What’s Going on with Real Estate in Placentia, Yorba Linda, Brea & Orange County CA, March 2008

(The following was a response to a potential buyer who expressed his opinion that the market is going to come way down in the next 6 months to 1 year) 

 I think prices will continue to come down, but not to the extent that most of the public thinks.  Think about this — if the prices come down too much, 75% of all homes bought 2004 and later will be worth less than purchased.  This won’t happen.  We’re seeing the results of “pent-up demand” here at the Brea office…tons of buyers who have taken the “wait and see” stance for the last couple years are now starting to enter the market.  I’ve been tracking the number of homes going into escrow in a sample of cities (Anaheim Hills, Brea, Fullerton, Placentia, Orange, Yorba Linda) for the last 2 years.  Yesterday 16 homes went into escrow as backup or pending status.  March, 2008 is by far the best month we’ve seen since the downturn started around February of 2006.  The government’s 6th interest rate cut will eventuate in lower long-term lending rates.  Part of the Economic Stimulus Package was to raise conforming loan limits to $729,500 in Orange County.  The local economy is still bustling with strong employment in Orange County now that the subprime loan companies are buried and gone.  I’m seeing sellers holding out so that the average List Price to Sold Price ratio is 95%…$25,000 to $30,000 whereas 6 months ago the LP/SP was more like 92% (about $40,000).  When you say 20%, you’re talking $70K on a $350,000 purchase.  That’s not going to happen right now.  I sincerely and honestly think the market will drop only about 10% to 12% more…BUT, even if you get $25,000 to $30,000 off a property this spring or summer, the interest rate is creeping below 6%, which means you can get into an awesome payment with a 5 yr. interest only (all interest is an income write-off), or a 30year fixed (not that you need it) for under 6% w/ no points (this I heard through a colleague).

So, I’m sure your lender can find you a product that gives you a comfortable payment…if you bought today, you would have a fantastic interest rate.  You’d see your home go down in value some, but unless you’re trying to flip the property, you’ll stay in it long enough to see a marked appreciation in 3 to 5 years.  If you try to time the “bottom” of this downturn, you may see the best possible interest rate slip you by and that only the mortgage calculator knows if it’s worth it to wait.  1% difference in your borrower’s rate is a serious difference in your monthly payment.