, aboard the first firetruck pulling up to the scene.

“I didn’t have one foot on the ground when they handed me a baby covered in mud,” Ybarra said. “She had mud packed in her mouth and nose. She was very cold and wet, and she was not breathing.”

Ybarra cleared her airway with a bulb syringe – five times, 10 times.

“She started moaning a little bit, and breathing,” Ybarra said. “She was living!”

That done, he cut her wet, filthy pajamas off her and wiped mud from her face.

Meanwhile, Teresa Sarabia, barely conscious, had been loaded onto an ambulance. When she awoke, she was frantic about her husband and three children.

“My baby! My baby!” she screamed.

Ybarra showed her the ambulance’s other passenger: a baby.


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