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Ecommerce is great! It offers choices and convenience. And this holiday season, many of us will purchase gifts online for our loved ones. But there is no substitute to being a well-informed consumer. So, we put together a list of best practices to help you shop safely and confidently this holiday season.

1. Patch security vulnerabilities in your devices. Install Operating System updates to patch security vulnerabilities and enhance the performance of your computers and devices. Cybercriminals can exploit vulnerabilities in your devices to obtain your personal and financial information. Don’t allow it. If you need help performing these updates, please give us a call. We’ll walk you through the necessary steps.

2.  Ensure your Anti-Virus, Malware and Ransomware protection is operating optimally. Before transmitting personal and financial information online, be sure your protection software is performing well. All these security measures running in the background are important to safeguard your well-earned money and identity.

3. Avoid using public Wi-Fi when shopping or banking. Don’t transmit any personal or financial information, such as passwords, credit card info, etc., when using a public Wi-Fi. Unsecure connections are just too risky.

4. Shop trusted merchants. Carefully read the merchant’s Shipping fees, Delivery and Return policies and other Terms and Conditions prior to purchasing goods or services. Read the item’s description and, if possible, also research merchant and product reviews as well.

5. Research less-known merchants. Sometimes that unique, amazing item is listed in a one-of-a-kind website. Before being hasty, research the store’s physical address and telephone number as well as their reputation. Assess the risk of the unknown before going forward.

6. Ensure a secure payment page. Be sure the merchant uses a secure connection on the payment page by using https://s in their URL and/or the image of lock.
https-002

7. Be extra diligent about possible fraud on online classifieds ads sites such as Craigslist. Scammers can be very sophisticated in their con. They may even create dummy Google Checkout websites to take your money without delivering the product. Verify the legitimacy of the seller, the product and the method of payment before you pay. Read more about this topic here.

8. Be alert for phishing scams. Pop-ups for sites that you are not actively visiting may be the work of cybercriminals. The pop-ups could be of familiar ‘Banks’ or ‘Virus Checks.’ If you did not initiate contact with these companies, don’t give out your personal data or download anything. If you have any questions about the security on your devices, give us a call. Learn more about phishing scams here.

9. Use your credit card, instead of your debit card. Typically, it is easier to dispute the charge on a credit card than a debit card. It is also harder to get a refund on a debit card.

10. Monitor your bank and credit card statements.Save your receipts and compare them to your credit card and bank statements regularly.  Report any questionable charges to the issuer of the card.


Wishing you a safe and joyful holiday season!

Your OC Tech Helpline Team

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Real Social Session
 
The use of social media as a means of making connections and marketing services is growing so rapidly that it is impossible for any one person to stay abreast of all the available apps, platforms, and possibilities. To help members make the most of social media, on October 24, the Orange County Association of REALTORS® presented REAL SOCIAL, a one-day social media conference and expo at the University of California, Irvine.
 
Featured speakers included Katie Wagner, of Katie Wagner Social Media, talking about Social Media Best Practices; Leigh Brown, a highly successful REALTOR® and personal branding expert, whose topic was Making Social Media Work; and Steve Pacinelli, chief marketing officer of BombBomb, explaining How to Use Video to Market.
 
For a sampling of the ideas, tips, and strategies this social media super trio had to offer check out their articles below.

For a special sneak peak into next year's event, Nerd Fest, read what Your Nerdy Best Friend has to say about content creation for social media.


View Photos from REAL SOCIAL 2016

 

 

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iOS 10

The Supra eKEY service is now compatible with Apple’s latest operating system for iPhones and iPads, iOS 10.1  Please check to see if you have any pending updates in the App Store of your mobile device and download that immediately to prevent any problems accessing lock boxes.

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The OC Tech Helpline service is currently unavailable due to Hurricane Matthew.  We will keep you updated as to when the Helpline will be back up.  Thank you for your patience.

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Thank you for visiting us at the C.A.R. Expo this past week. Congratulations!


Prize: 2017 OCAR Local Dues

Winners

Stephanie Martin-Velez
Champion Elite Realty

Brian Kamenca
RE/MAX Terrasol


Prize: Ticket to REAL SOCIAL Conference & Expo

Winners

Carole Kim
Carole Kim, Broker

Ericka McAbee
Grayson Homes

Charles Huynh
FirstTeam

Jean Tietgen
HomeSmart Evergreen Realty

 

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Although real estate is not generally thought of as a dangerous occupation, it does have its risks. REALTORS® sometimes work alone or late, may be asked to drive to remote locations, and often show vacant homes to strangers. Here are thirteen things you can do to stay safe on the job. 

  1. Always carry your cell phone where it is readily accessible. Do not leave it in the purse you locked in the trunk of your car or stowed out of sight in a kitchen cabinet.

  2. Be aware of your surroundings. Preview property before you show it. Familiarize yourself with the layout of the property, including all entrances and exits, and with the neighborhood.

  3. Be careful how you dress. Flashy or expensive jewelry may attract the wrong kind of attention. High heels or restrictive clothing could impede your ability to move quickly in an emergency.

  4. Ask prospective clients to meet you at your office or a neutral location—like a coffee shop. Request photo identification from prospective clients and have them fill out a new client information sheet.

  5. Vet prospective clients. Before establishing a professional relationship, use online resources to check a prospective client’s background, being mindful of criminal, civil, and character issues.

  6. Implement a buddy system. Enlist at least five close friends or colleagues on whom you can rely in case of an emergency. Tell them in advance what property you will be showing and trust that they will have your back.

  7. Create a paper trail and witnesses. Before you take clients to see a property, write down the clients’ license plate number and leave it at the front desk. Explain that doing so is office policy; clients who mean no harm won’t mind. And introduce the clients to a colleague or two. If you meet a client outside the office, text this information to a trusted colleague—and make sure that he or she knows your itinerary.

  8. Always take your own car for showings. When you leave your car, lock it. Consider parking along the street instead of in the driveway, where your exit could be blocked.

  9. When showing a property, let potential buyers take the lead while you follow. If there are features you want to call to their attention, do so from the rear, not the front.

  10. Avoid going into walk-in closets or other closed or confined areas with a prospect. Be familiar with all entrances and exits.

  11. Never advertise a property as vacant or show one alone at night. To do so is to invite trouble.

  12. Don't host an open house alone;take along a colleague. Suggest to home owners that they take breakables off tabletops and secure valuables. And request that pets be housed elsewhere so that they do not become a hazard, a nuisance, or a distraction.

  13. While showing a property, keep your hands free. Do not carry a clipboard, a household pet, or any other object that might interfere with your ability to use your cell phone, discharge your pepper spray, or otherwise defend yourself effectively.
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Small Unmanned Aircraft Systems (sUAS), most commonly known as drones, are making an impact in many aspects of life. In the past, being able to use drones for commercial purposes, including in the real estate industry, had been complicated and limited to operators who had an FAA Section 333 exemption.

That just changed. The first operational rule from the Department of Transportation’s Federal Aviation Administration for routine commercial use of small unmanned aircraft systems became effective August 29, 2016.

If you have been following the development of drones for commercial use, here are three significant changes to note with this ruling:

Overall, with this rule, the FAA is making drone technology more accessible to the commercial sector, and real estate is one area where anticipation and expectation is high because with drones, one can take breathtaking video footage and make a distinguishable impact in the marketing piece of the property.

How are drones being used today in real estate?

Mainly, drones are used to capture aerial videography. The aerial footage is weaved into video footage captured from the ground and crafted into a marketing piece; it is then used to showcase the property and represent the essence of the lifestyle in the area. Here are some examples:

https://www.youtube.com/watch?v=dktkJXp6LNc

https://www.youtube.com/watch?v=HgV_ZDgWCec

https://www.youtube.com/watch?v=v4E2XRCCwI0

Why does it work?

Out-of-state investors, international buyers, people accustomed to shopping online can have a better sense of the property when video is used wisely, as compared with marketing that employs only still photography.

Is it just a fad in the real estate industry?

Visual imagery is compelling. And effective. Statistics show persuasivereasons why video dominates in marketing today, and why it is expected to continue being an important tool in the future. Innovators are finding ways to use the technology better each time, so even if you are not an ‘early adapter’, we encourage you to keep your eye on this trend and find an appropriate entry-point for your business.

DIY? Three things to consider…

Drone video can be part of your overall video strategy. It adds drama. It adds flair. And because beautiful footage can be shot, it can be a great asset to the video. So when determining if this is something you want to do yourself, consider this…

Video on the ground

The length of the aerial footage you use should depend on what you wish to showcase. For example, if you are planning on using it to market the homes you are selling, you won’t only need to take aerial video – you will also still need to film inside the home to fully capture the property. Have a plan for that part as well.

Editing the video

Multiple video sources means needing to edit all the video footage together, to add background music and maybe even to add special effects, such as adding text that shows how prospective clients may contact you. Check that you have the hardware and software for editing both the audio and video.

Cost

Research carefully the drones that are equipped to give you the professional video your brand deserves. Keep in mind that these drones will be for the professional use of your business – not for recreational purposes. Aside from the drone itself, research what other gear you will need – memory cards, propeller guards, landing gear, etc.

Hire a crew?

Not everyone will be prepared to invest the time and money needed to create a good marketing video personally – with drone technology or not – and luckily, it’s not necessary. Do you typically hire a professional photographer? What about an interior designer for staging? If you do, hiring a professional real estate videographer with drone technology may be a good option for your business. All the benefits, none of the extra work. You can always get a drone for your recreational time and fly it for the fun of it, if you want. Here are the FAA guidelines for the recreational use of drones.

Where can I learn more?

 

 Contributions to this article were made by Jessica Rosado, Tech Helpline Team

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 Effective September 13, 2016, the following MLS Area Names and Codes will be changed as shown below.

 

Current MLS Area Name

Current MLS Area Code

New MLS Area Name

New MLS Area Code

Laguna Niguel East- S of Crown Vly- E of Niguel

NE

Sea Country

LNSEA

Laguna Niguel West- N of Crown Vly- W of Niguel

NG

Summit

LNSMT

Laguna Niguel North- N of Crown Vly- E of Niguel

NN

Lake Area

LNLAK

Laguna Niguel South- S of Crown Vly- W of Niguel

NS

Salt Creek

LNSLT


Additionally, there will be a Matrix Makeover effective September 13. The Matrix Makeover is an update to CRMLS Matrix intended to enhance visual appeal while rolling out some new features like Auto-Save that will enrich user experience. The Makeover is NOT a redesign of the Matrix interface, so users familiar with CRMLS Matrix should have no problem continuing use once the update takes effect.

To review, here’s what’s in store for Matrix Makeover.


For more information about these changes and more, visit the CRMLS website.

 

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Getting your email hacked can happen to any of us, and it can be alarming. The most popular way people realize that their email has been hacked is when a friend or family member lets them know that they received a strange email from them.

Email hackers target the public to take money from them fraudulently. One popular way they take people’s money is by getting unauthorized access to your email account and sending an email to your contacts. The email may state that you are on vacation overseas and suddenly need help and money – could they please send money right away to the mentioned account.

Unaware that it wasn’t really you who sent the email, and because it seems like a legitimate email from you, some contacts do send money to the fraudsters.

If you ever recognize that your personal email has been hacked, do these six things to mitigate risk:

1.   Change your email password right away – Log into your email provider’s web mail portal and go to your account settings. Typically, there is a Security section where you have the option to change your password. Choose a new, strong password that does not resemble the previous one.

  • If you no longer have access to the account, use the ‘Forgot Password’ option to create a new one and recover access to your account.
  • If you used this password in other sites/accounts, change those passwords as well and don’t use the same password in multiple sites.

2.   Review your account Settings – Review your settings, including your login history, contacts, linked Mail accounts, Signatures, Mail Forwarding, Banned Addresses, and Filters; delete anything that you don’t recognize.

3.    Scan for Viruses, Malware, and Spyware – There is a possibility that your computer/laptop may have contracted a virus, malware, and/or spyware in the process. Running a virus scan like Norton, Kaspersky, Avast, and AVG is highly recommended. Additionally, running anti-malware software, such as Malwarebytes, has shown great results extracting these malicious infections.

4.   Alert your contacts – Use another medium to let your contacts know that your email has been hacked (text message, phone, a different email address) and request that if they recently received an email from you, they delete it without opening it, clicking on any links or downloading attachments. If you are sending an email, the Email Subject should be a warning that grabs the reader’s attention. For example: Please do not open any emails from XXX date to XXX date. (You may even want to send them this list of helpful tips).

5.   Report the hack to your provider – Different providers have different methods for reporting these incidents; search their website for their instructions.

6.   Continue to monitor your email, financials, and other sensitive information – Over the years, you may have sent sensitive information which may still be in your email history. Hackers could have accessed it. Continue to monitor carefully the activity on your credit cards, including your real estate transactions and other sensitive areas, to ensure no one else is accessing them.

How did this happen to me?
There are multiple ways it could have happened. One possible way is that your email was hacked while you accessed your email using a public Wi-Fi. A common approach that hackers use is called Evil Twin, and it works like this: Say you are at your favorite local coffee shop named “Strong Joe”, and you want to take advantage of their free Wi-Fi. What hackers will do is set up a second hotspot in that location, naming it similar to the authentic hotspot for that business. For example: The authentic hotspot for the business may be “Strong Joe,” while the hacker’s hotspot may be “Strong Joe FASTEST.” Sometimes business patrons will not notice that there are more than two hotspots with the name, and inadvertently use the hotspot that is set up by the hackers. While using the hotspot trap that hackers created, you may decide to log into your email and catch up with work, friends or family. When you do this, the hacker’s hotspot can grab the email’s security packets, which contain your credentials. And there you have it. You’ve been hacked without realizing it.

Should I stop using public hotspots?
Not necessarily – just be careful when logging into free, Wi-Fi hotspots. Ask an employee for the correct Service Set Identifier (SSID) and password so that you are not inadvertently using one that a hacker has set up, and use public hot spots only for web browsing – not for online shopping, banking or accessing anything that requires entering your user name and password.

Beyond the Personal Email Hack: Reporting Real Estate Fraud
In addition to the email scams that the general population can experience, real estate professionals are also vulnerable to professional fraud when their emails get hacked because real estate transactions often require the transfer of significant sums of money. These types of scams are more sophisticated than what the general public will experience, and rather than covering the details in this article, we will provide you the link to a video that the National Association of REALTORS has created to educate REALTORS on this issue.

WATCH THIS VIDEO about Cyber scams targeting the real estate industry.
(https://www.youtube.com/watch?v=j3_CahMlH8U)

This video will show you prevention, damage control, as well as two identifiable areas of fraud in the real estate industry. We highly recommend you watch it and follow their recommendations.

As always, if you have any doubts, or wish to make sure you have followed all these steps above correctly; please be sure to contact us via phone at (877) 562-3156 or online chat.


Contributions to this article were made by Marcos Zayas, Tech Helpline Team

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On June 22, your OCAR Board of Directors voted to elect Tammy Newland-Shishido as 2017 President-Elect and Adam Rodell as 2017 Treasurer. Congratulations to you two!

Some words from our newly-elected officers:

Tammy Newland-Shishido, 2017 President-Elect

b2ap3_thumbnail_TammyNewland-Shishido_200x300.jpg My personal mission statement is to live a balanced life with a passion for service and developing leaders.  This is why I am a servant leader in my community, industry and at the Association.   The rest of my mission statement is, to be willing to risk for great abundance and excellence.  When you make changes you risk, but change is necessary for growth.  I believe we have the best Association, with the focus being on members and benefits for our members.  We listen to you and have made changes at our Association that our members have asked for.  I look forward to following in the footsteps of our Association leaders and continuing to move our strategic plan forward.  We have a lot of talent on our board of directors and I look forward to serving with our directors and being of service to our members.


Adam Rodell, 2017 Treasurer

b2ap3_thumbnail_RodellAdam.jpg I am truly honored and privileged to be able to continue serving the Members of the Orange County Association of REALTORS®.  As your Treasurer, I will continue to guide our Association in the most fiscally conservative manner possible, while always being willing to seek out our Members' voices for future growth potential.

 




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Your Guide to the Residential Purchase Agreement (RPA)

The RPA is the cornerstone of every successful real estate transaction. REALTORS® should be extremely well-versed with the principles and applications of this form. Receive step-by-step instruction from the expert! California Association of REALTORS® (C.A.R.) Assistant General Counsel Gov Hutchinson will show you how to properly complete the RPA. Sign up today for the next session on September 20 in our Laguna Hills office.

Even if you’ve previously taken an RPA course, you will benefit from this training:

  • Get familiar with the latest changes
  • Receive instruction on forms related to the RPA such as the Residential Listing Agreement (RLA), Requests for Repairs (RR), and more
  • Understand all mandatory and recommended disclosures Learn how to create, modify, cancel, or close a transaction
  • Ensure all commissions are paid-in-full and on-time
  • Better serve and protect your clients 

Cost:

$55 for OCAR REALTORS®
$80 for Non-Members

Registration:

Members, register via My Account

Non-Members, please send us your information here (we'll contact you to complete registration).

Additional Information:

This course is Bureau of Real Estate (BRE) accredited for 4 hours of Continuing Education (CE) in Consumer Protection. Cal BRE Sponsor No. 0001.  

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NOTICE: As of June 23, Supra is currently experiencing issues.

One group especially affected is eKEY users. The app is unable to perform the update necessary to enable the mobile device to access the lock boxes. To fix this issue you need to obtain an update code via www.surpaekey.com or contact OCAR.

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Watch the latest edition of the OC Broker Update to hear about:

  • New Wire Fraud Advisory & Updated zipForms®
  • OCAR's Inaugural Leadership Academy
  • Broker Summit: The Future of the MLS in the Age of Zillow
  • MLS Forum

You can also access the OC Broker Update handout which summarizes the topics covered in the video. We have also created the OC REALTOR® Update handout for you to provide to your agents to keep them apprised of timely news, changes and events.

Upcoming OCAR Events and Fundraisers

June 29 - Broker Summit: The Future of MLS in the Age of Zillow

July 14 - MLS Forum featuring Art Carter and Edward Zorn of CRMLS

August 5 - OCAR Palooza to benefit OCAR Cares

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OCAR Members are eligible to apply for State or NAR Director positions. For questions or to submit your application, please contact Debby Ritter.

 State Application National Application



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b2ap3_thumbnail_ShowingTime_High-Res.jpg

As of June 1st, ShowingTime for the MLS is available 24/7 to all OCAR members through CRMLS!  Discover how you can use this showing appointment tool to save time, generate more showings and help you sell your listings more efficiently. 

With ShowingTime you will be able to:

-    Use the 'Schedule a Showing' link to request showings on other agents' listings

-    Add showing instructions and determine the best settings for each of your listings to begin receiving online showing requests

-    Set your notification preferences, including 2-way text messaging

-    Benefit from the speed and accuracy of ShowingVoice, our text-to-voice notification system

-    Download and use the ShowingTime Mobile App to request and confirm appointments while on the go

-    Easily manage and customize your own feedback templates sent to showing agents

-    Create personal profiles for sellers displaying feedback, showings and more

 
ShowingTime Videos:

 

ShowingTime Materials:

Benefits and Features
Mobile App Guide
Mobile App: How to Setup Sellers on App



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Watch the latest edition of the OC Broker Update to hear about:

  • New CRMLS Rule Changes
  • HUD's Warning for Landlords
  • OCAR's Inaugural Leadership Academy
  • OCAR Palooza Sponsorship Opportunities

You can also access the OC Broker Update handout which summarizes the topics covered in the video. We have also created the OC REALTOR® Update handout for you to provide to your agents to keep them apprised of timely news, changes and events.

Upcoming OCAR Events and Fundraisers

June 29 - Broker Summit: The Future of MLS in the Age of Zillow

August 5 - OCAR Palooza to benefit OCAR Cares

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Effective April 25, 2016, the CRMLS Rules and Regulations and Citation Policy was updated and published on both OCAR's website and the CRMLS website. Below is a list of the changes:

  • Section 7.12 Withdrawal of Listing Prior to Expiration has been revised to require that a listing must be withdrawn by listing agent if seller instructs withdrawal in writing and that it may be withdrawn by listing agent in instances of a dispute with seller 48 hours after listing agent provides seller with notice of intent to withdraw. The MLS can require listing agent to produce a copy of notice of dispute or written instruction from the seller. There is an ongoing obligation to report solds. 

  • Section 7.18.3 Auction Listings has been revised to disallow right of reservation auctions because by their no minimum bid/ “confidential” reserve amount nature, they don’t fit MLS requirements requiring disclosure of an actual list price. Reference to compensation in the auction rule has also been removed since rules governing the offer of compensation are already set forth elsewhere in the MLS Rules. 

  • Section 8.3 Accuracy of Information; Responsibility for Accuracy has been revised to give the MLS the right to remove a listing that has been flagged for inaccuracy when an agent has refused or failed to correct. 

  • Section 9.9 Physical Presence of Participant or Subscriber has been revised to clarify that a participant or subscriber must be “physically” present when providing access to a property. 

  • Section 10.1 Statuses has been revised to change the title “Back-Up” to the RESO (Real Estate Standards Organization) “master” heading of “Active Under Contract.” [*Note: correlating language changes also made to Section 10.2 Reporting of Sales.] 

  • Section 11.10 Indemnification; Limitation of Liability has been added to provide a broad stand-alone indemnity provision. 

  • Section 12.22 Email Address Required; An Email Address requirement has been added as a new provision.

If you have any questions about these changes, feel free to contact our MLS Department for assistance.

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Upcoming OCAR Events and Fundraisers

May 12 - REALTOR® Summit with Mike Ferry

June 29 - Broker Summit: The Future of MLS in the Age of Zillow

August 5 - OCAR Palooza to benefit OCAR Cares

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Mission Viejo – On Tuesday evening, the Mission Viejo City Council voted to approve a resolution in support of the Housing Futures Initiative developed by the Building Industry Association/Orange County Chapter (BIA/OC) in collaboration with the Orange County Business Council and the Orange County Association of REALTORS®.

The purpose of this initiative is to find ways to make available additional housing across a broad spectrum of price ranges as a means of encouraging both businesses and employees to locate in, and remain in, Orange County.

“Orange County is losing 7 percent of its population between the ages of 25 and 34, while surrounding counties are showing an increase,” BIA/OC CEO Mike Balsamo said. “Cities can help reverse this trend by examining existing zoning codes and revising land-use recommendations to create incentives for housing that is accessible and affordable to a broader range of people.”

Mission Viejo, one of the largest cities in Orange County, is currently studying underutilized spaces for revitalization. “By considering the recommendations listed in the Housing Futures Initiative—many of which are specifically called out in the Housing Element of Mission Viejo’s General Plan—the Mission Viejo City Council has demonstrated its willingness to help address the region’s housing shortage,” declared Balsamo.

“Taking a look at initiatives like this one is extremely important,” said Mission Viejo Mayor Frank Ury. “The current cost to put a shovel in the ground to start building a house is $130,000. Mission Viejo is either part of the solution or we’re a bystander.”

“Making local policy makers more aware of the ways in which a housing shortage affects major employers, economic growth, and the health of local neighborhoods is an important part of the BIA/OC’s mission,” said Balsamo. “We plan to work with other cities and coalition partners to bring more attention to this issue in the future.”

The BIA is a nonprofit trade association of more than 1,100 companies employing over 100,000 people affiliated with the home building industry here in Orange County. Its mission is to champion housing as the foundation of vibrant and sustainable communities.

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Familiarity with these ten factors will enable you to address the questions your clients may ask about the real estate market and where real estate values may be headed.

By David Girling
Girling Real Estate Investment Group


With the Super Bowl in the rearview mirror and baseball season just around the corner, I thought I would take a page from David Letterman’s playbook and do a “Dave’s Top 10 Economic Factors REALTORS® Should Be Following Today.”

Today’s headlines convey different messages about real estate. Some are optimistic while others are pessimistic and still others fall somewhere in between. It is important that, as REALTORS®, we be able to read past the headlines and make sense of the news for our clients. The goal of this article is to give you the tools to address in client meetings some of the economic factors that are affecting real estate today.

David Girling wrote this article as a follow-on to a speech he delivered in mid-February. On Thursday, May 19, Girling will present an Orange County Real Estate Market Overview from 2:00 P.M. to 3:30 P.M. at OCAR’s Laguna Hills office. It's free for members, register now.

10. Interest Rates

Mortgage rates are one of the factors that drive the real estate market, and they result from the general level of interest rates, especially that of the ten-year U.S. Treasury Note. For the past three or four years, mortgage rates have been at historic lows because the Federal Reserve has employed a monetary policy that has kept rates low (see Figure 1). Although the Fed raised the Fed Funds rate in December, weakness in the Chinese economy and falling oil prices caused mortgage rates to drop. This is because the United States is viewed as a safe haven by investors; and as they buy U.S. securities, bond prices are driven up and interest rates fall as a result. (There is an inverse relationship between the price of bonds and interest rates.)

Because of the historically low rates, mortgage payments are attractive for many buyers; and as REALTORS®, we should be able to convey to our clients exactly how compelling they are. For example, with a $500,000 loan, the payment is $1,458 per month for an interest-only, 7/1 loan with an interest rate of 3.5 percent. The same loan amount for a 30-year amortizing loan is $2,287 per month at 3.5 percent. However the more important aspect of low rates is the purchasing power achieved. And, if rates ever do go up, it is important to understand the impact on purchasing power that will result. A rule of thumb is that a 1 percent change in rates equals a 10 percent loss or gain in purchasing power. This sort of information supplied to clients may be all that is needed to turn a renter into a buyer.

b2ap3_thumbnail_DavesTopTen_fig1.png

Figure 1. For the past three or four years, the Federal Reserve’s monetary policy has kept mortgage interest rates at historic lows.


9. Dow Jones Industrial Average

The low rates created by the Fed’s monetary policy have forced investors to look elsewhere for yield. As a result, both real estate and stocks have benefitted, with the Dow Jones Industrial Average surpassing the 18,000 mark and real estate growing at double-digit rates over the past three years. However, there are some who suggest that both real estate values and equity prices can no longer be supported and may be overinflated (or experiencing a bubble). Relative to home prices in 2007 and today, the Dow has far surpassed the peak 2007 levels while real estate values are, in general, still below peak-level prices but within approximately 10 percent across the different sectors. Since the beginning of the year, the stock market has experienced a drop while real estate values are still rising, although the rate of appreciation has slowed. The relationship between the stock market and real estate prices is one that REALTORS® should monitor.


8. Rent versus Buy

The housing crisis created more renters, and the number of single-family homes in the United States that are rentals went from 9 million to 12 million in 2013. Approximately 15 million of the total 90 million homes in the country are now rentals. REALTORS® should be able to help their clients determine if renting or buying is the best alternative by using one of the rent-versus-buy calculators at our disposal. As an example, take a purchase price of $710,940 (December Orange County median home price) with an interest rate of 3.5 percent, a loan-to-value ratio of 80 percent, and a tax rate of 25 percent, and add to the resulting payment the monthly cost of property taxes. Compare the payment to a rental at $3,500 per month looking at both interest-only and fully amortizing loans and the pre-tax and after-tax payments (see Figure 2). The decision would be to buy in all scenarios. And this analysis looks only at monthly cash flows and does not incorporate the benefit of any appreciation (e.g., $154,000 improvement in value at 4 percent appreciation over five years).

b2ap3_thumbnail_DavesTopTen_fig2.png
Figure 2. At today’s interest rates, when one compares rent payments with mortgage payments on both fully amortized and interest-only loans for the purchase price of $710,940 (the December median home price in Orange County), purchasing offers a clear advantage over continuing to rent.


7. Home Prices

Some experts believe that, once housing prices return to the peak levels of 2006–2007, we may be close to another bubble. Driven by low interest rates, limited inventory, strong buyer demand, and improved job markets, prices in some areas of California are approaching peak levels. However, for January, the California median home price was 21 percent below peak levels, and the Orange County median home price was 9 percent from peak levels. Newport Beach prices were 17 percent off peak levels according to the Newport Beach Home Price Index (see Figure 3). Although home prices are at eight-year highs, they are generally 10 to 15 percent below peak price levels. Unlike stock prices, home prices have not yet reached 2007 peak levels.

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Figure 3. Unlike stock prices, home prices have not yet reached 2007 peak levels. For example, in January, Newport Beach home prices were 17 percent off peak levels according to the Newport Beach Price Index.

Home prices continue to improve; and according to the California Association of REALTORS®, the median home prices for January were as follows:

California  $ 468,330 (up 8.8 percent year over year) 
Orange County $ 704,950 (up 4.5 percent year over year) 
Newport Beach $2,521,279 (up 5.6 percent year over year)

On average, 2016 predictions call for a 1 to 4 percent growth in home prices consistent with the year-over-year growth that has been decelerating. It is important for REALTORS® to be aware of this type of home price information. One way REALTORS® can further differentiate themselves is by developing a more detailed understanding of the neighborhoods they farm.


6. U.S. Homeownership Rate

Across the United States, the homeownership rate currently stands at 63.8 percent, the lowest since 1994. The rate peaked at 69.2 percent in 2004, was steady until mid-2006, and has been dropping since the housing crisis that started in 2006–2007. Some see this development as a negative; however, REALTORS® could view it as an opportunity. Many of the homeowners who became renters during the housing crisis will become homeowners again.


5. Foreign Investment

Most will agree that the recent improvement in the housing market was fueled primarily by low interest rates and foreign investment. However, the strong dollar has caused foreign investment to pause because U.S. real estate is now more expensive. The Chinese, who have overtaken the Canadians as the number one investors in U.S. real estate, are an exception because they view the United States as a safe haven and continue to invest at a steady pace, despite the strong dollar. Foreign investment is important for the continued strength of the real estate market because it supports prices. One development that may have an impact on foreign investment is an announcement by the Treasury Department that it will be tracking secret buyers of luxury properties because of concerns about money laundering in high-end real estate. (Almost 50 percent of the homes selling for more than $5 million were purchased by shell companies.) The initiative will start in Miami and New York but is expected to expand to other states.


4. Housing Affordability

Rising home prices have impacted housing affordability, which has been decreasing since the beginning of 2012. In California, the percentage of home buyers who could afford to purchase a median-priced, existing, single-family home as of the third quarter of 2015 was 29 percent according to the California Association of REALTORS® Housing Affordability Index (HAI). The number was even lower for Orange County at 20 percent. The HAI peaked at 56 percent at the beginning of 2012 and has dropped steadily since home prices started to appreciate. The median price for a home in California has doubled since February 2009, while the median price for a home in Orange County has risen 62 percent in that same period. Wages, which grew at 2 percent in the past twelve months, are not keeping pace with home price growth, so fewer people have been able to afford to buy as prices have climbed.


3. 2007 Peak versus 2016

It seems that everyone wants to compare real estate prices today with the price levels at the peak in 2007. Because I find that it is also helpful to compare the levels for other economic factors today with their peak levels, I created the chart shown in Figure 4. Other than home prices, the factors I found especially interesting were the following:

  • Interest rates. Along with foreign investment, low interest rates fueled the housing recovery. Imagine where the recovery would be if rates were still around 6 percent, as they were in 2007.
  • Housing affordability. In 2007, affordability was even lower than it is today, but the easy credit conditions offset the impact of the low affordability.
  • Oil prices. In 2007, oil prices were double what they are today, and gasoline is cheaper today.
  • National debt. The most ominous of these factors is the level of national debt, which has increased from $9.2 trillion to $19 trillion.

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Figure 4. It may be instructive to compare the levels of several measures of economic activity in January 2007 with the levels of these same measures in February 2016. Perhaps most interesting in this comparison are the numbers given for interest rates, housing affordability, oil and gasoline prices, and the national debt.


2. Housing Inventories

Low housing inventories have added support to home values. Further, I do not think that inventory levels will improve significantly for the reasons listed below.

  • Some homeowners still have negative equity and cannot sell.
  • For someone selling one property and buying another or just downsizing, property taxes might be higher.
  • Capital gains taxes could be significant.
  • Some homeowners may be reluctant to give up their low mortgage rates.
  • New construction is not meeting demand, and homebuilders are underperforming with some smaller builders having trouble getting loans.
  • There is a fear of not finding an adequate replacement because of low supply and high rents.
  • Some homeowners are still affected by the 2007 crisis and are unwilling to sell.
  • Many single-family homes that might be listing candidates are now part of the rental pool because so many were purchased by investors during the past few years.

I have been compiling this list since it became clear that inventory levels were becoming a key driver of real estate values and activity. Low supplies and high demand will continue to support home prices.


And the Number One economic factor REALTORS® should be following today is—

1. Is There a Real Estate Bubble?

I hope that my discussion and analysis of the preceding nine factors will help to address the question of whether a real estate bubble is developing or not. Below is a summary of how I might expect some of the previous nine factors to impact real estate values and activity.

  • When interest rates go up significantly, there will be an impact on real estate values.
  • Wages will need to keep pace with values if housing affordability is to be addressed. Easier credit conditions (lower down payments) can also help, but lower prices are the most likely result.
  • As prices approach peak levels, some may suggest we are approaching a bubble.
  • Continued foreign investment will support prices.
  • If housing inventory levels remain low, prices will be supported.
  • As long as buying is still seen as a viable alternative to renting, prices will remain strong.
  • The homeownership rate has declined, but those renters who used to be homeowners may come back into the market as buyers, providing additional support for home prices.

In summary, these are ten factors that REALTORS® need to monitor. Many of these factors will continue to support real estate values and buying activity. Share this knowledge with you clients. They will appreciate you for it.

David Girling completed his undergraduate work at the University of Southern California and earned the degree of Master of Business Administration from the Anderson Graduate School of Management at the University of California, Los Angeles. In 2008, he formed Girling Real Estate Investment Group (Girling REIG) with his father, Bing, and has more than thirty years of experience in the financial services industry.

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