Houses For Sale Right Now are like Toilet Paper in 2020

Housing Inventory is non-existent, as you can probably tell from the lack of for-sale signs in Canyon Crest and throughout Orange County. There are currently just 2 active properties on the market in Canyon Crest - both have been on the market for over 2 and 3 months, respectively. Frankly, the only reason these two active properties haven’t been purchased is because they are priced at higher price points and need updating. There is also one property that is coming soon on Shadow Ridge. Based on its current listing price and location, I anticipate it will sell quickly. 

The status of the market isn’t much different than it was at this time last month with the exception that mortgage rates have increased slightly. Overall, sales are low and inventory is low. We had roughly the same amount of active listings during the COVID-19 lockdown that we do right now. 

Why is there a lack of inventory? 

The majority of homeowners have an interest rate of 5% or lower, and the thought of losing that rate is horrifying - especially when you realize that interest rates are now hovering around and even above 7%.  A person/family has to be very motivated to sell right now to incur that increase in monthly payment. As a result, homeowners are hunkering down even though they may want a home with different features, sizes, or locations. 

The Silver Lining: 

1. This lack of inventory is maintaining home values. While home values did drop in the second half of last year, they have steadily increased this year and are hovering just below the peak prices of May 2022. (Did you see that a house on Ashton just sold for $2million!?!) That means a vast majority of homeowners have seen a great appreciation in their homes.
2. If you are thinking of selling, now is a great time. The seller holds ALL the power. Buyers can't buy what doesn't exist. As a result, buyers are gobbling up any property as soon as it comes on the market provided one key requirement is met: The home is priced at a fair market value according to its condition in comparison to similar properties.
3. If you have the ability to hold on to your current property while maintaining a low interest rate, think about renting it. Properties in Canyon Crest have rented for $4900 (for 3 bedrooms) to $7000 (for 4 bedrooms) per month. Keeping your home in Canyon Crest or anywhere in Mission Viejo is a great investment and can be a great source of passive income. {Click here to see active and leased rental properties in Canyon Crest}

With non-existent inventory and plenty of buyers wanting to live in Canyon Crest, there is ample opportunity for homeowners to cash in on all the equity that has accumulated over the past few years and beyond. Sellers will achieve success if they prepare their homes properly for sale and price it at fair market value. (And if they hire The Swan Team, of course!)

See for yourself what is going on in the Canyon Crest market:

What's currently for sale?

Click here to see properties that are currently active

What properties are in escrow (under contract or pending)? 

Click here to see properties that are currently in escrow

What properties have sold in the past 60 days? 

Click here to see properties that have sold in the past 2 months

What properties have sold in the past 6 months? 

Click here to see properties that have sold in the past 6 months

Many of you have asked, “But where am I going to go?” That is a very good question. It is also something I can help with. Contact me now to create a comprehensive plan of where you are, where you want to go, and how we are going to get you there.

I don't merely market, list, and sell your home. I am a consultant who helps you understand your options, helps create a plan that accounts for your particular wants and needs, and then executes the plan with a precision that exceeds your expectations.

If you are thinking of selling your house in the next 2 years, please contact me. Now may be the best time to get the most return on your investment. Call me at 949-444-1601 to find out more information and get the ball rolling.

As the golden hues of fall approach, it's time to prepare your home for the cooler temperatures and changing scenery that this season brings. From ensuring your heating system is up to par to safeguarding your home against potential pests, here are some essential tips to get your home fall-ready.

1. Inspect Your Heating System
Before the cold weather sets in, make sure to inspect your heating system. Schedule a professional maintenance check to ensure everything is functioning correctly. Don't forget to replace the furnace filters to improve air quality and efficiency.

2. Clean the Gutters
Fall means leaves, lots of them! Ensure your gutters are clean to prevent water damage and ice dams in the winter. Consider installing gutter guards to keep leaves and debris out.

3. Seal the Gaps
Inspect your home for any gaps or cracks that might let in cold air. Use caulk or weather stripping to seal any gaps around windows and doors to keep your home warm and energy-efficient.

4. Prepare Your Garden
Fall is the perfect time to prepare your garden for the next season. Remove dead plants, prune perennials, and mulch your garden beds to protect them from the winter cold.

5. Check Your Roof
Inspect your roof for any signs of damage or wear. Repair any loose or missing shingles to prevent leaks and further damage during the winter months.

6. Pest-Proof Your Home
As the weather cools, pests like rodents and insects look for warm places to nest. Seal any holes or cracks in your home's exterior to keep pests out. Consider scheduling a pest control service to safeguard your home.

7. Safety Checks
Fall is a great time to perform safety checks around your home. Test smoke and carbon monoxide detectors and replace batteries if necessary. Review your family's emergency plan and update it if needed.

8. Cozy Up Your Living Spaces
As the days get shorter, make your living spaces cozy and inviting. Add warm throws and pillows to your furniture, and consider switching to heavier curtains to keep the cold out.

9. Prepare Your Fireplace
If you have a fireplace, fall is the time to get it ready for use. Have your chimney cleaned and inspected to prevent fires and ensure it's ready to warm your home on chilly evenings?

10. Organize Your Garage
Before winter sets in, organize your garage to make room for your car and winter gear. Clean out any clutter and make sure your snow removal equipment is easily accessible.

By following these tips, you'll ensure your home is ready to face the fall season head-on, providing a warm and safe haven for you and your family. Happy fall!

In recent times, we have witnessed a noticeable shift in the market pace, with the expected market time experiencing a significant increase. This change can be attributed to the rise in rates above 7%.

A Glimpse into the Current Economic Landscape
The current economic landscape has seen a surge in various expenses, from gas prices soaring above $5 per gallon to a noticeable increase in dining and grocery costs. This surge has led to a change in spending habits, with many individuals opting to cut back on extra errands or nights out.

Similarly, the real estate sector has not been immune to these changes. Home affordability has been under pressure, especially with the 30-year fixed rate experiencing a steep climb from 3.25% in January 2022 to over 7% in the latter part of the year. This trend continued into the new year, with mortgage rates hovering around 5.99% in February. Despite a slight ease in April, the rates have been on an upward trajectory, reaching a peak of 7.49% on August 21st, a rate not seen since December 2000. This has inevitably stretched buyers' budgets, making home ownership a distant dream for many.

Analyzing the Orange County Market Trends
In April 2023, the Orange County market witnessed its hottest period, with an expected market time of just 37 days, thanks to a dip in rates to 6.16%. However, as mortgage rates gradually increased, surpassing the 7% mark in May, the market began to cool down. Despite a steady demand, the inventory saw a slow yet consistent rise, leading to an increase in the expected market time to 39 days, a trend that continued into the subsequent months.

By August, the rates were nearing 7.5%, causing a further dip in demand. Even though the inventory began to decrease, the market time extended to 49 days, adding nearly two weeks compared to April. This period, although still considered a "hot market", necessitates careful pricing strategies and a sympathetic approach towards buyers who are grappling with the high mortgage rate environment.

Economic Forecasts and Their Implications
Earlier in January, economic experts had predicted a drop in mortgage rates below 6% by the end of 2023. However, the persistent strength of the U.S. economy, characterized by robust consumer spending and a resilient job market, has led to a revision of these forecasts. It is now anticipated that the rates will remain high until at least the second half of 2024.

As we move forward, the market dynamics are expected to change, with mortgage rates potentially seeing a decline if there are signs of a weakening U.S. economy or a significant drop in inflation. Until then, sellers are advised to adopt a more calculated approach to navigate the housing market effectively.

A Closer Look at the Current Real Estate Scenario
Currently, the active listing inventory has seen a 2% decrease in the past few weeks, settling at 2,385 homes, the lowest since the beginning of July. This trend indicates a potential record-low number of available homes as we enter 2024.

On the demand front, there has been a 7% decline in the past couple of weeks, marking the largest drop of the year. This decline is largely due to the near 7.5% mortgage rates witnessed on August 22nd, which has limited the number of qualifying buyers. As we move past the peak seasons of spring and summer, a gradual decrease in demand is expected, which will further intensify during the holiday season.

In terms of market time, there has been an increase from 46 to 49 days over the past few weeks, the highest since February's start. This trend is quicker compared to the previous year and significantly faster than the pre-COVID 3-year average.

Final Thoughts
As we navigate through these changing times, it is crucial for both buyers and sellers to adapt to the evolving market dynamics. Sellers, in particular, need to be more strategic in their approach, considering the high mortgage rate environment and its impact on home affordability.

By staying informed and adapting to the current trends, individuals can make well-informed decisions, ensuring a successful outcome in the real estate market.

Choosing the right location for your new home is arguably one of the most critical decisions you'll make during the home-buying process. The location of your home not only influences your living experience but can also have a significant impact on the future value of your property. Here, we delve into the various factors you should consider to make an informed decision when choosing your house location.

1. Understanding Your Lifestyle Needs
Family Dynamics
If you have a family or are planning to start one, consider proximity to good schools, parks, and family-friendly amenities.

Career Considerations
For working professionals, a location with easy access to the workplace or well-connected public transportation can be a priority.

Leisure and Recreation
Think about the proximity to leisure and recreational facilities that align with your hobbies and interests.

2. Safety and Security
Safety should be a top priority. Research the crime rates in different areas and consider choosing a location with a low crime rate to ensure the safety of your family.

3. Infrastructure and Amenities
Healthcare Facilities
Ensure the area has nearby healthcare facilities for easy access during emergencies.

Shopping and Dining
Consider the availability of shopping centers and dining options in the vicinity.

Public Transportation
If you rely on public transportation, check the availability and connectivity of the same in the area.

4. Real Estate Value
Future Developments
Investigate any future developments planned in the area, as this can influence property values.

Historical Data
Look at the historical data of property values in the area to gauge potential future trends.

5. Natural Environment
Green Spaces
If you are a nature lover, you might prefer a location with parks and green spaces.

Climate
Consider the climate of the area, especially if you are moving to a different region.

6. Community and Neighborhood
Community Engagement
Explore the community engagement in the area. A neighborhood with a strong sense of community can offer a more fulfilling living experience.

Noise Levels
Consider the noise levels in the area, especially if you are looking for a peaceful and quiet environment.

7. Personal Visits
Before making a decision, visit potential locations personally to get a feel of the neighborhood and see if it aligns with your expectations.

Conclusion
Choosing the right location for your house is a multifaceted decision involving various factors that can influence your quality of life. By considering the above aspects and conducting thorough research, you can find a location that not only meets your current needs but also holds promise for a comfortable and prosperous future.

Remember, the perfect location is one that aligns well with your lifestyle, preferences, and long-term goals. Happy house hunting!

Winter-Ready: 4 Essential Tips for Preparing Your Home and Garden for the Cold

Winter is just around the corner, and as the crisp air begins to envelop us, our homes need a bit of TLC to ensure they're ready for the colder months ahead. Here are four must-do steps to make sure your home and garden are prepared and protected:

1. Seal, Insulate, and Stay Warm:
With dropping temperatures, it's not just about adding another layer to your attire, but ensuring your home is snuggly too. Begin by investigating potential draft spots around windows, doors, and other openings. Sealing these gaps with weather-stripping or caulk ensures the warmth stays in and the cold stays out. And while you're at it, take a look at your home's insulation, especially in areas like the attic and walls. Proper insulation not only keeps you warm but can also lead to a significant reduction in heating costs.

2. Guard Those Gutters:
If you've been noticing a cascade of leaves falling, it's a gentle reminder from nature to check on your gutters. Ensuring that gutters and downspouts are clear of debris is crucial. Clean gutters ensure smooth water flow, preventing the formation of ice dams on your roof and potential water damage. For those looking for a longer-term solution, consider installing gutter guards—your future self will thank you.

3.Secure Outdoor Plumbing:
Frozen pipes are more than just a winter inconvenience—they can be a homeowner's nightmare. Take preemptive measures by shutting off water valves to outdoor faucets and draining residual water. Don't forget to disconnect those garden hoses. If your home setup allows, utilize an indoor valve to shut off and drain water from pipes leading to outdoor faucets. And here's a pro-tip: winterizing your outdoor sprinkler systems now can save you from an unexpected repair bill come spring.

4. Tend to Your Winter Garden:
Though your garden may not be in full bloom during the winter, it still requires attention. Start by raking and composting fallen leaves. If composting isn't your thing, these leaves can act as a protective mulch layer for plant roots. For those residing in heavy snowfall areas, wrapping fragile shrubs in burlap can shield them from snow weight. And let's not forget the lawn—aeration and fertilization before that first frost will set the stage for a beautiful green resurgence in the spring.

As you sip on your hot cocoa, wrapped up in your favorite blanket, you can rest easy knowing that your home and garden are well-prepared for winter. With these steps, you’re not just bracing for winter but embracing it. Stay warm and stay prepared!

In the tumultuous world of real estate, it's easy for many to jump to dire predictions, especially with memories of the Great Recession still fresh in our minds. However, understanding today's Orange County housing landscape requires a careful examination of facts, trends, and indicators rather than succumbing to panic and generalization.

Unraveling the Myth of a Housing Crash

Although soaring rates and dwindling home affordability have raised eyebrows, the anticipated wave of foreclosures remains largely speculative. In reality, U.S. homeowners have never been healthier financially, which acts as a buffer against a market crash.

A Look Back to Look Ahead

It's essential to draw distinctions between today and 2008. The latter was marked by a credit bubble bursting, stemming from loose lending practices. These included subprime mortgages and other risky borrowing mechanisms, eventually leading to an avalanche of foreclosures.

Today's Orange County market paints a drastically different picture. There are a mere six distressed listings, representing a minuscule 0.3% of the active listing inventory and 0.07% of overall demand. In stark contrast, January 2009 had 5,104 distressed listings, encapsulating 44% of the inventory.

The Strength of the Modern Homeowner

Contemporary housing is marked by stringent lending criteria, higher buyer qualifications, and stronger financial health. With a robust 96% of homeowners locked into low fixed-rate mortgages and 50% being “equity rich”, it's clear that today's homeowners are neither fickle nor financially vulnerable.

This stability is reflected in Orange County's Expected Market Time (EMT), an indicator of market health. The current EMT stands at 50 days, which, while higher than last year's 68 days, remains healthier than the three-year average preceding COVID-19.

Inventory Insights

As of now, Orange County boasts an active listing inventory of 2,340 homes. While this number has seen a 1% decline in recent weeks, it's worth noting that it's the second-lowest mid-September reading since records began in 2004. The cause? Homeowners are more inclined to stay put, benefiting from their locked-in low rates.

Demand Dynamics

Despite the slight drop in demand (a 4% decrease over the past fortnight), it remains vital to contextualize. Today's demand is primarily influenced by higher mortgage rates, which affect housing affordability. Unless these rates dip below 7%, expect demand to remain somewhat subdued.

The Upscale Housing Sector

While the overall housing market has seen some fluctuation, the luxury market (homes priced above $2 million) has experienced a slight uptick. With a 1% drop in luxury inventory and a 4% increase in demand, the EMT for luxury homes currently sits at 124 days.

A Comprehensive View

In essence, while the Orange County housing market has seen changes, it's crucial to understand these within the broader context. With homeowners showing financial robustness, strict lending practices in place, and an overall healthy Expected Market Time, fears of an impending housing crash may be overstated.

Concluding Thoughts

The narrative isn't about impending doom but rather the resilience of the housing market and its capacity to withstand external pressures. With thorough analysis and fact-based understanding, one can appreciate the stability and promise that Orange County's housing landscape offers.

{Disclaimer: The information provided below is for educational purposes only, not legal or tax advice. Please reach out to your own advisor for legal or tax implications of selling your home in California.}

Earlier this month, I met with my tax advisor and we were discussing the real estate market. I asked about capital gains taxes on real estate and if he had noticed any clients shying away from selling their properties to avoid the taxes. 

He shared with me that in the past couple of weeks, while he has been preparing taxes for clients, they shared that they sold their homes. Those clients were completely unaware of how much they owed in taxes on the sale of their homes. For some of his clients, he said it was quite a hefty tax (hundreds of thousands of dollars) and quite a shock. He wished they had come to him before they sold their homes, if nothing else, to be prepared and have a realistic understanding of how much money they were walking away with. 

His wish and my desire to keep you informed and prepared is why I am providing the information below. Now let’s get into the nuts and bolts of it.

Capital Gains Tax

If you profit from the sale of a home in California, then you may owe some amount of capital gains tax unless you qualify for an exclusion.

Capital gains are the profits made when you sell an appreciable asset, such as a house. For example, if you buy a home for $400,000 and sell it for $1,000,000, then you have a capital gain of $600,000.

In California, capital gains are taxed by both the state and federal governments.

On the state level, California’s Franchise Tax Board (FTB) taxes all capital gains as regular income. Depending on your tax bracket, the tax can be anywhere from 1-13%.

On the federal level, gains are either considered short-term or long-term.

• Short-term capital gains are when you sell an asset within a year of purchasing it. Those gains are included in your ordinary income and taxed according to your tax bracket.
• Long-term capital gains are any profits made from the sale of an asset after at least a full year of ownership. For a home sale, those gains are taxed according to the following table.

Source: IRS Topic Number 409

Capital Gains Tax Break

Both the IRS and FTB provide a capital gains tax break for home sellers who meet certain conditions. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly. (Note: these exclusions started in 1997 when home prices were much different than they are today.)

According to IRS Publication 523, to qualify for the full exclusion amount, the following criteria must be met:

• The home being sold is your primary residence.
• You’ve owned the home for at least two years in the five-year period before selling it.
• You’ve lived in the home for at least two years within the five-year period before selling it. The years you’ve lived in it don’t need to be consecutive. Certain exceptions to this rule are made for those who are disabled or those in the military, Foreign Service, intelligence community, or Peace Corps.
• You didn’t acquire the home through a like-kind exchange (also known as a section 1031 exchange) within the last five years. This is basically when you swap one investment property for another.
• You haven’t claimed the exclusion on another home in the last two years.
• You aren’t subject to expatriate tax (a government fee paid by those who renounce their citizenship or take up residency in another country).

If you don’t quite check all of these boxes, you may still qualify for a partial exclusion of gain. This can happen if the main reason for your home sale is a change in workplace location, a health issue, or an unforeseeable event. As mentioned in the disclaimer, please contact a professional tax or legal advisor to learn more and how this all applies to you. For details on such circumstances, please refer to IRS Publication 523.

For information about the value of your home, selling your home, or the real estate market in your area, contact me at 949-444-1601 or leslie@theswanteamoc.com.

Market dynamics have been notably influenced by fluctuations in gasoline prices and mortgage rates. In California, gas prices skyrocketed from $4.25 in January to $5.90 at the beginning of this month, with a substantial $1 increase from August to October. This rapid price alteration has inevitably altered consumer behaviors. Many decide to endure lengthy queues at Costco gas stations to save money on fuel expenses, while others curtail their outings or daily errands. When gas prices soar, driving diminishes, leading to a fall in fuel demand.

Similarly, mortgage rates have demonstrated a comparable fluctuating trend. According to Mortgage News Daily, a tumultuous journey of mortgage rates has been observed throughout the year, with rates leaping and retreating in a seemingly erratic pattern. These abrupt changes in rates have a pronounced impact on the housing landscape, affecting buyers' behaviors and budgetary constraints amidst a scenario of low housing inventory.

The principle of Supply and Demand from Economics 101 clarifies that prices and demand share an inverse relation, whereas prices and supply have a direct relation. Discerning these levels helps ascertain the market temperament, indicating whether it leans towards buyers or sellers, or rests in a balanced, or equilibrium state where neither party holds the advantage.

We continue to have the same story in the Orange County housing market. Over the past two weeks, the active listing inventory has seen a growth of 68 homes, a 3% increase, now standing at 2,408 homes. This rise marks the largest since early August, defying the typical Autumn Market trend of a gradual decline in inventory. However, with mortgage rates nearing the 8% threshold, the market's instantaneous nature is altering. New sellers are facing extended market times as homes linger longer on listings, a result of buyers not depleting the inventory as swiftly. Currently, the inventory is nearing its August peak of 2,475 homes, and if the growth pace sustains, a new peak might be on the horizon in the coming weeks. The inventory is projected to decline slowly through early November before plunging toward the Holiday Market on January 1st.

Comparatively, last year's inventory stood at 3,656 homes, which is 52% higher or 1,248 homes more. The three-year pre-COVID average from 2017 through 2019 is 6,306, an additional 3,898 homes or 162% extra, nearly tripling the current standing.

A notable trend is homeowners' inclination to "hunker down" in their current residences, driven by their locked-in low fixed-rate mortgages. September saw 1,915 new sellers enter the Orange County market, which is 1,114 fewer than the three-year pre-COVID average, marking a 37% reduction.

Demand, captured by the snapshot of new pending sales over the preceding month, has decreased from 1,414 to 1,335, down 79 pending sales or 6%, marking its lowest since February's outset. This is the lowest October reading since 2007, even though inherent demand remains due to the basic need for shelter. Cash buyers, those with substantial bank reserves for hefty down payments, and buyers with high dual incomes capable of absorbing increased owning costs continue to exist. The current levels closely mirror last year's, with just 92 pending sales fewer or 6% less, despite a lower rate of 7.12% compared to today's 7.8%. The forecast suggests a slow dip in demand, accelerating from mid-November through the beginning of next year, coinciding with the Holiday Market.

Last year, demand was at 1,427, 7% higher than today, or an extra 92 pending sales. The three-year pre-COVID average was 2,206 pending sales, 65% higher or an additional 871 compared to today.

With a rising supply and falling demand, the Expected Market Time (EMT) - the days required to sell all Orange County listings at the current buying pace - has escalated from 50 to 54 days over the past two weeks, reaching its highest since February. Contrastingly, last year's EMT was 77 days, slower than today, while the three-year pre-COVID average was 87 days, significantly slower than the current pace.

The luxury inventory, comprising homes priced above $2 million, increased from 789 to 810 homes, up 21 or 3%, marking its highest since July. Meanwhile, luxury demand diminished by six pending sales, down 3%, now standing at 185. With inventory ascending and demand descending, the EMT for luxury homes priced above $2 million rose from 124 to 131 days. At 131 days, the market is far from instant, requiring luxury sellers to meticulously approach the housing market.

Year-over-year, luxury demand has risen by 35 pending sales or 23%, and the active luxury listing inventory has grown by 22 homes or 3%. Last year's EMT was 158 days, slower than today.

In the $2 million to $4 million price bracket, the EMT over the past two weeks has risen from 92 to 95 days. For homes priced between $4 million and $6 million, the EMT remained static at 171 days. For homes priced above $6 million, the EMT soared from 260 to 326 days, implying that sellers in this bracket could anticipate transitioning their homes into escrow around September 2024.

Having said all of that, homes that are priced appropriately at fair market value, are going under contract very quickly - we are talking 10 days or less! Sellers with unrealistic hopes and expectations that are overpricing their homes are keeping the expected market time higher on average. So what does all this mean?
Sellers: Price your home at fair market value according to recent sales and comparable properties to achieve immediate offers (plural) and top dollar for your property.
Buyers: Be ready for a battle against other buyers for the properties you like. Prepare to offer over the list price and sweeten the deal with terms the seller can't resist.