While the active inventory did drop over the past month, the rate is still much lower than the annual average for this time of year.

Pricing is Everything: Many sellers are seeing their home sit on the market longer because they want to hold out for a higher price.

Despite ferocious demand, the active listing inventory has nearly doubled since mid-March. Values had increased to the point where buyers were unwilling to pay an excessive amount more than the most recent sale in an area. So, the inventory continuously rose for seven straight months, until now. The active listing inventory dropped by 17 homes in the past two weeks; but, that is still not enough.

In the past nine years, the inventory has dropped an average of 2.3% over this past two-week period. Today, that would represent a drop of 146 homes, not 17. Typically, the active inventory reaches a high point at the end of August or the beginning of September. The average drop over the past nine years from the end of August to the end of October is 6.7%. If that had occurred this year, it would have represented a drop of 424 homes; instead, it increased by 6.2%, or 368 homes.

What’s going on with sellers? Many more homeowners have been coming onto the market after reading or hearing about how much the median has increased year over year. Those statistics describe what has taken place over the course of a year; they do not illustrate what is going on in the trenches of the housing market today where appreciation has come to a grinding halt and the number of pending sales has dropped significantly. It is still a slight seller’s market, but buyers are no longer willing to pay much more than the most recent sale.

It is time for sellers to take a long look in the mirror. Do they really want to sell? If so, they must drop the price to fair market value and wait for a willing and ready buyer to come along. Also, homes are no longer flying off the market like they were last Spring; instead, the expected market time for all of Orange County is 2.74 months. That translates to 82 days, not a week. We are hearing from many sellers that are disconcerted when they don’t receive an offer after being exposed to the market for seven days. Given the current market time, that expectation is irrational.

If sellers are not willing to bring their home in line with the fair market value, then it is time to pull their homes off of the market. Waiting until the Spring Market is not the answer either. That is when everybody waits to place their home on the market. There may be more activity, but there are more sellers competing, so it is essentially a wash. Based on current appreciation, it is not looking like there will be a lot of positive pressure on pricing come this Spring.

Buyers, on the other hand, have been slow to pull the trigger and many have cancelled contracts because of cold feet. Others have been unsuccessful in obtaining an accepted offer to purchase, so have opted to wait until “sellers are a bit more realistic.” Unfortunately, those are not winning strategies either. First and foremost, it is best to pack your patience and wait for the right property. Also, if at first you don’t succeed, try and try again. Buyers that are persistent are finally winning. This is no longer the spring where many buyers never had the winning bid. That market may have been frustrating, but it is in the rearview mirror.

It is also imperative that buyers know that these low, historically low interest rates are going to come to an end soon. Even if values remain the same, as interest rates float upward, affordability drops, and so will a buyer’s purchasing power. For the median priced detached home, $612,000, and 20% down, a 1% increase in interest rates equates to an extra $295 per month. That totals $3,540 in one year and $17,700 in five years. Sometimes it does not pay to wait. Forecasts are calling for a minimum of a 1% increase as the Federal Reserve ends their involvement in the secondary market, known as “tapering” in the mainstream media. Rumors now are that the tapering will now occur during the Spring Market.

For buyers it is wise to pull the trigger sooner rather than later. For sellers it is time to price according to the fair market value or throw in the towel.

Active Inventory: The inventory dropped for the first time in seven months.

In the past two weeks, the active listing inventory dropped by 17 homes and now totals 6,333. It’s only three-tenths of 1%, but a milestone nonetheless, the first drop since mid-March. The drop in inventory is a bit delayed and should have started a couple of months ago. Instead, overly optimistic sellers have flooded the market. Hopefully more and more sellers will come to the realization that they need to be priced at the fair market value or throw in the towel, pulling their homes off the market. This is a cyclical phenomenon for this time of the year. As we roll towards the holidays, sellers will finally figure out that it is going to take a more realistic approach to be successful.

Last year at this time there were 4,043 homes on the market, 2,290 fewer than today.

Demand: Demand dropped 2% in the past two week.

Demand, the number of new pending sales over the past month, dropped by 41 and now totals 2,310. Over the past nine years the average drop has been 1%. Through Thanksgiving, we will continue to see small changes in demand. From Thanksgiving week through the first couple of weeks of the New Year, the Holiday Market, demand will slow to its lowest point of the year.

Last year demand was at 3,145 pending sales, 835 more than today. But, those numbers are a bit inflated as there were 790 additional pending short sales and only about half of short sales ever close. In the end, the discrepancy is large enough that it will equate to fewer closed sales in the coming months in comparing year over year statistics.

Distressed Breakdown: The distressed inventory decreased by 3% in the past two weeks.

The distressed inventory, foreclosures and short sales combined, decreased by 3%, or 8 homes, and now totals 276. Only 4.4% of the active listing inventory and 12% of demand is distressed. Compare that to last year when it represented 13% of the inventory and 35% of demand. Distressed properties today play only a small role in a housing market dominated by sellers with equity.

In the past two weeks, the foreclosure inventory decreased by 2 homes and now totals 57. Only 1% of the inventory is a foreclosure. The expected market time for foreclosures is 34 days. The short sale inventory decreased by 6 homes in the past two weeks and now totals 219. Short sales remain the hottest segment of the Orange County housing market with an expected market time of 29 days. Short sales represent just 3.5% of the total active inventory.

The pros and cons to incorporation. Does the legal protection a corporation offers always make sense for every investor?

October is a busy month around Southern Orange County! There are numerous events going on that are family friendly, a few that adults will love as well.

Check out the list below to find out where you can celebrate the harvest season and Halloween in the cities of South Orange County.

Laguna Niguel

Haunted Trails 10/24, 10/25 & 10/26 6:30pm – 8:30pm

Watch for Little Red Riding Hood, Hansel & Gretel, Rapunzel and other characters that will haunt each and every visitor. Groups of 10-13 people are escorted through mazes, tents,and ultimately pass through the graveyard. Wear comfortable walking shoes. No costumes allowed. This is a very scary event and not recommended for children under 8 years of age. Call our Special Events Hotline at (949) 362-4351 x 1 for more information.

Aliso Viejo

AVCA Fall Harvest Festival 10/19 10:00am - 12:00pm

Join the Aliso Viejo Community Association (AVCA) for a morning of fall fun! The annual Fall Harvest event includes: family games, pony rides, arts & crafts, balloon twisters, and DJ entertainment.

Wear your costume as you walk through the costume parade which begins at 10:30 a.m. Bring THREE (3) canned food items to be entered in an opportunity drawing for a prize. Canned food will be collected and distributed to those in need here in Orange County. For more information, please call 949-243-7750 or visit our website at: www.avca.net

2ndAnnual Beer & Brauts Festival 10/25 6:00pm-9:00pm The Aliso Viejo Conference Center on Friday, October 25 will host its second annual "Beer & Brats Fall Festival" from 6 p.m. to 9 p.m. at 31 Santa Barbara Drive. The Aliso Viejo Conference Center overlooks the golf course near the intersection of Glenwood and Golf Drive.

The fun-filled festival caters to adults and kids alike. For adults, the event will feature craft beer samples from specialty breweries, beer-boiled Bratwurst on homemade pretzel rolls and Parmesan truffle potato chips.

Children ages 3-12 will enjoy a private "Kids Lounge" with games, activities and dinner.

Tickets are $15 for adults 21 and over; and $15 for kids 3-12. Other beverages will be available at Happy Hour prices.

To RSVP, call 949-425-2575 or register online at alisoviejoconferencecenter.com

Mission Viejo

Hometown Halloween 10/26 4:00pm-8:00pm

Celebrate this fall holiday in style with themed carnival game booths, the 'Whacky Witch'n Kitchen' pint-sized haunted house, costume parade, crafts, face painting and pony rides.

For more information, please call 768-0981. The event is free (minimal charge for some activities).

Dana Point

Doheny State Beach Halloween Haunt 10/26 6:30pm-8:30pm

Don’t miss out on Doheny’s most festive event of the year! Bring your family and friends to celebrate Halloween in a fun and safe environment with good ole fashioned spookiness, arts and crafts, a fun zone, and an array of educational booths. The event runs from 6:30pm – 8:30pm and meets at picnic sites A & B. There is no charge for admission however, a donation of one non-perishable item per person is greatly appreciated. Don’t forget to dress up those little ones!

Lake Forest

Heritage Hill Historic Park in Lake Forest is celebrating Halloween early with its annual haunt on Friday and Autumn Harvest Festival on Saturday.

On Friday, Oct. 18, the 6th annual Haunt at Heritage Hillincludes a haunted schoolhouse, the Legend of Sleepy Hollow, a scream zone and a special screening of the classic movie "Dracula." There's also a DJ and dancing.

Looking for even more family-friendly events in Orange County this Halloween? Popcicle Blog has an amazing resource! Check out a complete list HERE

Many buyers tire from too much competition and opt to wait, but

it has proved to be the wrong decision.

Waiting to Buy: Buyers who have opted to wait a year ago are looking at monthly payment increase of 25% for the median priced detached home today.

For buyers, the Orange County real estate market has been extremely tough for the past 18-months. With very little supply, tremendous competition, multiple offers, offers over the asking price, and brisk appreciation, many buyers decided to retreat to the sidelines and wait until the market was a bit less crazy.

The good news: after a year-and-a-half, the market is a little less crazy right now. The bad news: with higher interest rates and massive appreciation, the payment for the median priced home skyrocketed by 33%. The monthly payment for the median priced detached home in 2012, $542,700, along with the average interest rate of 3.7%, was $1,998. According to Dataquick, the median price of a detached home is currently at $625,000, a 21% increase year over year. Given today’s interest rate of 4.4%, the monthly payment for the current Orange County median is $2,504, a $506 increase.

So, for last year’s buyer who was understandably frustrated and opted to sit the market out after writing offer after offer to no avail, they are now looking at a monthly payment that went up by $506 per month. That’s a little over $6,000 extra per year, each and every year, or $30,000 in five years.

To be fair, even if every buyer decided they were going to stick to their guns and purchase no matter how many offers they had to write, there just wasn’t enough inventory to match the unbelievable demand. Buyers would have still been unsuccessful in their attempts to purchase given the supply constraints.

In comparing today’s median sales price payment to prior years, the payment is not as high as 2004 through 2008. It is slightly higher than the annual median in 2003. Last year’s median payment was the lowest since 2001. With appreciation and higher interest rates, home affordability has been on the decline.

These facts are irritating for the buyer who has wanted to buy, but simply was not able to compete. The problem was that prices were just too low coupled with interest rates that were artificially too low. Now, prices have bounced back and are at a more realistic level and interest rates are on the rise.

There is good news. The market is less crazy right now. Homes are not flying off the market. Where homes had generated a baker’s dozen of offers, they are now looking at two or three at best. Many homes are sitting and not generating any offers at all. Ultimately, it is now all about price. Today, buyers have choices. It is still a seller’s market, just not as strong. Appreciation has slowed significantly and the month to month run-up in prices has come to a complete halt.

The best advice for a buyer is to not look longingly in the rearview mirror at what their payments could have been if they were successful a year ago. Instead, knowing that interest rates are going to rise, purchasing right now is the best strategy. The California Association of REALTORS® just delivered their annual forecast for the coming year, and they expect interest rates to rise to 5.3%. It is understandable that we have all got used to these wonderful, historically low interest rates, but we need to keep in mind that the Federal Reserve has been pumping money into the system; basically, printing money. The Fed can only do this for so long. Over time, inflationary pressure will build, and the Fed fights inflation by increasing interest rates.

Back in June, the Federal Reserve announced that they were going to start to “taper” pumping money into the secondary market. They were warning everybody that they could not print money forever and wanted to start to cut back their involvement and eventually would pull out altogether. Wall Street responded with a big drop and interest rates shot up by 1% seemingly overnight. For now, the Fed has place tapering on hold, but expect it to start at the beginning of 2014. As they taper, interest rates will rise.

Appreciation for next year is forecasted to be a modest 6%, which would be an increase in the detached median to $656,250. The payment, based upon the 5.3% interest rate forecast, would be $2,915, an increase of $411 per month every single month, or $4,932 per year. Even if homes did not appreciate one dime, but interest rates still popped up to 5.3%, the monthly payment would be $2,778, an increase of $274 per month. For the average person, $411 or $274 per month is a lot of money and they would prefer utilizing it as disposable income.

In looking at the data, it did not pay for a buyer to sit out the market over the past year. We will be coming to the same conclusion a year from now: it will not pay to wait to purchase.

Active Inventory: The inventory increased by only 1% in the past two weeks.

In the past two weeks, the active listing inventory added only 52 homes, or 1%, and now totals 6,350, levels last posted in April 2012. We are officially in territory not seen since 2005, where the inventory continued to increase well beyond the normal yearly inventory peak, the end of August. But in 2005, the increase was going strong during this time of the year, rising at a rate of 5% every two weeks. Currently, the pace is slowing and we could reach a peak at any moment.

Last year at this time there were 4,199 homes on the market, 2,151 fewer than today.

Demand: Demand did not change in the past two weeks.

The six week drop in demand came to an abrupt halt and only shed 2 pending sales in the past two weeks. Current demand, the number of pending sales over the prior month, now sits at 2,351. The Autumn Market is cyclically slower. From here we can expect only slight changes in demand through Thanksgiving. From there the distractions of the Holiday Market will take root and demand will decelerate to its lowest point of the year.

Last year demand was at 3,255 pending sales, 904 more than today. Those numbers need to be taken with a grain of salt. There were 729 additional short sales embedded in those pending sales statistics and only about half of all short sales ever closed. But, the year over year difference in demand is so large that the difference in year over year sales will ultimately be less.

Distressed Breakdown: The distressed inventory increased by 10% in the past two weeks, the second largest increase this year.

The distressed inventory, foreclosures and short sales combined, increased by 10%, or 26 homes, and now totals 284. Only 4.5% of the active listing inventory and 13% of demand is distressed. Compare that to last year when it represented 13% of the inventory and 36% of demand. Thus, the current market is predominantly homeowners that have equity in their homes and distressed properties have a much smaller role in today’s housing landscape.

In the past two weeks, the foreclosure inventory decreased by 11 homes and now totals 59. Only 1% of the inventory is a foreclosure. The expected market time for foreclosures is 33 days. The short sale inventory increased by 37 homes in the past two weeks, totaling 225, the largest gain thus far this year, beating the prior mark of 25 set just one month ago. The number of currently active short sales has been on the rise, but still remains the hottest segment of the Orange County housing market with an expected market time of only 28 days. Short sales represent just 4% of the total active inventory.

The housing market seemed to be inching along on the road to recovery in 2012, and then along came the 2013 and BOOM! It felt like an explosion of growth in a little under 6 months! Record low interest rates along with record low inventory combined to bring buyer demand to a fever pitch. We saw home values increase at rates that we had only seen before the crash in many areas, and quite a few perspective buyers found themselves in bidding wars once again.

Then came a slight bump in interest rates in toward the start of the summer, and the explosive growth started to slow. Some buyers were priced out of their ideal price range, but it allowed inventory to catch up with buyer demand. Many experts believe that we are now seeing a leveling off of the market. So what does this mean for buyers? Well interest rates took another dip this month, and with inventory up that means it may finally be that moment they've been waiting for! See what some of the experts are saying:

Fannie Mae and Freddie Mac have have relaxed rules that would have kept banks from approving mortgages.

Home values to taper, could be a windfall for buyers!

The National Association of Realtors' Projections through 2014

Preparing a home for sale can be a daunting task at any time of the year, but if you’re thinking about selling your home this fall there are a few seasonal considerations that could help make your home even more appealing to potential buyers. Yes, there are potential fall-time issues that should be addressed …even in Southern California!

We all know that leaves can be a concern during this time of year, but is it really an issue that could cause a buyer not to make an offer? Well remember that curb appeal is everything. There’s no second chance to make a first impression. While a potential buyer may still make an offer they may also be more likely to offer LESS if they feel the property is in disarray or needs maintenance.

With this in mind, here are a few outside areas that should be addressed before buyers come through:

Call a Roofer: It’s a good idea to have a roofer come out and seal the flashing and around vents, etc. Fall can be one of the wettest seasons in Southern California, and you don’t want to be surprised by any unknown leaks just as a buyer comes through!

Clean Up the Yard: Whether it’s leaves or an overgrown lawn, it’s essential to make sure both the front and back yards have been properly manicured. This doesn’t mean investing a ton of money to complete all of that landscaping you’ve been putting off. Just make sure it looks as good as it can before showing. EXTRA TIP: Arborists generally recommend bi-annual tree trimming, and October or November are two of the most common months to have your trees trimmed in the fall. April is typically the recommended month for Spring.

Gutters: Even in a sunny climate like Orange County, you may want clear the leaves from the gutters. Potential buyers often see deferred maintenance on something like the gutters as a sign that the rest of the home may not have been well cared for either. Also, rain is more likely during the autumn months. If a buyer happens to see your home in the rain, they will definitely be looking at the gutter system.

Prevent Flooding: Surface drains can easily become clogged with yard debris. If you’ve hired a professional to help with gutters and/or yard work have them take a look at the drains as well. This way there won’t be any surprise floods if the rains come. Make sure they are clear of debris and free-flowing.

Give it a Good Wash: The summer months in Orange County can be dusty and hot, which can really put a film of grime on both the windows and exteriors walls of your home. It’s a good idea to have your windows professionally washed on the outside, as well as power washing the exterior walls and any fence that may be looking a little dingy. If your home is close enough to the ocean to smell the salt in the air, then this one is EVEN MORE essential.

Light the Way: Remember that the hours of daylight are much shorter during the fall and winter months. It may be a good idea to install a set of solar lights along the walkway, and make sure all other outdoor lights are working. This way if a buyer drives by your home after work they will see it at it’s best! LOCAL TIP: Check out ACE Hardware in Laguna Niguel for great help with this!

Front Door Spruce Up: In addition to cleaning up any leaves or debris, it may be a good idea to pick up a new door mat and pick out a few fall-appropriate flower pots to create a clean, welcoming scene. LOCAL TIP: Check out the Armstrong Garden Center in Laguna Niguel for help finding plants that will last through out the fall and winter seasons.

Moving to the interior of the home, here are a few more ideas to get your home in tip top shape this fall:

Clean Out the Chimney: Nothing says fall like a warm cozy fire in the fireplace. However, no buyer is going to feel cozy if the chimney is full of soot. Have the chimney cleaned by a professional, and make sure to have a fire lit at any open house!

Go Easy on Holiday Decorations: There’s nothing wrong with celebrating the holidays when you’re trying to sell your home. Just remember that potential buyers want to be able to envision themselves in the space. Try and keep decorations light and as neutral as possible. If done correctly, this can help make the home feel cozy and even more appealing.

Hide the Coats: With all of those extra coats and boots, your entryway will fill up fast! Make sure to put all of the extra clothing and boots somewhere they won’t be seen.

Lastly, if you’re selling your home this fall remember to use season appropriate scents to help create a cozy sanctuary for potential buyers. Scents like cinnamon, pumpkin spice, and evergreen can help make buyers feel right at home!

Local Professional Links (Southern Orange County)

South Coast Shingle Company (roofing & repair)

Dave's Tree Service (Arborists)

Urban Forest Landscape & Construction (Yard Maintenance & Constructions) *Drains

Evergreen Landscaping & Maintenance (General Yard Help)

Tradewind Window Cleaning

Pacific Cleaning Services (Power Washing)

Red Hot Hearth & Home (Chimney Cleaning & Maintenance

Additional Resources

http://www.hgtv.com/decorating-basics/creative-ways-to-paint-with-falls-trending-colors/pictures/index.html

http://www.hgtv.com/decorating-basics/before-and-after-fireplace-makeovers/pictures/index.html

http://www.realtor.com/home-finance/real-estate/sellers/selling-home-in-autumn.aspx

Photo credit Flickr Creative Commons user Wonderlane

*Please note that the links included in this article are intended to assist homeowners in finding local help in the stated areas. They are not meant as an endorsement. Please do your due dilligence when hiring any professional.

OPEN HOUSE this weekend! SAT & SUN 1-5PM

With the inventory rising and demand slowing, the expected market

time has been increasing.

Expected Market Time: With an expected market time of 2.7 months, Orange County has not seen these levels since January 2012.

Orange County housing is moving away from a sizzling hot seller’s market with rapid appreciation to a cost conscious cooler market with restrained appreciation. The expected market time is how long it would take to exhaust the current supply of homes given current demand. Back in mid-March, the expected market time hit a new low, just 33 days, in records that date back to 2004. Today, it is at 2.7 months, or 80 days.

This about face is not unprecedented. Back in 2005, the expected market time hit a low of 34 days at the end of February and increased to 82 days by the start of October. From there, it continued to rise until it hit a high for the year of 4 months at the end of December. The inventory did not reach a peak until Thanksgiving and only started to drop when sellers finally decided to throw in the towel and fewer homeowners opted to place their homes on the market.

This year is very similar to 2005. The first half of the year was not whether or not a seller would be successful in selling, it was all about how many offers they could generate and how much more money they could get compared to the last closed or pending sale. $20,000, $30,000, $40,000 above the last comparable sale was normal. Buyers wrote offers on many homes to no avail. Sellers were in the driver seat and they knew it.

From July through today, the market has been adding a lot more homes and demand has been dropping. Since the end of June, the inventory has increased by 43% and demand has declined by 25%. This resulted in the expected market time nearly doubling in just a few months.

Let’s peel back the onion and see how the market has evolved this year. Despite voracious demand at the beginning of the year, the listing inventory began to rise in mid-March and has increased unabated ever since. It wasn’t just the high end. As a matter of fact, the $500,000 to $750,000 range has increased the most, 161% so far. The $250,000 to $500,000 increased by 130%. Any REALTOR® will confirm that the craziest price ranges in terms of multiple offers and rapid price increases had been taking place in these very same lower ranges.

The market was starting to cool as values began to dramatically recover from their recession lows a few years ago. What looked like a total deal and had attracted a wave of investors had lost a bit of its allure and luster. Investors started looking elsewhere. Homes began receiving fewer offers and buyers shied away from grossly overpriced homes.

The trend picked up momentum when interest rates rose at the end of June after the Federal Reserved announced that it would begin to taper their involvement in purchasing loans in the secondary market sometime in the near future. The mere mention of tapering set Wall Street reeling and interest rates shot up a full percentage point. Overnight, buyers were now looking at paying even more for homes that had already experienced a dramatic year over year increase in their values. At that point, buyers were not interested in paying much more than the last comparable or pending sale. It became all about price instead of acquiring a home at whatever cost.

Flash forward to today and buyers will simply ignore overpriced homes. Since sellers have continued to price their homes higher than the most recent comparable or pending sale, they have been languishing on the market. Buyers will not pursue these homes. Sellers are finding out the hard way that Orange County housing has changed. They are perturbed after being on the market for more than a week, even though expected market time is inching closer to three months. Slowly but surely, sellers are going to come to the realization that they have a decision to make: reduce the asking price or pull their home off the market.

Active Inventory: The inventory increased by another 3% in the past two weeks.

In the past two weeks, the active listing inventory added 175 homes, or 3%, and now totals 6,298, levels not seen since April 2012. In the past nine years, only once, in 2005, did the inventory not peak by this time of year. In that year, the inventory continued to climb until reaching a peak in mid-November. That was also the year that the market started shifting away from a seller’s market.

As more overpriced homes are placed on the market, the inventory will continue to rise. Combine that with decreased demand, and even more sellers will be unsuccessful. As we move deeper into the Autumn and Holiday Markets, properly pricing a home becomes paramount to finding success today.

Last year at this time there were 4,416 homes on the market, 1,882 fewer than today.

Demand: Demand dropped by 5% in the past two weeks.

Demand continues to drop as we make our way through the Autumn Market. In the past two weeks, demand has dropped by 112 homes and totals 2,353. We have not seen these levels since January of this year. In the past six weeks, demand has declined by 17%.

This is cyclically a slower time of the year as demand downshifts a bit from the second best time of the year to sale, the summer. But, the downshift is a bit more pronounced this year. In the past nine years, the deceleration has averaged 11% from mid-August to the end of September, compared to 17% today. The change can be felt in the marketplace. On the weekends, major intersections once vacant are now populated by a sea of open house arrows. Buyer traffic has diminished. Multiple offers are growing less common. The Orange County housing market is evolving.

Last year demand was at 3,366 pending sales, 1,013 more than today. Those numbers need to be taken with a grain of salt. There were over 800 additional short sales embedded in those pending sales statistics and only about half of all short sales ever closed. But, the disparity of year over year pending sales is at its largest point of the year. This will translate to fewer sales in the waning months of 2013 compared to 2012.

Distressed Breakdown: The distressed inventory dropped by 3% in the past two weeks.

After posting the second largest gain of the year in the distressed inventory, foreclosures and short sales combined, two weeks ago, it dropped in the past two weeks by 3%, or 7 homes, and now totals 258. Only 4% of the active listing inventory and 12% of demand is distressed. Compare that to last year when it represented 14% of the inventory and 37% of demand. Thus, the current market is predominantly homeowners that have equity in their homes with only a hint of distressed.

In the past two weeks, the foreclosure inventory increased by 6 homes and now totals 70. Only 1% of the inventory is a foreclosure. The expected market time for foreclosures is 46 days. The short sale inventory decreased by 13 homes in the past two weeks, totaling 188, and remains the hottest segment of the Orange County housing market with an expected market time of only 23 days. Short sales represent just 3% of the total active inventory.

The housing market can be frustrating for a buyer, so patience is essential.

Buyers Approach: The market is getting a little bit better for buyers, but it is still nuts.

Since mid-March the active inventory has increased and so has the expected market time. For homes price below $1 million, the inventory has doubled and the expected market time increased from a little over three weeks to six weeks. Both are extreme sellers markets, but it is slowing. It’s like speeding along at 65 miles per hour versus 55. Either way, you are still going fast.

Buyers feel the sense of urgency when a home is placed on the market at or near their fair market value. These homes generate multiple offers and a sea of buyers parade through the homes immediately. But, there has been a shift in the market and it lies in how most homes are initially overpriced. The inventory is increasing substantially and it is entirely on the backs of overzealous, irrational sellers reaching for the stars. Many are erroneously pricing their homes based upon other area listings that are overpriced.

Since homes have appreciated substantially in the past year, homes no longer look like a “fire sale.” Buyers are not willing to pay tens of thousands of dollars over the last comparable sale. Homes are still appreciating, just not at the rate that they were earlier this year. Keep in mind, values are still far from their peak.

In this overpricing environment, price reductions are the new norm. In some areas, 50% of the listing inventory has reduced their asking prices at least once. When homes are reduced at or close to their fair market values, they are achieving success.

Given the current environment, is it a good time to buy? Should a buyer who has written several offers with no success throw in the towel? It is absolutely an excellent time to buy and buyers should not throw in the towel out of frustration. The key to tackling this market it to be patient. The frustration is completely understandable; however, it is a very smart decision to pursue purchasing if a buyer plans on staying in their homes for several years to come.

Interest rates remain at historically low levels even after rising from 3.5% to nearly 4.5%. For perspective, in 1980 they were at 14%, in 1990 they were 10%, in 2000 they were 8%, and in 2007 they were 6.5%. Today’s interest rates are a gift from the Federal Reserve and are part of a long term strategy to reverse the course of housing and, ultimately, the overall economy. The rates have been working, but they will not last forever at their current level. Ben Bernanke and the Federal Reserve have already started talking about the end of this strategy; thus, rates have bumped up nearly 1%. It is not IF rates will be higher; it is WHEN rates will be higher. Nobody knows for sure when that will be, but the rise is inevitable after the stimulus is gone. Very few buyers really know the impact of rising rates and how much they influence affordability.

When the rates jump from 4.5% to 5.5%, the payment for 20% down on a $540,000 home (July’s median sales price in Orange County) increases by $264 per month, or $3,168 per year, or $15,840 in five years. At 6.5%, the payment is an extra $542 every single month, or $6,504 per year, or $32,520 in five years. 6.5% is still low. The trouble is that everybody is now accustomed to ridiculously low rates that are part of a stimulus package. Buyers should absolutely take advantage of today’s interest rates. They will be saving significantly every single month. One year after purchasing, a buyer will not care how much was paid for a home; instead, they will care about the check they have to write on a monthly basis. A savings of several hundred dollars each and every month is great for a family’s budget.

Yes, writing offer after offer can be very frustrating. But, with a long term objective and goal in mind of cashing in on today’s great home values along with today’s phenomenal interest rates, eventually success will be achieved.

Active Inventory: In the past two weeks, the active inventory jumped another 6%.

In the past two weeks, the active listing inventory has grown by 347 homes, the second largest gain this year, and now totals 5,869. Within the next couple of weeks, the inventory will cross the 6,000 home mark. From there, cyclically, the inventory begins to fall in the Autumn Market. Will this year follow the normal cycle? It may continue to grow through September before reality sets in. Only time will tell. There are 766 more homes on the active listing inventory today than one year ago. In all of Orange County, the inventory has increased by 84% since mid-March.

Demand: Demand increased by 5% in the past two weeks.

Typically for this time of year, demand remains flat; but, within the past two weeks, demand, the number of new pending sales over the prior month, has increased by 122 pending sales, and now totals 2,829. Last year demand was at 3,544 pending sales, 715 more than today. Remember, there were a lot more short sales last year embedded in those pending statistics, making the number appear artificially high. As we enter into the Autumn Market, we can expect demand to slowly fall. It will drop further during the Holiday Market as buyers turn their attention to eggnog and mistletoe.

Distressed Breakdown: The distressed inventory increased by 6% in the past two weeks.

The distressed inventory, short sales and foreclosures combined, has continued to increase since bottoming at 169 at the end of May. In the past two weeks, the distressed inventory increased by 15 homes and now sits at 246, 77 additional short sales and foreclosures compared to that May mark.

Only 4% of the active listing inventory and 11% of demand is distressed. Compare that to last year when it represented 14% of the inventory and 40% of demand. The current market is predominantly homeowners that have equity in their homes with a dash of distressed.

In the past two weeks, the foreclosure inventory increased by 2 homes and now totals 84. Even with the increase, only 1% of the inventory is a foreclosure. The expected market time for foreclosures is 41 days. The short sale inventory increased by 13 homes in the past two weeks, totaling 170, and has a sizzling expected market time of only 19 days. Short sales remain the hottest segment of the Orange County real estate market today.

Aliso Viejo

July 4th Celebration with Fireworks

Grand Park

Aliso Creek Road and Pacific Park Drive

6 p.m. - 9:30 p.m.

Low-level fireworks show, choreographed to patriotic music

Enjoy live entertainment, bounce houses, face painting, arts and crafts and an apple pie contest. Food and beverages available for purchase.

(949) 243-7747

http://www.avca.net

Dana Point

4th of July Fireworks Extravaganza at the Dana Point Harbor

Fireworks at 9 p.m. Most popular viewing locations at Heritage Park and Lantarn Bay Park

Free shuttle service from Dana Hills High School will be offered from 10 a.m. - 11:30 p.m.

(949) 248-3530

http://www.danapoint.org

Dana Point

Laguna Cliffs Marriott Resort and Spa

Vue Lawn and OverVue Deck

25135 Park Lantern

Dana Point

5 p.m. to 8:30 p.m., harbor fireworks at 9 p.m.

BBQ Buffet, live entertainment and fireworks viewing

Open seating, first come, first served

Price: $89 for adults, $35 for kids 6-12, complimentary for children 5 and under

For Reservations, call (949) 487-7555

http://www.lagunacliffs.com

Dana Point

4th of July Cruises

Dana Wharf Sportfishing and Whale Watching

Dana Point Harbor Dr. and Golden Lantern St.

Cruises at 7:30 p.m. (2-hour) and 8 p.m. (1 1/2-hour)

Price: Starting at $29 for adults, $19 for children, kids 2 and under are free

For Reservations, call (949) 496-5794

http://www.danawharf.com/cruises.html

Doheny State Beach

25300 Dana Point Harbor Dr.

Dana Point, CA 92629

Independence Day Fireworks Extravaganza

Fireworks start at 8:45 p.m.

No personal fireworks allowed

Thursday, July 5: Beach clean-up volunteer opportunity

http://www.dohenystatebeach.org/

Laguna Hills

Fourth of July Celebration at the Laguna Hills Sports Complex

Festivities begin at 4 p.m., fireworks at 9:10 p.m.

25555 Alicia Parkway

Laguna Hills, CA 92653

Enjoy food, music, activities, face painting, carnival rides and fireworks.

Free admission and games; food, drinks and ride tickets will be available for purchase.

(949) 707-2680

http://www.ci.laguna-hills.ca.us

Laguna Niguel

4th of July Celebrations

Pancake breakfast at YMCA from 7:30 - 11 a.m.

Concert 6 p.m. - 8 p.m., fireworks at 9 p.m.

Free shuttle service available from 4:30 - 10:30 p.m. at the City Hall Parking Lot at 3011 Crown

Crown Valley Community Park Amphitheatre

29751 Crown Valley Parkway

Laguna Niguel, CA 92677

(949) 425-5100

Bring flashlights for walk to Laguna Niguel Regional Park

http://www.ci.laguna-niguel.ca.us

Lake Forest

4th of July 5K Run/Walk

Race starts at 7:30 a.m. at El Toro High School

4th of July Parade

Starts at 10 a.m. at the intersection of Toledo Way and Ridge Route and will travel along Lake Forest Boulevard turn on Serrano Road, ending at Dayton Road.

(949) 461-3450

http://www.lakeforestca.gov

Mission Viejo

Annual Street Faire and Fireworks Spectacular

Noon - 9 p.m., fireworks at 9 p.m.

Olympiad Road between Marguerite Parkway and Melinda Road

Enjoy games and food booths, wine and beer garden, crafts, live entertainment, rides and a spectacular fireworks show. A free shuttle will be available from 1 p.m.- 8 p.m. surrounding Lake Mission Viejo.

(949) 830-7066

http://www.mvactivities.com

Newport Beach

4th of July parade and firework cruises

2 1/2-hour parade cruises through Newport Bay at 1 p.m. and 4 p.m.

Fireworks cruise from 7 p.m. - 9:30 p.m.

Admission only: $45; Admission with unlimited drink package: $70

For more information or to make a reservation, call (949) 675-0551

400 Main St.

Newport Beach, 92661

http://www.cruisenewportbeach.com/4thofjuly

Newport Harbor

The American League 4th of July Boat Parade

1 p.m. - 5 p.m.

Newport Harbor/Balboa Island

(949) 673-5070

http://www.americanlegionyachtclub.com

San Clemente

4th of July fireworks show at the San Clemente Pier

Fireworks start at approximately 9 p.m.

Event is free and open to the public

(949) 361-8264

http://san-clemente.org

San Juan Capistrano

4th of July Celebration at San Juan Capistrano Sports Park

Festivities begin at 3 p.m. with fireworks in evening

Admission is free; food, drinks and ride tickets are available for purchase.

25925 Camino Del Avion

San Juan Capistrano, CA 92675

Free parking is available on Camino Del Avion

Enjoy family games, rides, bounce houses, live music, dancing and fireworks.

(949) 493-5911

http://www.sanjuancapistrano.org