| December 28th, 2009, 6:00 am | | | | increasingly realized as we move closer to |
| A short interview with Mark Boud the founder | | | | economic growth. Sidelined buyers will re-enter |
| and CEO of Real Estate Economics. Mark answers | | | | the market in larger numbers to take advantage |
| many controversial questions regarding the | | | | of distressed housing, low priced resales, and |
| Orange County, CA residential real estate market | | | | reduced priced new homes. |
| Eyeball: Did Orange County housing have a | | | | Eyeball: Predict 2010 gain in DataQuick's OC |
| bottom in 2009 — full or partial? | | | | median home-sale price … |
| Mark: We formed a price floor around June 2009 | | | | Mark: We predict a 2.1% positive change in the |
| and have since seen improvements. We actually | | | | median price of housing in Orange County during |
| formed a floor in sales volume back in January | | | | 2010; our forecast for 2011 is +4.0%; and we |
| 2008, and have since seen improvements. Prices | | | | forecast an +8.0% change by 2014. |
| always lag sales volume — both up and down | | | | Eyeball: A year from now, what surprise might |
| — by as much as 2 years. Some are | | | | we be talking about? |
| forecasting a "double dip" or "W" recession where | | | | Mark: The new home market may rebound more |
| housing prices continue to deteriorate — partly | | | | dramatically than the overall housing market. For |
| due to a deluge of distressed inventory to be | | | | example, new homes being offered on the Irvine |
| unleashed on the market. I don't buy it. At current | | | | Ranch may absorb and appreciate faster than |
| levels of undervaluation, distressed inventory is | | | | anyone anticipates – partly due to the lack of |
| being absorbed faster than it is being introduced, | | | | competitive new home inventory and partly due |
| and this trend will continue in Orange County and | | | | to a faster-than-anticipated drop in distressed |
| throughout California. 2010 won't feel like a | | | | housing inventory. As early as January, there may |
| dramatic improvement in either price or sales | | | | be a bit of a new home ‘frenzy' on the Irvine |
| volume, but small, incremental economic and | | | | Ranch. |
| market improvements will continue through next | | | | Eyeball: Thinking back over this decade, list |
| year, with more dramatic improvements forecast | | | | "lessons learned" from the roller coaster ride? |
| for 2011. | | | | Mark: Most of the problems we face now are |
| Eyeball: Driving forces in local housing — good | | | | because we deregulated the mortgage market |
| or bad — in 2010? | | | | during this decade. By reducing our mortgage |
| Mark: Unfortunately, the main driving force won't | | | | standards, we allowed non-traditional buyers — |
| be job growth until the latter part of 2010. The | | | | speculators, investors and unqualified buyers — |
| main driver in housing sales during 2010 will be | | | | to enter the market en masse, and encouraged |
| under valuation. Home prices remain grossly | | | | the housing market to transition to an investment |
| undervalued relative to incomes when the present | | | | market. We're paying a deep price for such |
| mortage cost-to-income relationship is compared | | | | foolishness. |
| to long-term trends. Undervaluation will be | | | | |