Monthly Archives: February 2014

Orange County’s Demographic Challenge

Three Generation Family Holding Hands While Walking On Beach

Orange County, by most standards, is a great place to live and raise a family.  We have beautiful neighborhoods, great public spaces, award-winning schools and the weather is consistently the envy of the country.  But as we learned last week, household formation is unfortunately on the decline in the United States.  And here in Orange County, we have another problem that isn’t helping the overall economic landscape: young professionals aren’t choosing to settle in Orange County.

Orange County has been gradually losing the number of its young professional workforce for several decades now.  The number of 18-44 year olds residing in Orange County has been dipping steadily which presents a problem for housing growth.  Typically, young professionals are the ones that purchase larger homes while the Baby Boomers are looking to downsize.  With less young professionals in the housing market, Baby Boomers are staying put in their homes, and the market experiences a less productive exchange of homes.  The overall problem is that Orange County isn’t widely perceived to have a bustling job market or an affordable housing market for the younger professional demographic.

In 2007, California state demographers estimated that California would hit 50 million residents by 2032.  Factoring in recent data and trends, it’s unlikely the state will hit that landmark until 2049.  With the state experiencing a slowed influx of new residents, Orange County is further impacted by our aging population.  In fact, Orange County is aging faster than California and the US.

Two additional factors having significant influence on our region: 1) Californians are having fewer children per household and 2) Immigrants are also on the decline in search of higher-paying jobs and more affordable housing.

This isn’t bad news.  It just means that Orange County’s demographic challenges will produce a much slower growth year over year than what we experienced in the past.  So the next time you see a sweeping headline declaring an upturn for the economy and housing, just be mindful that these statements are generally created from aggregated data that doesn’t necessarily represent regional specificity.  On the whole, rapid rate of growth and recovery is unrealistic, and here in our beloved Orange County, one can only expect modest growth on the foreseeable horizon.  But at least, our foreseeable horizon of endless sand and ocean is breathtakingly beautiful and unique to our residents!

Household Formation: What Is It?

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Since the housing bust, everyone is trying to get a handle on what’s happening with the economy.  In conversations regarding the “big picture”, economists tend to talk a lot about consumer confidence and employment.  Specifically when it comes to real estate, forecasters frequently point to interest rates and new home sales to determine if we are well on the road to recovery.  But there’s one economic indicator that plays a huge role, particularly in our industry, but gets less airtime, and that is household formation.

A household, as determined by the Census Bureau, is a group of people living together whether it be roommates in college, or a newlywed couple setting up shop together, or a nuclear family consisting of mom, dad, 3 kids and an grandparent.  These are all separate and unique households.  Formation occurs when person previously in a household leaves the group to set up a brand new residence.  It tends to suggest that the person has gained more financial independence warranting an apartment or new home, and on the path to getting married and having children.  Formation is a positive occurrence.  It additionally implies greater disposable income to express financial independence, potentially increasing spending to furnish new residence.

Unfortunately, household formation is at an all time low.  Historically, the U.S. has witnessed an average of 1 million household formations per year.  In 2013, that figure was less than 400,000.  What is happening is that young adults are experiencing weak job growth and have a harder time obtaining credit, forcing many millennials to move back home with Mom and Dad.  Raw Census data shows that in 2013 over 30% of this demographic continue to live with parents, relatives or roommates.

The irony is that the last few years should have been prime time for home buying with interest rates at its all time low and falling home prices, but the truth is that speculating home builders and all-cash foreign investors have been reaping in all the rewards and snapping up available inventory.

While many economists have been optimistic about the 2014 forecast, until the job market provides the younger generation with greater financial footing to leave their parents’ homes, recovery will continue to be slow.  The good news is that with rising prices, some investors holding properties for rent will be enticed to sell, adding much needed inventory to the market.  Additionally, should the economy recover with steady job growth, many project that these millenials will jump at the opportunity to create new households, unleashing pent-up demand which will drive homebuilders to build more units and home prices upward.

Housing is paramount to the health of the economy.  And household formation is key to housing demand.  Job growth is the catalyst to formation.  In future deliberations regarding the direction of the housing market, add household formation to the list of indicators to monitor.  While often overlooked, it may be the most relevant factor to consider.

 

Real Estate Photography: Quality Photos Required!

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I’m not a photographer. But I know that with nine out of ten buyers starting their home search online, good photography matters when it comes to selling houses.  With the proliferation of real estate search engines and visually dependent social media platforms, both buyers and sellers are demanding appealing photography. A couple of years ago, having beautiful photos of a listing set you apart from the competition, but now beautiful photography is what’s expected.

Now again, I am not a photographer.  I leave the artistry of real estate photography in the capable hands of the professionals that I hire.  But here are few details I keep in mind when dealing with photographing listings:

1) Get a good exterior shot.

Researchers who track the eye movements of consumers looking at online home listings found that more than 95% of users viewed the first photo – typically the exterior photo – for a total of 20 seconds.  The photos of the rest of the house, such as the master bedroom, kitchen, and outdoor space, each net less than 10 seconds of the viewer’s attention span.  Not surprisingly, the exterior shot is the one that leaves the strongest impression and hooks the user into viewing the rest of the photos.  Plus, with eye fatigue and extensive search of inventory, users tend to forget the interior shots fairly quickly.  So if nothing else, make sure the photo shoot yields an attractive exterior shot.

2) Highlight the strong points of the house.

Before a photo shoot, I go through the house and pinpoint its strongest points and make certain I convey these features to the photographer.  I don’t assume that the photographer and I share the same opinion on what sells the house.  Sometimes an assessment of a house’s strengths will determine which photographer I use.  For example, for homes with dramatic windows or stunning views, I typically hire photographers that offer to shoot twice in the same day: daytime and twilight.  The reason being that during twilight hour (the half hour before sunset), there are two shots that showcase the windows beautifully: exterior of the house with the lights on inside and interior shot with sunset colors through the windows.  These shots consistently provide photos with the wow factor that consumers are looking for.  Additionally, luxury waterfront properties here in Coastal Orange County often warrant an aerial shot to demonstrate water frontage, proximity to beach or expansive lot size.

A few other features that are at the top of a photography hit list include outdoors spaces, expansive views, dramatic staircases, spacious floor plan and an inviting bedroom retreat.

3) Curate the pictures.

Upon receipt of photos from the photographer, I like to select a handful of pictures that get uploaded with the listing to the MLS. It’s not necessary to include every photo from the entire shoot.  If the house is immaculate with the exception of the powder room, then the powder room photo gets discarded.  The purpose of the photos is to lure the viewer into requesting an in-person showing.  It serves no one to include photos that might leave a bad impression or imply a remodel project.  In general, a listing going live on the MLS should be accompanied by 8-15 photos depending on the size of the home.  More than 15 pictures may potentially dilute a powerful impression.  Less than 8 might imply that the home is hiding a few flaws.

With real estate photography, it’s best to keep it simple.  It’s imperative to capture a single, stunning exterior shot.  To cover all the bases, a well-rounded set of photos should also include a shot of each major living space: kitchen, family room, dining room, formal living room, master bedroom, extra bedrooms and outdoor space.  Exceptional properties might warrant aerial shots and/or shots from various times of the day. To showcase the home’s strongest features, a set of key images should be selected to accompany the listing on the MLS.  Digital enhancements and dramatic filters generally aren’t necessary, as they tend to give images the “over-processed” look.  At the end of the day, real estate photography should be warm, inviting and genuine, and hopefully be effective in delivering a steady stream of potential buyers to the front door.