Jonathan Lansner, OC Register October 12, 2012
If you had some delusion that you could finally get off the couch and go out into the real estate market and easily snap up some deeply discounted small home or condo — that game is officially over.
The infomercial-like, once-in-a-lifetime bargains are gone. At least for the very foreseeable future.
The low-end house hunt has become a frustrating experience, at best, because a surge of shoppers has been stonewalled by a dearth of supply to shop for. Ponder the numeric trends for Orange County homes priced under $250,000.
For one, no Orange County ZIP had a median selling price below a quarter-million bucks in the 22 business days ended Sept. 20, DataQuick found. A year ago, we saw six ZIPs — Laguna Woods 92637; Santa Ana 92701 and 92707; Foothill Ranch 92610; Tustin 92780 and Stanton 90680 – with a median priced at $250,000 or less.
Say what you want about the median and its relevance to home values – it certainly says tons about what house shoppers are willing to pay!
Then look at Steve Thomas’s Orange County homes-for-sale supply figures for Sept. 27 vs. October 2011. In a year where the overall supply of Orange County residences for sale fell 56 percent – the drop was sharpest at the lowest slice of the price spectrum.
There were 538 Orange County residences listed for sale under $250,000 on Sept. 27 vs. 1,802 last October — a drop of 70 percent. The rest of the market has tightened, too, but just by 53 percent.
But what’s equally stunning is on the dealmaking side.
In the 30 days ended Sept. 27, Orange County shoppers went into escrow on 571 homes prices under a quarter million. That is actually down 12 percent from a year earlier. It seems that supply is so tight at this lower end, that buying activity has slowed — where the rest of the Orange County market is enjoying a 23 percent jump in the pace of sales contracts being signed.
Yes, numerous theories circulate as to why the cheapest part of the market has become so problematic for the Orange County shopper.
Banks look to be holding back some of their supply of foreclosed homes — perhaps in this price range — to keep this market niche relatively healthy. The shoppers who favor this market niche – notably, first-time buyers — may not have the financial strength or nerve to delve instill.
Don’t overlook the power of cheap mortgages in pushing up the price paid. Last year’s buyer – using $200,000 of financing at the average 30-fixed mortgage rate — got a house payment of $948 a month. This year, that same theoretical shopper could save $60 a month — or borrow $15,000 more for the same payment.
And some of these curious trends in under-$250,000 listings and escrows are certainly due to Orange County sellers raising the price of cheaper residences. Some those increases simply moved homes up and out of this price bracket.
A big question is if those price hikes match bargain-minded shoppers expectations.
Whether any of these low-end patterns are good sign or a bad omen for Orange County real estate — or just a statistical quirk, it’s obvious that you’ve got your hard work ahead if you’re house shopping with a sub-$250,000 budget.