Market Overview

US home prices are up two months in a row, says the Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac. The Commerce Department reported that August new home starts (a documentation of construction beginnings) rose 1.5% to an annual rate of 598,000. Building permits rose 2.7% to 579,000. Both figures were the highest since November 2008.

The National Association of REALTORS® (NAR) reports that in July, the number of pending sales contracts signed increased for the sixth month in a row, largely due to affordability and federal and state incentives.

Existing home sales inventories fell 10.8% in August to an 8.5-month supply, the lowest level of inventory since April 2007. However, sales closings slowed 2.7% after four months of rising sales volume.

NAR Chief Economist Lawrence Yun noted that nationwide, the typical mortgage payment for a median-priced home now represents less than 25% of a family’s monthly income. He added that 2009 payment percentages have been the lowest on record since 1978.

California

July 2009 sales prices in the state declined by 19.6% to a median of $285,480, compared to $355,000 in July 2008.

As the tax credit draws to an end, sales are rising. Month-to-month sales in July 2009 increased 8.1% over June, and median prices rose 3.9 % to $285,480 compared to the June median of $274,740.

“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July, based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”

Foreclosures Pressure Prices

Data Quick Information Systems reports that notices of default in Southern California were up 3.8% year over year in the second quarter of 2009. According to Credit Suisse, 40% of Alt-A loans are due to reset in the next 24 months. Another wave is due to reset in mid-to-late 2010. The majority of those loans are Option adjustable rate mortgages.

First-Time Home Buyers Lead the Way

About 67% of first-time home buyers can now afford to buy a home in California, compared to 76% of first-timers nationally. Homes priced under $500,000 accounted for 74% of the California market in July — a testament to the strength of the first-time home buyer. As of June 2009, California topped all states with a 10% market share of all FHA lending in the U.S.

Historical Comparisons Favor Today’s Housing Recession

Surprisingly, California’s current housing correction isn’t as severe as the one the state experienced during the recession of the early 1980s, when housing sales plummeted 61% peak-to-trough between 1978 and 1982. In comparison, housing sales volume sank 44% between mid-2003 and 2007, and has steadily risen since that time.

With improved affordability comes demand. In July 2009, there was a 3.9-month supply of unsold inventory across the state — down dramatically from a 16-month supply in January 2008.

ORANGE COUNTY

Orange County is one of the fastest-moving markets in Southern California, with a hot seller’s market* in homes priced at or under $899K, and only 11 months of inventory on hand in homes priced above $900K.

Not since December 2008 have listings been absorbed faster than they enter the market. The number of listings on the market was down to 3,290 in August 2009 from 3,453 in July. Listings sold were up to 3,568 units in August from 3,126 sold in July.

Real- Time Market Profile

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