There is now doubt about it… the south Orange County real estate market is going through a market correction… But some market segments are being hit harder then others. This correction is effecting the entry level market much harder then the older and staid move up markets. To illustrate this point, we conducted market analysis of distressed properties for sale in the cities of Laguna Beach, Irvine, Dana Point, San Clemente, Laguna Niguel, Mission Viejo, Aliso Viejo, Rancho Santa Margarita, Ladera Ranch and Lake Forest. This analysis comprised of counting the number of properties currently listed for sale that are either Bank Owned (REO), in Foreclosure, or Short Sales, for each city. We then took these numbers and divided by the Cities population (and then multiplied by 1,000). This gives us a simple ratio of distressed properties for sale per 1,000 population for each city.
This analysis illustrates that the entry level market is being hit much harder then the move up market. The result of our analysis is shown in the chart below:
| CITY | Distressed Rate |
| Laguna Beach | 0.10 |
| Irvine | 0.23 |
| Dana Point | 0.31 |
| San Clemente | 0.57 |
| Laguna Niguel | 0.65 |
| Mission Viejo | 0.80 |
| Aliso Viejo | 1.01 |
| Rancho Santa Margarita | 1.28 |
| Ladera Ranch | 1.55 |
| Lake Forest | 1.67 |
The coastal communities consisting of more expensive and older properties, have a much smaller percentage of distressed properties for sale compared to the more affordable and newer inland communities. For example, Lake Forest has a 16 times higher rate of distressed properties (bank REO, foreclosure, shore sale) for sale then Laguna Beach. The reasons for this are several. A higher percentage of the homes in Ladera Ranch, Rancho Santa Margarita, Aliso Viejo and Lake Forest (including Portola Hills, Foothill Ranch) are newly built in the past 15 years and geared towards entry level or first time move-up home buyers. Compared to Laguna Beach, Dana Point, and Laguna Niguel which have a higher percentage of older properties that were targeted for move-up and estate buyers. A higher percentage of the newer entry level buyers who bought in the inland communities used lower down payment financing, some with adjustable rate mortgages, and some of these home owners have no equity or negative equity (short sale) due to the recent pull back in property values. Whereas many of the home owners in these coastal communities bought long ago, or recently purchase with large down payments which shelters them from market corrections such as this one, in case they have to sell and move.
Another angle to this analysis is the following. We have been tracking the months of inventory for the south orange County real estate since July of 2002′. The entry level price range of “Less Then $450K” has always been the hottest market segment until recently. Now this price range is the softest market segment at 10 months of inventory.
It is hard to know how long this correction will last, but I guesstimate that the recovery will occur sometime in mid 2008′, which actually makes this a good time to be thinking seriously about buying a home. For more information about the orange County real estate market please feel free to contact us at: 949-388-3396 or email us at: Info@SearchOCHomes.com To view any home for sale, please visit: south Orange County Real Estate
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