Things to Know Weblog

Orange County home prices continue to strengthen according to the following OC Register article.

O.C. home median price at 21-month high

June 4th, 2010, 9:09 am · posted by Jon Lansner

For the 22 business days ending May 18 – DataQuick’s latest real estate buying report — Orange County saw …

For the 22 business days ending May 18

Slice	Price	Yr. ago	Sales	Yr. ago
Houses	$515,000	+15.7%	1,935	+7.0%
Condos	$295,000	+13.5%	926	+18.9%
New	$640,000	+34.9%	195	+61.2%
All O.C.	$440,000	+12.8%	3,056	+12.8%

• $440,000 median selling price that is up 12.8% vs. a year ago yet -32% below June 2007’s peak of $645,000.
• A median of $440,000 was last seen in Orange County in August 2008.
• The most recent median is 19% above the cyclical low hit in January 2009 at $370,000 — a current bottom that was 43% below the peak.
• The median selling price of an Orange County single-family home is 30% less than their peak pricing (June ‘07) while condos sell 37% below their peak in March 2006. Builder prices for new homes are 26% below their February ‘05 top.
• Single-family homes were 75% more expensive than condos in this period vs. 71% a year ago. From 1990-2008, the average house/condo gap was 58%.
• In this most recent period, Orange County shoppers bought 3,056 residences — that is +12.8% vs. year-ago buying activity. This current sales pace is 85% of the average 3,597 homes sold per month in the 20 years ended in 2009.
• Builders’ new-home sales were 6% of all Orange County residences sold in the period vs. 4% a year ago. From 1990-2009, builders did 14% of the selling.

via O.C. home median price at 21-month high – Lansner on Real Estate : The Orange County Register.

What are your thoughts?

Below is an interesting OC Register article pointing out how the Newport Beach area housing market has improved over the last quarter.

Newport Beach homes own the most zip

June 3rd, 2010, 12:01 am · posted by Jon Lansner

Newport Beach 92660 had Orange County’s zippiest housing market in the most recently concluded quarter.

So says our Zippy rankings that weigh pricing and sales momentum plus foreclosure frequency as measured by DataQuick stats.

This ZIP — running from Back Bay to around Fashion Island up to the toll road –ranked 7 of 83 for pricing; 2 for sales; and 6 in terms of foreclosures frequency in the community. In the previous quarter, this ZIP ranked 19 of 83 overall.

Second strongest was Newport Beach 92663 – from the pier to around the bay up to Hoag Hospital — followed by Irvine 92614 as third best. The beach theme in the Top10 also included Laguna Beach 92651 (#5); Newport Coast 92657 (#6); and Newport Beach 92661 — basically, most of the Balboa Peninsula (#8).

When you look at the 83 major ZIPs in the county and their Zippys rankings, you see these trends for the best-performing communities:

* The top 25 had a median selling price of $635,000 – that’s +35% vs. the middle of the pack.

* Price momentum of the top 25 — activity vs. a year ago was 17% compared to 8% for the middle of the pack.

* Sales momentum of the top 25 — activity vs. a year ago was 54% compared to 5% for the middle of the pack.

* Forecloures occurred in the top 25 ZIP at a rate of 1.4 homes per 1,000 vs. 2.6 for the middle of the pack.

* Forecloures momentum in the top 25 ZIP — change vs. a year ago — was 11% compared to -2% for the middle of the pack.

Rank	Prev.	Town	ZIP	Price	Pricing rank	Sales rank	FC rank
1	19	Newport Beach	92660	$1,126,500	7	2	6
2	42	Newport Beach	92663	$962,500	4	7	15
3	17	Irvine	92614	$495,000	19	4	5
4	51	Irvine	92618	$540,000	12	1	22
5	28	Laguna Beach	92651	$1,250,000	11	10	17
6	33	Newport Coast	92657	$1,686,250	14	13	13
7	45	Fullerton	92835	$570,000	32	9	18
8	3	Newport Beach	92661	$3,300,000	1	63	1
9	33	Irvine	92603	$830,000	16	24	28
10	8	Orange	92866	$483,000	30	37	4

* At right is last quarter’s 10 zippiest ZIPs, as measured by Zippy math, and their respective rankings (1 best; 83 worst) in terms of pricing and sales momentum and foreclosure frequency.

* Two Santa Ana ZIPs finish last in Zippy rankings.

* See this coming Sunday’s Register for more analysis.

PS: What’s a Zippy?

* WHAT? Tally of 3 key home-market performance benchmarks: Pricing and sales momentum (year-over-year change) plus foreclosure density (per homes in neighborhood).

* WHY? All rankings need a nickname, thus, “Zippys.”

* HOW? Using DataQuick data for most recent quarter we rank the 83 ZIPs by price, sales and foreclosure — then determine overall ranking by each ZIP’s average ranking.

via Newport Beach homes own the most zip – Lansner on Real Estate : The Orange County Register.

What are your thoughts?

According to the below excerpts from this article on MarketWatch, John Paulson is adjusting his investment strategy to take into account an improving housing market.

By Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) — John Paulson, the hedge-fund manager famous for betting against mortgage securities, is now bullish on the U.S. housing market and the economy.

During a conference call with investors Wednesday, Paulson said he was concerned earlier this year about a potential double-dip recession.

“I’m not concerned about that at all today,” he said. It’s more likely there could be a V-shaped recovery, Paulson elaborated.

House prices have stabilized and could climb 8% to 10% nationwide in 2011, he added.

Corporate earnings are coming in ahead of expectations, the stock market is stronger and there’s a “vibrant” credit market. With the “final leg” of a rising housing market, “the outlook for 2011 could be very strong,” Paulson said.

Paulson oversaw $32 billion in assets at the start of 2010, making it the third-largest hedge-fund firm in the world behind J.P. Morgan Chase & Co.  and Bridgewater Associates.

The firm grew quickly after it made billions of dollars betting against mortgage-related securities before the housing market collapsed in 2007. One of those bets was against parts of a Goldman Sachs collateralized debt obligation called Abacus 2007-AC1.

Covering shorts

Returns generated by Paulson’s main Advantage hedge funds lagged some rivals in the first quarter. Paulson said Wednesday that this was because the firm kept its net exposure to the market low. This means negative bets, known as short positions, were relatively high compared to positive, or long, positions.

Paulson added he was concerned about a potential double-dip recession and a possible default by a Southern European nation. “I’m currently much less concerned that either those two issues will happen.”

Greece’s problems are much better understood now and are being dealt with, he commented.

Paulson & Co. covered, or closed, many of its short positions recently and that showed up in stronger returns in April, the fund manager noted. The firm has been “much more aggressive” in positioning its Advantage funds to “participate in a stronger economic recovery,” Paulson said.

via Paulson & Co. turns bullish on housing, economy Hedge Funds – MarketWatch.

What are your thoughts?

Here is a short article from the OC Register indicating the improving housing market in the Orange County Coastal areas.

Homebuying up 52% at beach, south O.C.
April 18th, 2010, 7:58 am
posted by Jon Lansner

For calendar month March – freshest numbers from DataQuick — our region-by-region analysis of homebuying shows Orange County slices up geographically speaking this way …

• DataQuick identified 704 homes selling in Orange County’s north-inland ZIP codes in this most recent period, +6% from a year ago.
• Median selling price? $448,000 in these 23 ZIPs. This most recent median price change was +11.0% vs. a year ago.
• Mid-county ZIPs — median selling price $347,000 – had 762 sales, -10% from a year ago. In these 24 ZIPs, the freshets median price change was +7.2% vs. a year ago. Combined, total homes sales in ZIPs in the north and mid-section of Orange County were -2.7% vs. a year ago as homebuying the the rest of the county ran +51.6% vs. 12 months earlier.
• North/mid-county homes accounted for 54% of residences sold in the most recent period vs. 65% a year ago. 460 homes sold in beach cities’ 17 ZIP codes in the most recent period, +47% from a year ago. Median selling price? $701,500 in these 17 ZIPs. Newest median price change was +14.5% vs. a year ago.
• South inland ZIPs — median selling price $521,875 – had 785 sales, +54% from a year ago. In these 19 ZIPs, the latest median price change was +6.7% vs. a year ago.
• All told, countywide sales were +9% vs. a year ago. The median selling price was +12% in the past year.

via Homebuying up 52% at beach, south O.C. – Lansner on Real Estate : The Orange County Register.

What are your thoughts? –

Below are excerpts from an OC Register article outlining some improvement in the Orange County housing market. It specifically indicates that the Newport Beach market has improved in the upper end of the spectrum.

SoCal sales shifting to pricier homes
January 19th, 2010, 2:22 pm · posted by Jeff Collins

Home sales in the region shifted to pricier areas last month, pushing December’s overall median home price up 4%, MDA DataQuick reported today.

* Relatively large annual sales gains were recorded last month in such higher-end markets as Beverly Hills, Santa Monica and Newport Beach — areas that saw very low sales a year ago.
* Some of the more affordable inland areas that saw robust 2008 sales recorded year-over-year declines last month. Those markets included Moreno Valley, Lake Elsinore and Palmdale.
* Overall, the Southern California median home price increased to $289,000, the first annual price gain in about 2 1/2 years. It was the highest median sales price since October 2008.
* Prices rose in every county but Riverside and San Bernardino.
* Sales were up 12.1% to 22,328, the largest number for a December since 2006, DataQuick reported.
* Sales were up in every county in the region but Riverside.

What do you think?

Here are excerpts from the “California Economic Forecast” article by Mark Schniepp. It has the most uplifting outlook on the Southern California Housing market that has been published in a long time.

Following are some of the reasons that Mr. Scnhiepp outlines for the recovery to occur.

Expected Timeline for Recovery:
Southern California

• Home prices are stabilizing as foreclosures
  decline this year.
• Selling values will begin rising again, no less than
  one year following the end point (month) of the general
  recession in California.
• The general economic recovery in California will lag
  the nation by one quarter. Consequently, recovery occurs no later than the winter of 2010, with more convincing evidence by the spring of 2010.
• Home sales are rising now in Southern Santa Barbara
  County for condominiums and for lower priced single family homes. In the Santa Maria Valley, sales are soaring, largely due to fire-sale priced distressed homes. This is also true in the Inland Empire, the Antelope Valley, and Northern Orange County.
• More broad-based participation by all price ranges of
  the housing market will occur in 2010, providing mortgage rates and credit market conditions remain favorable.
• The likelihood that mortgage rates will remain compet-
  ive into 2010 is high. The Federal Reserve will unlikely increase
  rates over the next 9 months, to insure that the recovery
  evolves into a firm expansion of economic activity.
• The likelihood that credit market conditions will con-
  tinue to ease is very high. They are already easing now. Mortgage rate spreads have narrowed and bank lending standards are no longer tightening. Consumers are saving.
  There is less leverage in the economy.
• The likelihood that the economic stimulus will be
  impacting the economy is very high by the end of 2010.
• The likelihood that the trauma in labor markets is over
  by early 2010 appears highly probable, and job creation is forecast to be positive in California during calendar 2010.

Mr. Schniepp sums up his projection article with the following:

By mid-2012, selling values return to 2004 levels, a gain of approximately 30 percent from the lowest levels recorded earlier this year.

The complete article may be read here.

Here is an excerpt from a recent Bloomberg article that indicates a continued interest by the Warren Buffett organization in capturing good real estate investments now while the market is still down.

Berkshire, Leucadia Join to Acquire Capmark Assets (Update3)

By Andrew Frye and Pierre Paulden

Sept. 2 (Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp. agreed to pay as much as $490 million for Capmark Financial Group Inc.’s loan-servicing and mortgage business in a bet on the U.S. real estate market.

The partnership of Omaha, Nebraska-based Berkshire and New York-based Leucadia was paid $40 million by Capmark to enter into the agreement, the Horsham, Pennsylvania-based lender said today in a statement. The deal gives Capmark the right to sell the assets later to the venture, known as Berkadia III LLC. Capmark may file for bankruptcy after a $1.6 billion second- quarter loss, the lender said in a separate statement today.

Berkshire has been increasing investments in the U.S. real estate market, buying shares of banks including Wells Fargo & Co., the No. 1 U.S. mortgage lender this year. Yesterday, Berkshire’s real-estate brokerage unit announced it acquired a Chicago-based agency to expand in Illinois.

The Capmark deal “fits with the real estate brokerage they bought,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington who has studied Buffett’s investing history. “The market’s down. It’s time to buy.”

With some of the big investment organizations and their top management beginning to re-invest assets in the real estate market, now may be the time to join them and secure a property while prices are down.

In attempting to figure out the direction of the housing market, one needs to consider strategies of the major real estate investors.  This article from CNBC.com News gives some insight into the thinking of a few major REIT fund investors, where they feel the real estate market is headed and when.

By: Jeff Cox, CNBC.com | 02 Jun 2009 | 02:27 PM ET

After taking a beating for the past two years, real estate investment trusts are regaining popularity with investors looking for bargains and a way to capitalize on an industry rebound.

More commonly known by their acronym, REITs are funds that provide investors with a broad range of investment opportunities while delivering substantial tax breaks to the corporations that set up the vehicles.

Wildly popular in the earlier part of the decade during the real estate boom, REITs nosedived in 2006 and 2007 as the market fell correspondingly.

But recent developments over the past several weeks have sharp-eyed investors again examining REITs as a way to profit from a looming rebound in the industry.

* REIT Stocks: Long and Short Strategies

And contrary to the growing trend of investors to eschew the traditional buy-and-hold stocks strategy, REITs are being looked at as long-term plays that will stand up against expected economic trends.

* Special Report: Investor Spring Cleaning

“It’s not a play I’m looking to go into for a month or two. Over the next several years there will be opportunity in REITs,” says Joe Heider, president of Dawson Wealth Management in Cleveland, which manages more than $400 million in assets.

“The market did oversell, and if you look at the replacement costs, the net asset value of these individual REITs, and roll them up into a portfolio, that is where the opportunity is.”

But it’s been a tough ride getting here.

REITs have fallen precipitously over the past two years. In 2007, the FTSE National Association of Real Estate Investment Trusts All REIT Index fell 17.83 percent, then dropped 37.34 percent in 2007. While the index is down more than 10 percent in 2009 after negative months in January and February, March posted a 4.41 percent gain and April saw a rise of just under 28 percent.

Industry experts trace the rebound in REITs to several factors.

Over just the past several weeks publicly traded REITs have gone to the marketplace and raised more than $10 billion in equity, according to Real Capital Analytics, a New York firm that follows real estate trends. While that can be dilutive to share prices, the ability to raise cash in a market that has struggled for liquidity has been a show of strength from some of the less debt-laded companies.

There also has been an important economic trend that has fed into enthusiasm for REITs: Growing optimism that the economy is improving–so much so that inflation could be the next significant problem. Real estate is generally seen as an effective hedge against inflation as property values increase. [read more...]

During the last three weeks, in the small community of Newport Heights, Newport Beach California, five homes have been placed into escrow. They were all in the asking price range from $1,595,000 to $3,595,000. Is it possible that these buyers are also tracking the play of the major REIT investors?