You often hear of a presidential political campaign’s “October surprise” – the unexpected that shocks just before Election Day.
If you can think all the way back to last month – when presidential politics ran at a heated peak – you may recall the many so-called experts listing numerous reasons for grand economic anxiety.
This home at 3121 Third Ave. in Corona del Mar sold for $825,000 on Oct. 5, according to Redfin. The 1,100-square-foot house is on half a lot that’s about 30-by-53-feet. It likely will be torn down to make way for a new home, listing broker Suzanne Wyrick said. It’s located less than half a mile from the beach.
PHOTO COURTESY OF SUZANNE WYRICK, WYRICK AND ASSOCIATES
Who’d be the next president? What would their policies truly be? What of global economic troubles? How about the doom and gloom of the impending federal budget’s “fiscal cliff” – a deficit-cutting debate that could harm housing’s critical mortgage deduction?
Well, this October surprise came after the election: 3,148 Orange County house buyers ignored numerous financial warnings – and made last month the busiest October for home shopping since 2005, according to DataQuick’s latest housing report.
It was an unexpected homebuying surge, and not just for the shaky business-climate backdrop. Autumn is a typically quiet period for real estate. The key homebuyer niche – families – typically finishes acquisitions in summer to get children set before the school year starts. Yet this year, Orange County home sales rose 17 percent from September to October. Homebuying surged only nine times in this period in the past 25 years.
Home prices acted accordingly. Orange County buyers paid a median sales price of $455,000 – up 12 percent in a year to the highest point since July 2008. That year-over-year gain was the largest annual rate of appreciation – minus the tax-incentive-juiced 2010 – since December 2005.
I’m sure that October’s buyers were not aggressively buying while blind to the economic challenge debated during the campaign. Rather, it’s likely these shoppers perceived Orange County’s economy as outpacing the national pace and that local housing was a relative bargain.
The local economy is producing jobs at the fastest pace since 2005. That certainly gives buyers confidence that employment is secure – or that opportunity is growing.
Then there’s also the stunning lack of housing choice. Analyst Steve Thomas says the supply of homes for sale is down 60 percent in a year to the lowest level in the eight years he’s been tracking the market.
This inventory shortage is nudging shoppers to quickly pull the trigger on deals in what have often become multibid, feeding frenzies on properly priced homes.
And don’t forget landlords are helping ownership, too. Numerous reports show significant price hikes for rentals, with the cost of an apartment at local big complexes is at an all-time high, according to at least one measure.
Still, do not overlook the most important fuel for this rally: cheap mortgage rates. Let me give you an example of how mortgages rates under 4 percent translate to a shopper.
DataQuick each month calculates for the Register an estimate of the typical house payment obtained by Orange County buyers. For October, this loan cost index ran at $1,987 a month. That is down 11 percent in a year – in the same time frame when the median selling price rose 12 percent.
That’s part of a long-running, dramatic cost reversal – part cheap money, part the result of the housing crash. This estimated monthly house payment is off 45 percent from its 2006 peak – at $3,555.
In 2012, this homebuying cost index has run below $2,000 each month to date. The last time we saw 10 straight months of this mortgage cost so low was late 2001 and early 2002 – in the economic slump after the Sept. 11 terror attacks.
To the typical O.C. wallet this means that the monthly house payment has essentially not budged in more than a decade.
Can you say that about much else? Go back to the end of 2001 and remember, if you can, that gasoline was $1.10 a gallon and a Big Mac cost $2.54. The consumer price index has jumped by 30 percent since 2001.
Sure, today’s housing may be a bargain with risks – from another recession to disinterest with homeownership.
But I’m guessing that October’s house shoppers have a long-term view and will own for an extended period. That makes their homebuying surprise not so totally shocking: New owners are betting they can outlast today’s uncertainty.