Lansner: Housing’s back from the brink

JONATHAN LANSNER
Business Columnist
THE ORANGE COUNTY REGISTER

Published: Oct. 19, 2012 Updated: Oct. 22, 2012

Four years ago, the local housing market was in the grips of a death spiral.

A financial crisis — in good part tied to risky “subprime” mortgages pioneered in Orange County — was in full bloom.

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Local home sales had peaked in 2005. Prices topped out in 2007, the same year homebuilding vanished. Those housing troubles, compounded by dumb lending practices and broader economic weakness, pushed local foreclosures to record highs in the summer of 2008.

Then came the spike to the housing heart. Global economic fears in late 2008 all but shut down the mortgage market for a time. When lending resumed, it was cash for only those with the very best credit.

So, when you ask the grand presidential reelection question — “Are you better off four years later?” — the real estate retort must note how bleak it was at the end of 2008.

To better ponder the difference in four years, we asked DataQuick to compared homebuying activity in this year’s third quarter to the same period in 2008.

You may say, with a political bent, is that fair? Didn’t President Obama take office in early 2009?

Well, real estate is cyclical. To compare a first quarter — typically the slowest slice of a year — with a busy summer quarter would be skewed. Plus, my choice of comparisons has more than political meaning.

If we forget how bad things were in 2008, no matter our politics, we may end up with bad analysis or off-point future tactics or policies.

Bottom line in this math: Orange County home buying rose 11 percent in four years — by no means a boom, but clearly progress. The median sales price only rose 1 percent since 2008, a hint that we’ve bottomed.

And most stunning: Those painful foreclosures are down 75 percent.

MIXED PICTURE

It’s been, by no means, a uniform four years of home buying in Orange County.

Comparing 2012’s third quarter results to 2008, we see a theme that’s been repeated in numerous slices of the economy in this recovery period: the upper crust faring better than the lower end of the economic spectrum.

When we sliced the market into four geographic regions, Orange County’s 17 beach-close ZIP codes had the best four-year sales performance: up 48.6 percent from 2008.

The beach remains the county’s priciest housing, with the median selling price at $627,500 this year — and that’s after a median price drop of 9.5 percent from 2008.

The seaside surge in buying parallels the uptick in high-end home buying. DataQuick stats show Orange County’s six million-dollar-plus ZIPs in the third quarter had collectively 572 purchases — 112 percent more than four years ago.

Buyers of such high-end home are enjoying the return of mortgage financing to this risky niche. Large-dollar mortgages — often dubbed “jumbos” — all-but vanished during the 2008 financial crisis and ensuing years.

That pricier buying boomlet is a sharp contrast to what’s gone on in the county’s midsection, home to the most affordable residences.

Sales counts in these 25 mid-county ZIP codes were down 13 percent in four years. Pricing was weak, with median selling price at $356,250 following a median price dip of 4.4 percent.

Several quirks are built into these trends that look like lower-end weakness.

Modest tax incentives in 2009 and 2010 were best suited to buyers of lower-prices homes. As a result, some folks may have moved up their purchasing plans, and cut into 2012’s low-end activity.

Also, analysts say there’s a huge shortage of lower-priced homes to buy, another factor depressing this niche.

Finally, a meager economic recovery — with unemployment stubbornly high — doesn’t give the typical shopper of more affordable housing, the first-time buyer, lots of confidence to jump into the market.

THE CAVEAT

The housing market is by no means fully healed.

For example, there were 1,007 foreclosures in Orange County in the third quarter. That’s roughly equal to the total homes lost to the banks from the entire 2003-2005 period.

Or ponder the 9,101 homes that sold from July to September. That sales pace is 15 percent slower than average homebuying since 1988.

You can argue the causes of the latest boom and bust — or this local industry’s habitual leaning toward insane volatility. Or question the sanity of the numerous rescue tools deployed for housing since the 2008 crisis. Or ponder whether recent housing strength — by many measures — is sustainable.

But one thing is not debatable: Anything looks better than four years ago and today’s Orange County home market is a noteworthy upgrade.

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