Are the RE storm clouds lifting?

Steve Thomas of Re/Max thinks so, and mentioned point blank in his latest report that he believes "the market is improving." Here is some of his reasoning:

The majority of the upswing in demand is in the lower ranges. Our agents in the trenches are unanimously reporting that there is a large wave of first time home buyer activity. First time home buyers had been priced out of the market and dwindled in numbers during the last couple years of the housing boom. But, prices have finally fallen to a point where they can now afford to purchase and that is precisely what they are doing.

We agree the brunt of the current demand seems to be in the "lower ranges" - that is to say, homes $500k and below. Not surprising since these are the homes the majority of residents can afford. As prices decline, it is natural to see more buyers jumping in.

Many properties now in escrow were positioned well below peak pricing (a lot of REOs), or appear to be owners who purchased well before values really got out of hand and were able to price effectively.

The jury is still out until this demand shows up in the sales numbers, but it would not be surprising if there was (finally) a year-over-year increase in sales volume - we can't keep falling forever. It will be interesting to see what the homes that are in the escrow process now (apparently it is slanted towards REOs and distress sales, plus lower-end properties taken by buyers who see them as "affordable" compared to bubble pricing) do to future pricing when they close, since the properties being bought and sold today help establish the comps moving forward.

Here is the first chart from Thomas' data, which covers distressed inventory. The "% change" column compares the percentage of distressed inventory now to two weeks ago. All data is as of April 17.

As you can see, South OC's distressed inventory remained virtually unchanged and is now 28.8% - meaning almost 30% of homes for sale on the MLS have been tagged as either a foreclosure or a short sale. OC as a whole nudged upward to 35.11%. Keep an eye on Coto de Caza - this city had the largest uptick in distressed inventory percentage-wise in South County. Here is a visual of foreclosure activity in the area:
Now, here is Thomas' market time data, or the amount of months it would theoretically take for buyers to absorb all the MLS properties for sale given the current pace of pendings.


Couple of notes on this chart: 1) The All South OC market time in the 1 year ago column is simply the median of all the city data , since we do not have complete information from back then. 2) Thomas' average asking prices appear to be skewed by high-priced listings, since these figures tend to be significantly higher than the median sales prices we're seeing. We assume he is using the mean as opposed to the median. Also remember that properties typically sell for less than the asking price, so that is why the average might be a bit higher than closed sales.