Lately we have seen a couple of interesting trends. Homes that are below $1 Million and priced right are selling relatively quickly. This means banks are lending and closing. This is a big difference after last year where 50% of the "Approved" buyers couldn't get funded and didn't close. It was making agents crazy. All that work and no commission.
Buyers were having fun either and many just gave up after one try. Personally I had five "pre approved" loans when I made the offer on my house. Three of the five cancelled my approval after the 17 day contingency period leaving me to lose my deposit. Thankfully two kept moving forward, and yes I paid fees to all five of them.
At the very last second, the bank I was about to sign with backed out. At the end of the day only one lender stuck it out and closed the deal. My wife and I were not the listing or selling agents on the deal, and I can tell you that poor woman called almost every week to see if the banks were still going to loan.
The difference between me getting the house and the people that didn't close that month was simple. I didn't quit when the first bank said "No". Quitting isn't how you get a deal on a house, or any other kind of deal for that matter.
These days the above $1.0 Million homes are still soft, even if they are priced right. When I say soft, they are closing more than last year, but they are sitting unless they are priced very low. The spread between wholesale foreclosures/short sales and retail in the sub $1 Million home priced in Orange County and LA County is narrowing. The $1.0 Million plus market is getting a little wider. My guess is people are holding out longer and getting into more trouble, and banks don't want to dump those jumbo loans.
Sunday the L.A. Times had a pretty good chart that showed LA county was seeing a similar change. Homes that were hit the hardest in areas like Lancaster were starting to see a little rebound. The water front homes of Long Beach and Manhattan Beach were still falling although in single digits now indicating we are near a bottom.
I want to use a little caution here and say this isn't a "demand" bottom, rather it is an inflationary bottom. What that means is that houses are just following the increasing prices of everything else. While the Fed is still loaning money at record low interest rates, they are also printing it at record rates. That is the real definition of inflation, more money available without an increase in supply of goods equals inflation.
That inflation is what we are seeing right now, and the benefit to the housing market is that the loans are worth less as the house prices follow inflation upward. If the home market falls at 5% relative to the previous year and there is 5% inflation, the result is no change in home prices. This looks good for the president in the short run, but sets us up for double digit inflation in the next couple of years. Look back at the Carter-Reagan years. Remember 18% home loans?
The second interesting trend reported by the National Association of Realtors last week was a significant drop in the number of "low ball" cash offers. Another indicator that we have hit bottom and the cash buyers are looking for a different kind of deal.
Of course the banks still hold the wild card with over one million homes in the foreclosure process at some stage. I don't imagine they will dump all of these homes at once. Instead as the new foreclosure rates decline, they will start releasing a few homes for sale. That is exactly what we are seeing in Orange County right now.
What is going on in your part of the state?
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