May 6th, 2012, Jeff Collins
Cameron Merage is the founder and CEO of First Team Real Estate, an Orange County-based chain with more than 1,800 agents in 40 offices across Southern California. We thought we’d check in with him for his take on the current state of the Orange County real estate market …
Us: How’s business?
We are seeing sellers happier about the prices they are getting, and our agents are the busiest they have been in years, with more buyers in all price ranges.Cam: The Orange County housing market is starting to rebound nicely. While median prices continue to be down, and most of the transactions are taking place in the first home price range, we are seeing houses under $2 million in all areas of Orange County moving faster than they have in the past couple of years.
Us: In 2006, home sales stalled. We ended up with almost 18,000 homes on the market. Now, there are fewer than 7,000, lowest in seven years. Do we have a housing shortage?
Cam: I don’t know if I would call it a shortage, but it is definitely moving back toward being a seller’s market, especially in the affordable price range under $500,000.
Last month, in one of our offices, over 80% of the offers made were in a multiple offer situation. That is something that we have not seen in many years. There are not enough homes in the first-home price range, where we are seeing pent up demand absorbing the homes as soon as they come on the market.
The question is; will the distressed properties that still need to come on the market have an effect on the level of inventory in Orange County? I doubt it, especially in the affordable range, but that remains to be seen.
Us: What’s the outlook for home buying and selling this spring?
Cam: Real estate and real estate values are very localized business and therefore the supply and demand, as well as price trends across different markets and sub-markets (even in Orange County) vary.
Well, this is going to be a good spring for sellers who are selling homes compared to a year ago spring time (across all Orange County price ranges). However, the demand for homes and condominiums under $500,000 (where the greatest concentration of all sales activity is) is far greater than supply. In fact, we are seeing upward pressure on prices in this price range.
While the activity and pending sales in higher priced homes (from $1 million to $5 million) is improving, these sellers are going to have to continue to be patient and work with their agents to insure that their home is priced right and as importantly, that the home is marketed and staged properly.
As to home price trends and demand for homes between $500,000 to $1 million, the demand is not as great compared to the lower priced range homes in the affordable price range, but still stronger than homes priced over $1 million.
Of course, this is also a function of the geographical market location of the property within the county. Clearly homes closer to the coastal markets (under $1 million), remain in more demand than Inland Markets and in some high-end coastal markets is non-existent. Accordingly, for buyers, the additional demand we are seeing may create opportunities or challenges depending on the price segment being pursued.
Buyers need to work with their Realtor in evaluating the price trend in each segment and local market and decide how fast to make a move in order to avoid multiple offer situations where the property is priced well and marketed properly so that the best offer is made on a house upfront. At First Team, we have tested and proven proprietary software that is designed to graphically do price trajectory for each neighborhood and community across the entire county to help guide buyers and sellers.
Us: Prices are still – not just down, but WAY down. How long until we see home prices rising again?
Cam: Well when you look at prices below $750,000, you will see a stabilization taking place. Home prices are not dropping in this range, and in fact we are seeing homes in this range selling for more than the asking price right now. The keys to housing prices move up include a stronger economy in general – which we are seeing in O.C. earlier than the rest of the country; available credit – which we are just starting to see; more jobs – which is a positive trend in O.C.; and stronger consumer confidence – which appears to just be starting.
The other key point is that we have to clear out the distressed properties that the banks were sitting on which keeps putting pressure on prices and other sellers. While we are not completely through the distressed selling yet, we are making good strides and 2013 looks like a good time frame for those homes to have a reduced influence on the market.
Us: We’ve heard it before. The market is coming back. Heard it in 2009, 2010. Why should we believe it now when people say that?
Cam: Well right now the key is that we are seeing homes staying on the market for a much shorter period of time, the overall inventory is lower than it has been in more than eight years, we are seeing multiple offers, and the economy is rebounding. This is the first time in many, many years that all of those macro conditions and signals are lining up favorably at the same time. We believe that this says we should have a stabilized 2012 and a stronger and improving 2013.
Us: CoreLogic reported that 11,000 O.C. homes were in some stage of foreclosure. More than 100,000 O.C. homes were under water. How long until the foreclosure crisis is behind us?
Cam: The foreclosure situation is only a crisis if it is driving down the whole market, having a disproportionate effect, or overwhelming the system. I think that we have already passed that point.
While the foreclosure situation will continue to damper the whole housing market, we have already weathered the worst of it in O.C. While it is very hard on the families going through it, the market is doing a better job of getting those homes sold and owned by either other families or investors who are renting those homes to families who would like to live in them.
It is going to be a while until the situation is totally cleared up, but the market is showing signs of being able to handle the distressed homes that are coming on the market.
Us: So who is buying right now?
Cam: It is an interesting mix of people who currently make up the buyers pool. First are first-time home buyers who have been sitting on the sidelines waiting for the market to stabilize who are coming into the market in large numbers to buy a home, adding to the pent-up demand.
Second, in all price ranges above the affordable and into multi-million-dollar price ranges in the coastal markets, buyers are coming in, picking up the best locations and well-marketed homes, and getting a discount on the price, but paying all cash for the property.
Third are investors who believe they are buying low, they can rent out the properties and be cash flow positive, and they will get the upside in equity as the market continues to rebound. And fourth, we are continuing to see a strong international interest in living in O.C., and those buyers continue to play a significant role in the current housing market, especially in the over $1 million price range.