Holy cow! I mean, if you had been listending to a Realtor the last 8 years, you might never have suspected this 2x4 of obviousness across the face. But it's true.
Wait a minute, you mean, income, jobs and mortgage rates determine..... Yep, there's this complicated thing called "fundamentals".
This is a fantastic article by Susanne Trimbath which restates the critical success factors for prospective homebuyers.
1.) Do I have enough income (take home after expenses and debts) to purchase a home at the market prices?
2.) Will I have a job in 6 months?
3.) How do current and future mortgage rates coincide with local home prices and my monthly take home budget?
This is the part where our hall monitor Realtor friends step in and remind us, in that I-never-sold-anyone-into-foreclosure-ever condescending manner, "real estate is local".
True.
But so too are jobs and incomes.
And last Friday, California and Orange County got some interesting news:
California, the worlds' 9th largest economy according to GDP numbers, has an unemployment rate of 10.1%.
Orange County California's unemployment has reached an all-time high since 1993 of 6.5%
So why is it that a 4 bedroom, 2.5 bath, single family home in Lake Forest, CA is priced at $650,000, or 6 times the median income here of approximately $100,000 per family?
If you were to go to Redfin, Trulia, RealtyTrac, or Zeus forbid, Realtor.com, you'd be surprised as to the homes available for sale in Lake Forest.
And you would be far from impressed.
In a word, almost all single-family homes in Lake Forest, California are over-priced pieces of crap. I'm dead serious here. Most of the homes for sale right now in February 2009 in Lake Forest are foreclosures, or trashed out short sale properties. Nobody who doesn't have to sell is trying to sell their home right now. The availability of quality homes for families with children, for example, to consider purchasing are few and far between. Most fence-sitters must not only cope with still unbelievable home prices (between $450,000 and $750,000), but also the reality that the home they might buy will be riddled with defects and necessary repairs. It's just a fact. And this I'm reporting AFTER the housing crash has supposedly occurred.
Paseo Verdura, Lake Forest, California, 350 days later, still $650,000.
Bank get's an A for stubborness, and an F for creativity.
I submit that parts of Orange County are still living in a dream world in terms of their asking prices.
Why?
Well, because the local real estate market is screwed up. Yes, Orange County is a nice place to live. A beautiful place. Perfect weather, oceans nearby, mountains nearby. I mean OC living has its' merits, and those should be priced at a premium of some measure. But single-family homes remain overpriced.
Earned incomes in OC are higher than the rest of the country. However, I suspect that job market uncertainty combined with ridiculous home prices that bear no relation to incomes will keep many on the sidelines through a difficult 2009.
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