Read our take on housing at the Redfin blog

We were recently interviewed for our perspective on the local real estate market by one of Redfin's OC bloggers. The resulting blog post lays out some of our opinions about the market and where it might be headed. The short answer: The market is in a bad spot right now, and nobody really knows when it's going to get better.

We hope you find our perspective to be balanced and reasonable. If you're looking for unbalanced, try here. If you want a laugh instead and have had your fill of real estate for a bit, then try this site.

Google-riffic street-level maps of OC

This will teach us for sitting on a story. Kate in the Valley beat us to it by blogging about how Google street-level maps are now up and running on a bigger scale in the SF Valley. Well, ditto for OC as well.

Check it out by clicking on the street view button on Google maps and be amazed if you haven't seen these yet. The blue outlined streets on the map above show you which are accessible via the street-level view. Here is an example of what you see when you activate the view and zoom all the way in. This one happens to be in Ladera Ranch (click on the image below to enlarge, or click here to go to the address in Google Maps):

This is a great tool for scouting out neighborhoods before you visit, because it will give you a virtual first-person view of the look and feel of the neighborhood and surrounding streets. You can also "walk" down a street (by clicking on the arrows) to get a feel for stretches of pavement surrounding an address or intersection. In case you noticed the little orange man at the bottom of the picture, that's where you are "standing" on the map.

Many streets and areas in South OC are now covered. And, you can find target homes quickly just by searching for the address. A bit of a warning, though: We've found Google tends to be off by a few houses when it tells you you are seeing a particular address (but, to be fair, it does mention the address is approximate).

The easiest way to see for sure that you're looking at the right house is to compare the MLS or listing photos to the street level camera and make a match. In this endeavor, landscaping and other unique exterior features are your friends.

It appears the bulk of the areas not covered are understandably gated neighborhoods. Don't think Google would endorse its cars sneaking in.

All in all, it's a great tool for Web home searchers and downright curious people alike. Want to see what a sweet custom home in Nellie Gail looks like? No problem- you're there in seconds:

It's back: "Pent-up demand"

The National Association of Realtors announced today that existing home sales jumped up in February to a seasonally adjusted annual rate of 5.03 million units.

But, the real news is the figure is 23.8% below February 2007's level, and the national median fell 8.2% to $195,900 - the steepest year-over-year drop on record.

While this mostly a national story, here is what the report said about the West region:

"Existing-home sales in the West slipped 1.1 percent to an annual rate of 920,000 in February, and are 29.2 percent below a year ago. The median price in the West was $290,400, down 13.4 percent from February 2007."

Those are some significant declines - 29% in sales volume, 13.4% drop in median. Notice that these numbers don't include new homes. You may have noticed that new home stats aren't any better.

There is also the standard quote from NAR chief economist Lawrence Yun. The bold is our emphasis:

“We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

Ah yes, the old "pent-up demand" card. This tactic is constantly being employed by the NAR and others to explain why home sales have touched record lows and median prices are falling at a national scale not seen since the Great Depression.

The theory of "pent-up demand" assumes there are scores of hungry, salivating buyers looking to jump headlong into the real estate market, but are constrained for some reason. In the early 90s, it was the Gulf War, as evidenced by this May 1991 article in the OC Register that was overly optimistic (and way, way too early) in calling a turnaround. Today, it's the availability of credit.

Remember, a bottom was not reached for another four years after this story was written. We've included our comments on key messages employed in this news story - they are in parentheses. Take note of the types of messages, and notice how they are still in play today:

Sales of OC homes up 17.6% in April - Housing market on the rebound
The Orange County Register - May 29, 1991

"Statistics finally are catching up with rumors of a rebounding housing market in Orange County.

"Sales of existing homes in April showed the first year-to-year increase of the housing recession, the California Association of Realtors reported Tuesday. Lower interest rates and lower home prices drove the surge. ... (Interest rates are low! Prices are low!)

"The sales numbers support the industry's contention that the resale housing market bottomed out in January. ... (We're the real estate experts and we called the bottom. Look - we're right!)

"Price increases generally follow sales increases, said John A. Tuccillo, chief economist for the National Association of Realtors. (Did you notice this exact same tidbit appeared at the end of the Yun quote? This is what happened on the way down - lower sales levels led to lower medians)

'Buyer's market conditions are not as prevalent as they were six months ago. Now, with more takers for the offers, prices have started heading up in nearly all ranges.' (Buy now or you risk mistiming the market)

"Leslie Appleton-Young, economist for the Realtors association, expects sales to fall back.

'April's sales activity was stronger than expected and was intensified by the temporary boost in pent-up housing demand created by the gulf war; however, given the uncertainty over the national economy, housing sales may level off to a more sustainable level in coming months,' she said. (There's that pent-up demand again! Though, this time, Appleton-Young was a bit conservative about forecasting the future) ...

"Just as Orange County outperformed much of the state in April, California did better than the rest of the West and the nation as a whole. " (It's different here)

"In the West, home resales in April were still 3.4 percent below a year earlier." (This was the last paragraph in the story)

Two other OC Register stories directly mentioned pent-up real estate demand in 1991 alone:

"'I think there's a lot of pent-up demand out there for houses,' (RE agent) See said.

"At least some of that pent-up demand was built up during November and the first two weeks of December. Though the county's million-dollar home sales were more geographically dispersed during that period, there were fewer homes sold for less money overall than throughout much of the year."
...

"There's a tremendous pent-up demand for affordable housing," (consultant) Johnson said.

Remember...the actual bottom was still another four years away, despite these experts making it sound like buyers were ready to come out of the woodwork long before then.

Our take is that pent-up demand isn't nearly as much a factor in swaying the market as many real estate professionals lead you to believe.

Match Game: The sequel

Back in January, we used past and present headlines to create this post, which pointed out that today's issues tend to have parallels to the 1990s downturn that plagued the area. Now, we're back with some more examples of stories from the present, and how they link up with the past - specifically, early-to-mid 1991 (and one story from 1992). Enjoy...

Today's story: NAR public awareness campaign - Good Time to Buy
Date: Ongoing
"Many real estate markets across the country have recently experienced rising home inventories and stabilizing prices. In these markets, home buyers have increased negotiating power, but may be unsure of how to structure the best deal – they need a professional to help guide them through the transaction. 'Good Time to Buy' emphasizes the value that REALTORS® bring to home buyers in this environment. Of course, every market is different, which is why the ads recommend that potential home buyers call a REALTOR® in their local market to learn more about what’s happening with real estate in his or her community."

Yesterday's story: Making the best of it
Date: Feb. 13, 1991
"Coldwell Banker Residential Group, the Mission Viejo-based real estate giant, will begin a groundbreaking national advertising campaign this week that acknowledges the sluggishness of the current housing market while suggesting that there's never been a better time to buy or sell. While many advertising and real estate experts agree with the campaign's central theme -- 'Now's the time to make your move' -- some consider the campaign risky because it's pegged to what might be a temporary market condition and it might generate business for Coldwell Banker's competitors."

The connection: Whenever conditions exist that may threaten a group's business, they rush to convince the public that, contrary to what many think, real estate is still a great buy - and it's important to utilize their expertise to do so.

Today's story: No relief on mortgage rates this week
Date: March 6, 2008
"Homeowners and would-be buyers hoping to take advantage of lower mortgage rates were disappointed –again — this week. Orange County mortgage rates climbed for the fourth week in a row." Conforming rate: 5.929%. Jumbo: 6.983%

Yesterday's story: Home mortgages get more expensive
Date: March 7, 1992
"One-year start rates for adjustable home loans averaged 5.764 percent March 5, up from the 5.398 percent average Feb. 28. The average fixed-rate loan jumped to 8.829 percent, up from 8.720 percent."

The connection: As always, financing plays a crucial role in the home buying process. If mortgage rates rise, it is more difficult for borrowers to afford properties.

Today's story: Downey Financial swings to a loss
"Downey Financial in Newport Beach said today it lost $56.6 million in 2007, which compares to a profit of $199.7 million the prior year...The big culprit: a $283.5 million addition to loan loss reserves, which dings earnings. And the lender suffered from a $94.8 million drop, or 18.3%, in net interest income due to a drop in assets that earn interest and a lower interest-rate spread."
Date: Jan. 23, 2008


Yesterday's story: Downey Savings sells properties at a loss
Date: Feb. 13, 1991
"Downey Savings and Loan Association said Tuesday that it generated $10.2 million in the fourth quarter by selling off troubled real estate properties originally valued at $42.2 million...However, the lender said it still owns substantial amounts of real estate, much of which it already has recorded as a loss."

The connection: When things go bad, local companies that invested heavily in local real estate or made lots of loans can get burned.

Today's story: O.C. home reportedly goes for record $35 million
Date: Jan. 11, 2008
"Nicolas Cage sold his Newport Beach, Calif., house last week for $35 million — a new record for Orange County, local brokers say. The movie star, who has bought and sold many houses, paid $25 million for the nearly 0.6-acre property in 2005."

Yesterday's story: Home's record-setting sale has OC agents optimistic
Date: Feb. 5, 1991
"Whether it'll kick off a new frenzy of trophy-house buying is debatable, but a few real estate agents are happy that a price record has been set in Orange County's housing market."

The connection: No matter how bad things may be for virtually everyone, excessively rich people still have loads of dough and can buy really expensive stuff whenever they darn well please.

Today's story: Home buyer who overpaid sues real estate agent
Date: Jan. 25, 2008
"Legal and real estate experts say that Ummel and her husband, Vernon Ummel, should have done their homework better before purchasing their four-bedroom home in a luxury development outside of San Diego in 2005 for $1.2 million, a price that the Ummels say was as much as $175,000 more than what similar houses in the development sold for. They contend it was not their fault."

Yesterday's story: More buyers unhappy with agents
Date: June 10, 1991
"In the past two years the action in Orange County's housing market has shifted from writhing disco to ballroom dance. Now it looks like real estate agents are getting the rap. In a survey of home-shopper attitudes conducted in April for The Orange County Register, nearly 46 percent of the respondents who bought a house in the past year said they wouldn't use the same agent again."

The connection: Mad about a poor home purchase decision? Duh - blame anyone else but yourself...starting with your real estate agent!

Something off in Stanton?

Photo credit: OC Register

Each Sunday, the OC Register publishes a feature in its Marketplace (formerly Business) section called "Buying it in..." where it features a recently sold property and describes various types of financing that would be needed to purchase the subject property at the sales price.

It's a nice little feature - and informative as well, because it gives one a snapshot of the type of income needed and financing options available to buy different types of homes around Orange County.

Today's subject property was particularly intriguing since it is located in Stanton. A little background: Stanton (ZIP code 90680) is the No. 7 poorest ZIP in OC, according to the Register's analysis of IRS 2005 income data. The Register pegged the median income in that city in today's story as $45,445. The 4th quarter median resale home price there was $400,000.

Suffice to say, Stanton and its 32,188-person population is a working-class area with a fairly low average income - at least for Orange County standards. Now, to the subject property, 10160 Fern Avenue.

Size: 3 beds, 2 baths, 1,127 sq ft (built in 1958)
Purchase price: $430,000
Purchase date: 1/24/08
Price/sq ft: $382

Financing options

(all assume market interest rates as of Thursday, with no points and $4,000 in closing costs)

30-year fixed
Assumes 5% down, 7.25% interest (7.28% APR)
Down payment: $21,500
Loan amount: $408,500
Monthly payment: $2,787
Required income: $128,724
Cost as % of income: 33%

30-year due in seven
Assumes 10% down payment, 7% interest (7.03% APR)
Down payment: $43,000
Loan amount: $387,000
Monthly payment: $2,575
Required income: $117,830
Cost as % of income: 33%

30-year adjustable
Assumes 20% down payment, 1.5% interest (8.14% APR). Adjusts annually with 7.5% cap per adjustment and a life ceiling of 9.95%, tied to 12-month Treasury average (4.662%), plus a 3.45% margin.
Down payment: $86,000
Loan amount: $344,000
Monthly payment: $1,187
Adjusted payment: $2,551
Required annual income: $110,872
Cost as % of income: 33%

Notice the required income for all these financing options? To afford the adjustable loan option, you would need $86,000 in savings and an income of $110,872.

That is to say, you would need to be making $65,427 more per year than the Stanton median income, or $44,000 more than the countywide median household income, and have an $86,000 down payment just to be able to afford this property, which appears to be a fairly standard (though small) starter home.

If you were to go the "more conservative" 30-year fixed route and had 5% to put down (a much more realistic scenario, since 5% is about the average down payment these days), you would need to make $128,724 per year to afford this house.

Judging by similar properties for rent on the MLS, this would rent for about $1,900 per month. If we were to assume a gross rent multiplier of 160, this property "should" be worth $304,000.

It also means that if you bought this property with a 30-year fixed loan, you would be paying $887 more per month to buy as opposed to rent, not including insurance, property tax, maintenance, or accounting for the mortgage interest tax deduction.

Nobody is arguing the median income household has to be able to afford the median property. But, someone making nearly three times the local median income should sure as heck be able to afford a bit more than a modest, 50-year-old resale starter home in that community.

This week in OC history: 2003

Below is a sampling of headlines and summaries of stories that ran this same week in the OC Register five years ago.

OC real estate data, for the 22 business days ending Feb. 7, 2003
Median: $365,000 (up 21.7%, year over year)
Sales volume: 3,405 (down 0.7%)
4-week home payment for SFR at average 30-year interest rate: $1,487 (up 6%)

Size matters, or does it? Parents and teachers fight to save the state's class size reduction program amidst budget issues. "Several studies on smaller classes, including four years of research on California's 20-1 program, have failed to make the case that improvements are due to smaller class sizes alone. "

PacSun's rise falls to girls. "At a time when many retailers are struggling because of the soft economy, 791-store Pacific Sunwear is on a hot streak...Pacific Sunwear's focus on building its girls business is the single biggest reason for the turnaround..."


Job cuts deeper than thought. A revised report showed the county's job losses were nearly 20,000 more than estimated. "The county averaged 19,800 fewer jobs than initially estimated based on an annual revision...For the year, the county lost 10,700 jobs, the first time in a decade the job market did not grow on an annual basis. The best the usually optimistic (Chapman University economist Esmael) Adibi could say about the numbers is that the worst appears to be over." (click to enlarge chart)

Kohling all shoppers. Kohls opened 28 stores in Southern California, including 8 on the same day, attracting a frenzy of shoppers. "They have good products at good prices," said Tina Viray, 51, of Huntington Beach. "It's crowded with long lines, but I'm sure it will die down when the grand opening is over."


County budget cuts coming. County supervisors committed to cutting $25 million from the 2004 budget. Areas seeing reduced support: affordable housing, health and adoption programs and the promotion of business, arts and tourism. "The cuts were decided upon as supervisors wrestled with uncertain finances, increasing costs of providing services and the belief that the county will suffer as the state considers solving its budget troubles." Click on the image at the right to enlarge.

Gas tops $2 mark. The average price of a gallon of gas broke through the $2 barrier, and experts warned it could go as high as $3 by the summer. "Orange County's gasoline was up nearly 34 cents from a month ago and nearly 67 cents from last year. 'It's time to look for additional ways to conserve,' said Jeffrey Spring, a spokesman for the Automobile Club."

Back to basics

South OC is largely a bedroom community within a bedroom community, but that doesn't mean you can't find some off-the-beaten-path properties in the nearby canyon areas if you're looking for a little solitude, or the chance to be more in tune with nature.

Tip: If you ever head out to Trabuco Canyon, be sure to make a reservation to eat at this neat steak house - a place Nixon chowed down at. Oh, and don't wear a tie (people who have been there and have seen the hanging ties know what I'm talking about).

Here are some properties for sale that bust out of the tract house mold and let you live the simple life...if you dare.

17451 South Olive Hill Rd, Orange, 92676
Price: $299,900
Size: 1 bed, 1 bath, 700 sq ft
MLS: S500917 (208 days on Redfin)
Area: Modjeska Canyon
Purchase price: $225,000
Description: Charming Cottage in Modjeska Canyon!Plenty of room for two. Recent Remodel includes New plush Shaw carpeting, nu kitch & bath tile floor, int & ext paint and ceiling fans. New stove. Washer/Dryer included. Spacious bedroom with office area & Lg walk in closet. Cozy knotty pine interior. Flagstone front patio. Covered porch. 2 car parking. Lg storage shed. More storage under home. Views of Saddleback Mountains. Near National Forest, historic Modjeska House, Tucker Wildlife Sanctuary, hiking & biking trails.
Comment: This property was last purchased back in 2003. A sale at the current asking price would net $56,906 after 6% sales costs and before deducting the cost of renovation (was the "nu kitch" part of it?).

14914 Mountain View, Orange, 92676
Price: $399,000
Size: 1 bed, 1 bath, 673 sq ft
MLS: P616338 (59 days on Redfin)
Area: Silverado Canyon
Description: Beautifully remodeled and restored cabin with updated plumbing, electrical, septic, roof, paint, kitchen, bathroom and flooring. Floorplan has one bedroom plus second sleeping section with sliding wall for a second bed area. Spacious wooded lot has mature oaks and peaceful views. Near National Forest with miles of hiking and biking trails.
Comment: As you prepare to enter this place, don't forget to wave to the deer head over a nearby window. Classic.

28242 Bytha Way, Orange, 92676
Price: $450,000
Size: 2 beds, 1.75 baths, 800 sq ft
MLS: P553540 (430 days on Redfin)
Area: Silverado Canyon
Description: Convenience, privacy and possibilities this recently painted 2 bedroom 1.75 bath home offers all three. Conveniently located close to the cafe, store and post office. Privacy in the totally fenced oversized lot and possibilites with the potential to expand, keep a horse, store an RV or just relax and enjoy the ambience of Silverado Canyon with the riding and hiking trails.
Comment: We're not sure how much this property last sold for, but were surprised to see this place dates back all the way to 1928. We wouldn't be surprised if the stove in one of the photos were original to the house.

28022 Williams Canyon, Orange, 92676
Price: $3,450,000
Size: 4 beds, 6 baths, 5,400 sq ft
MLS: S523680 (5 days on Redfin)
Area: Silverado Canyon
Purchase price: $1,480,000
Description: Williams Springs Estates, Tuscan model home custom single story, cross your very own bridge to your 4 acre estate. Nestled in this canyon a testament to the builders foresight and planning the fire left this canyon intact and the rest of our 6 homes to be built will be built with the same state of the art safety. Design your own and we build or we will design for you. Six 4 acre parcels 2 with plans ready to build.
Comment: For the well-to-do outdoorsy person or captain of industry who could care less about any sort of commute - those are for losers, after all.

OC RE timeline: boom, bust, boom, bust

Jon Lansner of the OC Register put this together for Sunday's paper. The headline is "Price movements in O.C. homes, 1988-2008." Our (brief) comments at the end also are in italics. Enjoy:

"Here’s a timeline looking at key dates since 1988 involving the volatile movements in the Orange County median pricing by DataQuick’s math (overall for all residences, single-family homes, condos and new homes):

THE PEAK OF THE PREVIOUS BOOM …
January ’90: New-home price peaks at $256,000
August ’90: Single-family resale price peaks at $244,750
June ’91: Overall median price peaks at $220,000
February ’92: Condo price peaks at $155,000

… THEN THE PAIN OF THE EARLY ’90S SLUMP …
February ’93: New-home price bottoms at $183,000 for a peak-to-valley drop of 28.5% in 37 months.
January ’96: Single-family resale price bottoms at $191,500 for a peak-to-valley drop of 21.8% in 65 months.
January ’96: Overall median price bottoms at $184,000 for a peak-to-valley drop of 16.4% in 55 months.
March ’96: Condo price bottoms at $114,750 for a peak-to-valley drop of 26.0% in 49 months.

… TO A REBOUND AND THIS LATEST BOOM …
August ’97: New-home price passes old peak at $265,000 for a valley-to-new-peak time of 54 months, or 91 months between peaks. (Or how long it took to “break even.”)
May ’98: Overall median price passes old peak at $221,500 for a valley-to-new-peak time of 28 months, or 83 months between peaks.
June ’98: Single-family resale price passes old peak at $255,000 for a valley-to-new-peak time of 29 months, or 94 months between peaks.
January ’99: Condo price passes old peak at $158,750 for a valley-to-new-peak time of 34 months, or 83 months between peaks.

… AND ITS EVENTUAL PEAK …
February ’05: New-home price hits current peak at $864,000 for a valley-to-peak gain of 372% in 144 months.
March ’06: Condo hits current peak at $470,000 for a valley-to-peak gain of 309.6% in 120 months.
June ’07: Single-family resale hits current peak at $734,000 for a valley-to-peak gain of 283.3% in 137 months.
June ’07: Overall median hits current peak at $645,000 for a valley-to-peak gain of 250.5% in 137 months.

FINALLY, THE ENSUING REVERSAL
Through January ’08:
Overall median price of $520,000 is off 19.4% from the peak of 7 months ago. Single-family resale price of $583,250 is off 20.5% from the peak of 7 months ago. Condo price of $375,000 is off 20.2% from the peak of 22 months ago. New-home price of $506,000 is off 41.4% from the peak of 35 months ago."

Peak-to-trough drop, overall median, in previous bear market:16.4% over 55 months

Current drop in overall median, 7 months and counting: 19.4%

History lesson over.

(More) ads of our times

Aliso Viejo looking to get realtors on its side against USPS

Straight Digs recently posted about how the city of Aliso Viejo is trying to recruit OC realtors to take up its cause against the US Postal Service, which is planning to build a mail-processing facility within city limits. The USPS has apparently proposed a smaller facility than was initially discussed, but Aliso is still not happy about the situation.

Some snippets from the letter:

"The City of Aliso Viejo strongly opposes the U.S. Postal Service’s plan to build an enormous mail-processing facility on a 25-acre site near homes, a religious facility, preschool, teen center and proposed affordable senior-housing development – despite public claims from the USPS’ that state otherwise. Statements by the USPS to the media, residents and business professionals claim that the new slightly smaller proposal stems from discussions with the City, which is not the case. ...

"At least three neighboring cities would likely suffer from through-truck traffic that would alter the traffic patterns on their city streets. The Postal Service has continually failed to publicly acknowledge or address the surrounding sensitive uses near the site and instead only identifies commercial uses in its written materials. ...

"As political and public opposition to the project has continued to skyrocket, the USPS continues to disregard the concerns of the City, its residents and surrounding communities about this regional issue."

Here is a link to the blog post and the letter in its entirety.

Ads of our times

Here is a sampling of real estate ads from recent O.C. Registers:

Eye on "Eyeball '07"

In case you're following real estate here in Orange County, you've probably also been reading Jon Lansner's blog over at the Orange County Register and reading his "Eyeball '08" - a set of opinions about how the market will fare in 2008.

Since he also did this feature last year, we're checking up on some of the posts to see how things panned out. Below is a sampling of interesting tidbits - including some big misses and surprising hits - from Eyeball '07. To kick things off, first is Lansner's column from the December 31 newspaper that sums up some of the expert sentiment.


Will '07 housing surprise us all?
"...Almost every knowledgeable person in and around the industry whom I've talked with seems to agree on the coming year's outcome: Orange County home values will simply slip - but not tumble - in 2007. Even somewhat outside observers draw largely similar conclusions." ...

"O.C. housing circa 1997-2005 was clearly an asset that may have gotten a little too hot. In 2006, we saw the first signs of the market correcting itself: the end of double-digit appreciation, growing choices for buyers and a growing number of owners missing mortgage payments.

It's not rocket science to guess 'more of the same' for '07." ...

"Momentum and shopper psyche are weak. Some owners are in trouble, too, placing added pressure on the market. It feels like it would not take much to turn 2006's skittish housing market into a full-fledged 2007 fire sale."

Now, here's how a variety of his guests answered the question "What’s your outlook for the local housing market for 2007?" plus some interesting responses to others.

Note: For the 22 business days ending Dec. 14, 2007 (most recently reported data), the DataQuick median was down 7% from last year.

Lender/investor Bruce Norris of The Norris Group
Outlook: Orange County prices down 5 percent. ...

What might be the housing surprise we’ll be talking about a year from now?
Bruce: The greatest year-over-price year decline since the Great Depression, nationally.

Anil Puri of CSUF business school
Outlook: 3 percent to 5 percent drop in median price, monthly data, year-over year.

Reader comment on that post: "Anecdotal 10% drop doesn’t equal a 10% drop in mean. I would suggest you take advantage of those individual 10-15% drops (they’re bargains!) rather than complaining that the entire market hasn’t come down that much.

The sale is ending soon."

Consultant Walter Hahn
Outlook: A slow drift downward in terms of sales to a bottom in second half 2007. Slow recovery thereafter. Price change in 2007 of zero percent, plus or minus, based on Dataquick data.

How would you describe the risks for a huge drop?
Walter: 2 percent probability.

Talk show host Mike Roberts
Outlook:Most likely, stay close to what it has ended at this year. I see little in the way of further price declines or any real measurable appreciation. The wild card is whether or not sellers believe that the market is indeed falling and start a wave of panic selling. As you know, very little inventory is actually selling. Many people have dropped their prices up to 10 percent without getting an offer. Many of them have just taken the property off the market to wait for another day. However, if a few buyers start to actually buy some of these properties, they could set into motion a whole wave of selling. Most of those that would panic sell are investors trying to cut their losses. Unfortunately, it will still create a new set of comparable sales that everyone else will have to live with.

Pimco portfolio manager Saumil Parikh
Will loans be harder to get in 2007?
Saumil: We believe the subprime mortgage market will re-price credit risk during 2007, thereby making it more expensive and onerous for first-time homebuyers to enter the market.

What might be the housing surprise we’ll be talking about a year from now?
Saumil: The surprise will likely be that activity will not rebound meaningfully upon realization of lower mortgage rates....

Bill Plattos, executive VP at First Team Real Estate
Outlook: I think along with (ex-Fed boss Alan) Greenspan that we have hit bottom. But it does not mean we will now start back up next year at the previous pace. Rather, prices and sales will coast through 2007. We really have not seen the prices fall, such as they did from 1990 to ‘95. Nor do I expect that to happen. I think the latest (2007 price) forecasts that I have seen sound reasonable at flat to maybe minus 2 percent. I also believe that it could go up a few points, especially in pockets, because everyone is starting to become more secure where the market is going and that there is still a lot of normal pent-up demand.

What events might change your outlook, pro or con?
Bill: I do not see anything that would shake things up in O.C. I believe we will work ourselves out of Iraq as we know it now and that inflation fears are overblown.

Charles Rother of American Strategic Capital
Outlook: Orange County home prices are likely to decline 5 percent in 2007. To sell their homes, homeowners may need to price their homes 10 percent or more below the highest price ever paid for a similar property on their street.

How would you describe the risks for a huge drop?
Charles: For 2007, there is a 26 percent probability that Orange County home prices will decline more than 7 percent, and an 11 percent probability that prices will drop more than 10 percent.

UCLA economists
Outlook: "From 1990 to 1995, the median sales price of an O.C. home fell 9 percent. We don’t see anything like a 4.5 percentage point jump in unemployment in the next year or two in O.C., so I think that 9 percent drop over five years is the worst case scenario — worse than anything we’re likely to see given the current economy. Without any recession-sized job loss in O.C., we expect more of what we’ve already seen in 2006: flat prices and falling sales. ... Nationally, I expect low levels of sales of both existing and new homes, aggressive pricing of new homes (e.g., a 10 percent decline in price), but very little erosion (2-5 percent) of sales prices of existing homes."

Real estate broker Gary Watts
Outlook: Both sales and prices will be up from 2006. Sales should rise to our 10-
year average of 40,100, which puts sales up 10 percent, and prices should rise 7 percent for homes and the 4 percent-5 percent range for condos.

So inventory will be … ?
Gary: Our housing supply (inventory) should average three to four months this year. (That’s homes for sale divided by the sales pace.)
Note: Inventory now in January 2008 is double what it was last year - 14 months worth

Veronica Hicks of Condos Etc.
Condo market outlook: I still believe there is some instability in the condo market, particularly for first-time homebuyers....

CAR VP and chief economist Leslie Appleton-Young
Outlook: Sales statewide will be down about 24 percent in 2006 and another 7 percent in 2007. Orange County will see slightly larger declines because the run-up in sales activity was initially stronger than the state as a whole and the median home price in Orange County at $699,200 is well about the statewide median of $555,290. Affordability issues also will work to constrain sales activity in 2007. We are projecting a 2 percent decline in the statewide median price (this) year as the market continues to normalize. Orange County prices may be slightly softer because the inventory of unsold homes for sale is higher in Orange County than in many other parts of the state.

CAR November data is out

It's not pretty at all. The Calif. Association of Realtors (CAR) is showing a 5.4% decline in November median price of a single family house ($661,580) compared to October and September, which were both $673,770.

The stunning part is how quickly the median has fallen - the peak was $747,260 earlier this year and it has already declined 11.4% since then. What will 2008 bring?

Here is the recent data point with in an updated OC median single family home price graph - including a revision of the peak ($747,260 in April 2007).

For you visual types...

Here is how the Orange County median single family detached home price has changed over the years, as reported by the Calif. Assocation of Realtors (CAR). Some things on this chart:

• Minimum value is $129,641 in 1982. Max (peak) value is $721,190 in February 2007. The rest of the data points are each October's median price - October 2007 is the last month we currently have CAR data for.
  
  
• The other two points labeled on the chart ($241,708 and $209,400) are the peak and trough of the last downturn. However, these are not the absolute peak and trough - just the highest October median and lowest October median during that period.
  
  
• The median increased nominally by 61.5% between 1982 and 1995 - that's around a 3.8% average increase each year. It then proceeded to appreciate by 72.0% between 1995 and 2001, and then by another 87.1% between 2001 and October 2007. To arrive at the 2007 median, the 1995 median would have had to increase by an average of about 10.2% each year.
  
  
• CAR's latest reported median (October) was $673,770 - exactly the same as the September one.
  

The second chart is mostly for my amusement, since it's of the "what if" variety (click on it to enlarge):
This graph speculates what the median would be now if it had increased by:

• 4% every year since 1982 (pink). If this had happened, the median home price would now be $345,602.
  
  
• 5% each year (yellow). The median would now be $439,010.
  
  
• 6% each year (cyan). If this had happened, the October 2007 median would be $556,402.
  

Notice the 90s downturn took the actual median value below all three of these projected median value lines - the actual median did not catch back up with the 3% line until October 1997. The recorded median then proceeded to surpass the 6% yearly appreciation line in October 2002. It kept shooting up after that.

Feel free to use these charts for your own purposes - just cite this Web site as the source, please.