ORANGE COUNTY HOMES SEE STRONG PRICE GAINS

We’re getting mixed signals on the Orange County housing market, with forecasters predicting further home-price drops at the same time that indexes show prices rebounding.

The latest: The California Association of Realtors reports today another monthly gain in the median price of an existing single-family home in May with the smallest annual decline in awhile. The report shows:

- The median house price in O.C. was $474,110 in May.
- That’s up 9.7% from April, the fourth monthly gain in the past five months.
- That’s down 17.4% from May 2008, the smallest annual decline in 14 months.
- Sales were up 17.9% from a year ago.

Statewide, the Realtors group reported a median house price of $267,570, up 4.2% from April, but down 30.4% from a year ago.

To view the entire CAR report, click HERE

SOME GAINS SEEN IN SAN DIEGO ECONOMY

An index used to gauge the strength of the San Diego economy rose for a second straight month in May, with the "Index of Leading Economic Indicators" jumping by .3%. The gains of April of May follow 24 consecutive months of declines in the index, which is complied by the University of San Diego.

The report also revealed improved stock prices for San Diego-based firms and a hike in the number of building permits, perhaps in response to the increased demand being driven by the state's $10,000 new home tax credit (which, as we pointed out yesterday, is nearly depleted).

Although unemployment remains high and caution must be exercised, the report's authors suggest a third consecutive month of improved indicators could signal a turnaround for San Diego.

NEW CONSTRUCTION TAX CREDIT MONEY 95% GONE

Like watching sand trickle through an hourglass, we've watched $100 million in state tax credit funds for new home purchases disappear in less than four months.

The popular $10,000 tax credit, which was launched in March, was aimed at helping builders weather the economic downturn. And it seems to have helped.

The Franchise Tax Board is reporting that, through June 17, $95 million of the $100 million allocation has been claimed. 9,800 hundred applications have been filed (out of 10,000 funded slots) so far, although the state is saying it will take up to 12,000 applications before it freezes the credit to account for duplications, revisions and invalid applications.

Buyers must live their new home two years to keep the credit.

To learn more about the $10,000 state new construction tax credit, click HERE

CALIFORNIA HOME SALES RISE IN MAY

Home sales in California rose by about 3 percent from April to May and are up more than 18 percent from the same time last year, a real estate tracking firm said Thursday.

San Diego-based MDA DataQuick's data showed that the overall number of homes sold in California – 39,051 in May – has now increased on a year-over-year basis for 11 months in a row.

May's median home price was $230,000 in the state, up more than 4 percent from April. However, May's median price was down more than 32 percent from May 2008.

DataQuick said previously foreclosed properties accounted for more than 51 percent of the May home sales statewide.

In the nine-county San Francisco Bay area, home sales increased by more than 4 percent from April to May, and the price increased more than 12 percent, the firm reported. Still, May's median home price of $341,500 in a nine-county region of Northern California was almost 34 percent lower than the May 2008 median price of $517,000.

The Bay Area's April-to-May price jump was caused by an increase in more expensive home sales financed by "jumbo" mortgages, or loans of more than $417,000.

DataQuick said jumbo mortgages made up 25.5 percent of the home sales in the Bay Area last month. Two years ago, these mortgages made up 60 percent of Bay Area home sales.

The firm reported Wednesday that home prices in six Southern California counties increased nearly 1 percent from April to May for a median price of $249,000, the first month-to-month increase in nearly two years.

Homes costing more than $500,000 in Southern California also rose, from 15.2 percent of sales in April to 17 percent in May, the highest showing for such homes since October, the report said.

MAY SALES SHOW FIRST MEDIAN PRICE INCREASE SINCE 2007

DataQuick has released it's market summary for May - remember, you can never truly call "bottom" until you've started moving back up. Let's hope this is the launch point for Southern California's next positive cycle - DR

Southern California home sales rose for the 11th consecutive month in May as sales of $500,000-plus homes started to come back. The median price paid increased slightly from the prior month for the first time since July 2007, the result of a shift in market activity where sales of deeply discounted foreclosures waned and mid to high-end purchases rose.

A total of 20,775 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 1.3 percent from 20,514 in April and up 22.8 percent from 16,917 a year ago, according to San Diego-based MDA DataQuick.

Sales have increased year-over-year for eleven consecutive months.

May’s sales were the highest for that month since May 2006, when 30,303 homes sold, but were 21.2 percent below the average May sales total since 1988, when DataQuick’s statistics begin.

Foreclosure resales – homes sold in May that had been foreclosed on in the prior 12 months – accounted for 50.2 percent of all Southland resales. That was down from 53.5 percent in April and from a peak of 56.7 percent in February. May’s figure was the lowest since foreclosure resales were 50.9 percent of all resales last October.

Last month 83 percent of the existing Southland houses sold were purchased for less than $500,000, compared with 84.8 percent in April. Conversely, sales $500,000 and above rose from 15.2 percent of sales in April to 17 percent in May. The last time the $500,000-plus market made up more than 17 percent of all sales was last October, when they were 19.9 percent of sales.

The median price paid for all new and resale houses and condos sold in the six-county Southland last month was $249,000, up 0.8 percent from $247,000 in April but down 32.7 percent from $370,000 a year ago.

The median price hadn’t risen from one month to the next since July 2007, when it increased 0.6 percent from $502,000 to $505,000.

Last month’s median was the second-lowest for any month since it was $242,000 in February 2002, and it stood 50.7 percent below the peak $505,000 median reached in spring and summer of 2007.

NEW APPRAISAL RULES CAUSING DELAYS, HEADACHES

The California Association of Realtors puts out a weekly advisory called "Mortgage Matters" that speaks to both the challenges and the improving conditions in our market. This week the site tackled the issue of appraisals, which has become a hot button topic in our company as we suddenly have a new layer of bureaucracy to navigate in trying to close deals.

From the CAR advisory:

The Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the New York State General Attorney have created a new agreement titled the Home Valuation Code of Conduct (HVCC), which prohibits lenders, mortgage brokers, and real estate agents from selecting and having any “substantive” communication with an appraiser.

· HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values.

· The code applies to all conventional, single-family loans that are originated on or after May 1 and are sold to Fannie Mae or Freddie Mac. It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.

· Under HVCC, a lender’s loan production staff is prohibited from selecting an appraiser for a property or having any “substantive” communication with an appraiser or an appraisal management company about a home’s valuation. However, a non-loan production staff member may call the appraiser, or the lender can farm out the request to an appraisal management company.

· Lenders no longer can perform “value checks,” where appraisers pull comps for a house to see if the numbers are likely to work for a client, before the actual appraisal is ordered.

· Mortgage brokers and/or real estate agents cannot order or pay for an appraisal.

· Borrowers will receive, free of charge, a copy of their appraisal at least three days before closing, giving homeowners more time to contest what they view as an inaccurate appraisal.

· Because lenders are more likely to farm out requests to appraisal management companies, some appraisers believe borrowers will have to pay more out-of-pocket expenses–approximately $100 more than they would have previously.

· The appraisal process may take longer, so some housing experts recommend borrowers lock in a mortgage rate for a longer period of time. It’s important to note that the longer the lock, the more costly it is.

· Some real estate industry analysts are worried that appraisal management companies may hire an appraiser unfamiliar with a neighborhood, which could lead to an inaccurate valuation. To prevent this, appraisers recommend consumers check an appraiser’s name and license number with the California Dept. of Insurance to see where the appraiser is from and if the appraiser is familiar with the area where the home is located. Consumers and/or mortgage brokers and agents can click HERE to check an appraiser’s license."

82.5% OF STATE NEW CONSTRUCTION TAX CREDIT GONE IN THREE MONTHS

The Franchise Tax Board reports that as of June 3, 8,522 Californians had applied for $82.5 million in tax credits for buying a newly built residence between this past March 1 and March 1, 2010.

The credit, worth up to $10,000 to the buyers, is capped at $100 million on a first-come, first-served basis. Assuming all the applications meet the rules, just 17.5% of the money is left in a program that’s not even three months old.

Meanwhile, the California Building Industry Association released figures showing “signs of stabilization” in the new-home market, saying that the tax credit was partly responsible.

Costa Mesa-based Hanley Wood Market Intelligence reported that while California new-home purchase contracts were down 30.5% in April from the year before, sales have climbed steadily in the months since the tax credit went into effect.

REGULATORS MOVING CLOSER TO PERMITTING BUYERS TO USE FTB TAX CREDIT FOR CLOSING COSTS

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced here.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

A DISCUSSION ON MEDIAN PRICES

Your clients see the headlines - in April, the median price of a resale home in California was down 36%.

But does that mean your client's home has lost 36% of it's value?

The answer is... not necessarily.

For many consumers, the median price is a misunderstood number.

The median price does not track the value of individual homes... rather, it reflects what types of homes are selling in a given market.

To establish a definition, the median price is that point where 50% of the homes that sold in a given time period were priced higher than the median, and 50% were priced lower than the median.

If, three years ago, half the sales were above $500,000 and half were below it, the median price was $500,000.

If, today, half the sales are above $350,000 and half are below it, the median price will be $350,000.

Yes, most homes have lost value over the past few years. And the drop in values has been greatest at the entry level, where the impact of "no income qualifying" has hit the hardest. But a 36% drop in median price does not automatically equate to a 36% loss of value.

If lower priced homes (where the majority of foreclosures are occuring) are dominating the market, the median price is going to fall.

The median price is a reflection of where buyers are in the market... and right now, buyers are all about the lower end of the market.

CALIFORNIA NUMBERS FOR APRIL

There is no longer any doubt about the momentum in our market... it's just a matter of getting these numbers in front of consumers to help them understand it.

Here are some California-specific numbers from April:

· Existing, single-family home sales increased 49.2 percent in April to an annualized, seasonally adjusted rate of 540,360

· The statewide median price of an existing single-family home increased 1.4 percent in April to $256,700, compared with March 2009

· C.A.R.’s Unsold Inventory Index fell to 4.6 months in April, compared with 9.8 months in April 2008

· The median number of days it took to sell a single-family home declined to 48.7 days in April 2009, compared with 51.8 days in April 2008

· C.A.R. reports April home sales increased 49.2 percent, median home price declined 36.5 percent

You can see the tension between a 50% increase in sales and a 36% drop in the median price... it's like there's one foot on the gas (increased sales) and one foot on the brake (declining median price).

The subject of median price is one that many people do not understand, though, and so I want to address that in this space tomorrow.

PENDING SALES UP FOR THIRD STRAIGHT MONTH - WEST COAST LEADING THE WAY

We see evidence every day of how our market is changing in Southern California... but the national picture is improving as well.

NAR's pending sales index rose for the third consecutive month in April, to a national level of 90.3. In the west the index was highest with a reading of 94.8.

The pending sales index was started in 2001 - a reading of 100 equals the average sales activity for that year. 2001 was the first of five consecutive record-setting years for real estate sales activity in the United States, and so at this moment we are close to seeing the same level of activity we saw at the start of the last upward cycle.

To read more about the pending sales index, click HERE