From the monthly archives:

October 2008

Orange County Real Estate CA. — the Bottom may be near.

by Vincent Bindi on October 21, 2008

There is lots of worry in the residential marketplace today in Orange County, Ca. Prices have dropped about 30% to 35% from their peak values that occurred in the summer of 2006′. But I see some signs that we may be reaching the bottom of this pricing downturn. How you may ask ?

First sign… I have been tracking the internal market stats for residential real estate in south Orange county, CA since July of 2002′ on a weekly basis. I’ve been charting Months of Inventory, Active vs Pending and Price per Square Foot using our own proprietary indicators which are more time responsive by about 4 to 6 months then what is published by the traditional sources.(ie: Major Banks, Title Co’s).   The Months of  Inventory is a very sensitive indicator that is a leads the movement of prices by about 6 months.  The Months of Inventory dramatically dropped about 4 months ago, and if the rate holds, I expect prices to bottom out by the end of this year.  Now this indicator does not have any long term predictive powers, and if interest rates where to dramatically rise, of the lending markets where to freeze up and become illiquid then all bets are off.   (See Chart Below)

Second Sign — I know a little bit about the stock market, and one of the signs indicating that a bottom may have been reached is if the stock price does not react negatively upon the release of negative news that should have affected the stock.  I’ve noticed this phenomena in real estate prices. Albeit the price movement in real estate move at a much slower pace then stocks. During the tragedy of 9-11-01, the Orange County, Ca real estate market slowed done, but prices did not budge.  Then at the beginning of the following year, prices continued to rise.  During the the financial meltdown that started about 3 weeks ago, in which many financial advisers where fearful that this may have started a Great Depression II, the number of homes under contract (In Escrow), hardly changed.  Sure we new of a few clients here and there, who backed out of their transactions, but I was expecting a large number of contract cancellations… but it didn’t happen.  Evidently, the vast majority of buyer in escrow during this time feel confident that they are buying property at bargain basement prices.  That I say is a sign of an approaching pricing bottom.  See the graph below that shows that the number of homes in escrow, has essentially held steady for the past 6 months.  In addition, the number of homes in escrow has nearly tripled since the 20 year low set in January of this year, while the number of homes Active for sale has dropped considerably. (see graph below)

New FNMA Policy makes Short Sales a far better Solution – Orange County, CA.

by Vincent Bindi on October 17, 2008

Fannie Mae (FNMA) recently passed a new policy which makes a Short Sale a better solution for homeowners compared to Foreclosure. 

Fannie Mae is a shareholder-owned company whose charter is to make sure mortgage loan funds are made available to mortgage lenders who make loans to home buyers. They don’t make loans directly to homebuyers, but work with mortgage banks via the secondary mortgage market. FNMA purchases mortgages from lenders and hold those mortgages in their portfolio, and they also issue Mortgage-Backed Securities. These basic financial services help to bring liquidity to the residential mortgage banking marketplace.  .

Fannie Mae recently changed their underwriting policies for new mortgage loans for  homeowners who have been caught in the recent mortgage loan crisis. Starting in August of 2008, the new guideline requires that a Orange County homeowner must wait five-years after the completion date of a foreclosure, before they will underwrite a new loan with such a home buyer.  The previous requirement was only 4 years.

On the other hand, FNMA added a new guideline for Short Sales.  Fannie Mae is now stating that a homeowner who conducts a successful short Sale, only needs to wait  2 years to reestablish credit prior to buying another home, compared to 5 years for a Foreclosure.  This further adds to the other advantages that a Short Sale has compared to Foreclosure.

This is a huge advantage compared to Foreclosure.  In 2 years, the local real estate market here in Orange County will have bottomed out, and possibly start to slightly appreciate. Whereas, 5 years from now, the market will probably be in full swing recovering mode and possibly appreciated substantially from the bottom of the market values. 

For more information or questions regarding Short Sales in Orange County, please visit our website by clicking the previous link.  Or feel free to email us at:  Info@ShortSalesASAP.com or call:  949-388-3396

Loan Modification versus a traditional Refinance – Orange County, CA.

by Vincent Bindi on October 10, 2008

Loan modifications are only truly relevant in the real estate world when property values have dramatically declined, similar to what has happened recently in Orange County, CA.  Since the Orange County real estate economy has been rising since 1997, most people here have had no need to learn about loan modifications.  Therefore, when a homeowners mortgage needs to be addressed for any reason, refinance is the initial thought.  Refinancing is advisable in a stable or increasing market.  It gives homeowners the ability to take cash out when needed, lower their interest rate, fix their interest rate, as well as other options.

In today’s declining market in Orange County, refinancing is available to only a select few. Getting approved for a traditional refinance is extremely difficult.  This is due to Wall Street is no longer purchasing loans from originating banks, lenders have cut programs to less qualified borrowers, and loan to value ratios have substantially increased in Orange County and elsewhere.  If the government is not guaranteeing buying loans then most brokers and lenders will not release their funds. Fannie Mae, Freddie Mac and FHA are the Government Sponsored Enterprises (GSE’s) who are supposed to come to the rescue but are unable to do so in the recent financial crisis that hit Orange County and the rest of California.

Potential Orange County homeowners or current homeowners looking to get financing must now have superb credit , lots of equity in the home (or larger down payments), provable job security, disposable income after the bills are paid and proof of the ability to repay a large mortgage. If any of these conditions these conditions are not met, getting a refinance (or new) loan is almost impossible.  When considering refinancing in a market where equity has evaporated, causing loan balances to exceed property value, there is not option to refinance.  That is when  Loan Modification comes into play.

A Loan Modification is a negotiation with your current mortgage lender(s), in an effort to possibly reduce the loan payments, interest rate, or even the loan balance. A loan modification should be employed if the equity in the home is less then 5%, and the homeowner has had a recent financial difficulty, which in today’s market applies to about 70% of the populace due to the recent word financial crisis.

In today’s declining market, refinancing is available to only a select few, while a Loan Modification is more readily available to the masses of homeowners.  For more information about Loan Modifications, please visit our Attorney based Loan Modification affiliate at:  www.CaLoanModLawyer.com … or drop them an email at: Info@CaLoanModLawyer.com

How to Reduce your Orange County, CA Property Taxes

by Vincent Bindi on October 6, 2008

Unfortunately, real estate values have declined substantially in Orange County, CA. in the past 2 years. Home prices have dropped by as much as 35% in some areas, to market values that existed in 2004’. A small consolation to homeowners who purchased in the years 2005’ and 2006’, is that it may be possible to reduce your Property Taxes. As specified in Proposition 13 (Prop 13), your property taxes are based upon the price you purchased the home for times approximately 1.15%. For example, if you purchased a in 2006 for $700,000, your property taxes are approximately $8,050 per year. If your Orange County home is now worth $500,000 today, then you could possible save about $2,300 per year!

So far this year (2008’), the Orange County tax assessor has estimated that there are 125,000 properties that have a Market Value that is lower then the Prop 13 Tax Value. And the Tax Assessor has already sent thousands of tax reduction notifications to many Orange County homeowners. The problem is that the Tax Assessors automatic property reduction is typically substantially less then what you can accomplish by disputing your tax bill.

So lets begin to estimate if a reduction in your property taxes is possible. First, you can go to the follow Orange County Tax Assessor website: http://tax.ocgov.com/tcweb/search_page.asp  and enter in your APN number and obtain a quote of your current Tax Bill. Next, lets get a quick and free rough estimate of he value of your home. Go to www.Zillow.com and type in your address, and this software will give you an estimate of the current value of your home. A word of caution, Zillow can sometimes give inaccurate results, either high or low by Tens of Thousands of dollars. A much more accurate estimate can be obtained by a local experienced Realtor. I only recommend Zillow because it is instantaneous and easy. With this current market value, multiply by 1.15%, and compare this Tax amount to the Tax Bill found on the Assessors website above. If it is lower by about $400 or more, then I suggest you pursue a property tax dispute.

It is possible for you to conduct the dispute with the Tax Assessor yourself. The property tax dispute form is free, and not too terribly complicated. But if you make a mistake and it is rejected by the Orange County Tax Assessor, then you have to wait for one year, before you can attempt another dispute…potentially costing you hundreds if not thousands in savings. According to the Orange County tax assessor, the number one reason for declined property tax disputes are not due to the form being incorrect, but the current market valuation that is required to be submitted with the form. Comparing your home other like kind homes that have recently sold, and making the appraiser like adjustments, up or down, is not as easy as it looks. Therefore, we recommend that you hire the services of a licensed appraiser or a property Tax reduction firm. I could list some here, but you can easily find numerous service providers by searching in Google using “Reduce Orange County CA property taxes”.

If you have any questions regarding your Orange County property taxes, or real estate in general, please feel free to call us at: 949-388-3396, or email us at: Info@SearchOCHomes.com