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Learning from the Peak of Orange County Home Sales in 2007

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For the first time in nine years, the median selling price for Orange County homes hit $645,000 again, according to CoreLogic, as reported in the Orange County Register. Prices went from that amount in June 2007, dipped and then recovered in April 2016. Along the way, home sellers and buyers, real estate agents, mortgage lenders, and housing investors have learned a few lessons.

Pricier is Better

Homes above $645,000 recovered more quickly because buyers of these homes typically did not go for the trickier mortgage scenarios that were available back then. These homeowners generally benefited from better income and financial management, made bigger down payments, and settled for more conventional loans. So prices in these high-priced neighborhoods did not fall as far when the real estate bubble burst.

In contrast, cheaper homes, with prices under the median $645,000, recovered far more slowly because buyers of these properties generally did not have large down payments and often needed special consideration to qualify for a mortgage. Consequently, when the bubble burst, many of these homes went into foreclosure or were abandoned. Their prices dropped precipitously, which demanded a longer and steeper climb back up.

Stricter Mortgage Requirements

Remember subprime mortgages? That’s where lenders were falling all over themselves to give money to higher-risk borrowers. One example was the No Income, No Assets (NINA) loan, which required only a credit score to qualify. Another was an adjustable rate mortgage that allowed interest-only payments. All these shenanigans eventually led to financial institutions going bankrupt and consumers losing their homes.

Mortgage requirements have since become far stricter. You’ll need at least 10 to 15 percent down with 20 percent being ideal. In addition, your total monthly debt, which covers credit card bills, student loans, and car payments, can’t be over 36 percent of your gross monthly income. Finally, a credit score of 720 or more gets you the best rates. If your score is under 620, your loan application may be denied.

Due Diligence

During the crash, consumers relied on the expertise of real estate agents who depended on mortgage professionals who looked to financial institutions that consulted with housing gurus. Many of these experts didn’t understand what they were getting into, let alone being able to explain it to their clients. When the financial domino fell on top, it affected everyone underneath it.
Everyone today, from home buyers and sellers to Realtors and lenders, rely on their own due diligence to discover what’s up. Fortunately, with information so readily available on the Internet, that type of research is easier now than ever to do.

The bottom line is if something sounds too good to be true, then it probably is. Check everything out yourself and then go with the tried and true for the best results.

Timing The Market

In the past nine years, the housing market went up and down many times on its climb to the top. Ideally, you want to buy a home when prices are low and sell when they’re high. But it’s impossible to know in advance when those peaks and valleys will occur.
The best you can do is to buy when you need a home and hold on to it for a long-term gain. The good news is that interest rates are still at near-record lows and prices in Orange County, despite their recent rise, are predicted to go up. In Yorba Linda, for example, median home values increased by 12.1 percent in the past year and are forecast to grow by 2.8 percent in the next, according to Zillow. In Costa Mesa, the one-year change was 6.2 percent with a 2.1 percent predicted for the coming year.

If you want more information about home prices or want to tour one of our developments, please contact us.