Using Fear to Earn Real Estate Commissions: "Housing Prices Going UP in Orange County!"

I am searching for a home to buy in Lake Forest, California and surrounding communities. I wanted to share with you a recent real estate flyer I received via e-mail from a rather well-respected, highly experienced realtor in the area. I've removed the names to protect the shameless (except for those quoted in the flyer).

Read it. What do you think?

Housing Prices Going UP in Orange County! So Consider Buying NOW.
In case you forgot, you first contacted me through my web site at www.xxxxxxxxxxxxx.com and started searching there for homes. You have been getting your requested emailed updates from me since then.

If you are waiting for housing prices to hit rock bottom before you buy a home to live in or rent out, wait no longer.

Orange County home prices last month ACTUALLY ROSE for the first time since June, according to DataQuick.

The median selling price was $375,000 — up $5,000 from January but still down 27.9% from a year ago.

For calendar month February 2009, Orange County saw:

$375,000 median selling price that is 42% below June 2007’s peak of $645,000.
Single family homes sell for 41% less than their peak pricing (June ‘07) while condos sell 46% below their peak in March 2006. Builder prices for new homes are 42% below their February ‘05 top.

Home prices usually rise in February vs. January. Last time they fell in this period? 1999!

January was the 7th straight month of sales gains vs. the year-ago period. That follows 33 consecutive months where sales failed to beat the previous year’s pace

Delores Conway, a real estate economist at the University of Southern California, says home prices have come down 40 % in Los Angeles and Orange County since the mid decade peak.

She notes that those prices, coupled with record low interest rates, mean today’s buyers can secure the same monthly payments home buyers enjoyed six years ago."

This is marketing from a Realtor. This person is trying to earn my trust.

Look, I understand as well as the next person that even Orange County California Realtors have to earn to eat.

What I don't agree with is cherry picking recent 2 month MLS and DataQuick numbers, throwing down a fear hypothesis (prices going up) in an e-mail piece with zero supportive evidence, all in order to cajole people to buy a home and promote a self-serving, commission-paying agenda.

We've all seen this film before. And it sucks.

If I'm of just average intelligence and I read the above Realtor pamphlet with the stated 41% drop in single family home prices, I'd be asking myself "why did that happen?". "What factors could cause such a major drop?", and then determine whether this drop might continue down to 50% or 60% or more?

50%! You're crazy!! NO! NEVER! That can't happen. This is Orange County, California!

No, you've got to BUY NOW or....*yawn* you'll be priced out of the market forever you no-buying-fence-sitting-wastes-of-space!!!!!

I'm just an idiot renter here. But do we really need this? I mean, given all that's happened over the last 2 years in Orange County residential real estate, at what point do we conclude: "Hey, we should really stop ourselves with all the shameless bullshit!"?

Here's a message to Realtors from a prospective buyer: Drop the fear tactics, and do what you can to start instilling some confidence instead.

This Just In: Housing Prices Actually Linked to Income, Jobs and Mortgage Rates

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.