11/3/09 Caravan Notes

The market is definitely starting to slow down in anticipation of the holidays. Only 1 new listing was available to look at in Pacific Palisades...1 in Mar Vista and 2 in North Santa Monica.

Deal of the week: 2312 27th Street, Santa Monica. About a 1.5 blocks south of Pico, this 1,5698 sq. ft., 3 bed/1/5 bath Spanish home on a 7,644 sq. ft. lot needs quite a bit of upgrading but has a solid floorplan and features that really enhance its value. The work shop/bomb shelter underneath the home is not counted in the sq. ft. and easily adds about 800 sq. feet of usable space. It has nice yard space leading toward a garage with a work shop attached allowing the perspective buyer to either gain more yard space or upgrade what is in place. I expect this property to get multiple offers. Today's open house was very well attended.

Talk about slashing the sales price: 23 Oakmont located in Brentwood on one of the nicest streets on the Westside debut on the market at the end of last year for 21.5 million. It is now listed at 12.95 million. The architectural estate is 11,000 square feet and sits on 2 acres of land. . .

Home to Track: 2158 La Mesa Drive, Santa Monica, CA 90402: We should learn a lot about the high end home market by tracking the sale of this beautiful 1928 Spanish style home located on coveted La Mesa Drive. In late September of 2007, the property was listed for $5,500,000 and immediately sold in multiple offers for $6,332,000!

The current owners have done a few upgrades to the home (plumbing, some roof, resurfacing floors) but nothing that would be considered significant (100-150K worth of work?). It is now listed for $5,795,000 (came on the market November 1st) and had a very well attended open house today. The property is on the Santa Monica resources inventory list but it will not affect value of the very inviting 6,430 sq. ft. home.

The eventual sale of this home will provide great insight into what the market has done over the past two years in a superior location. . .

What Happens When The Shadows Go Away in 2010?

Bi-line: Only a small portion of homes that are bank owned or in the foreclosure process have hit the market on the Westside. . .what will happen when they do? Will the banks continue to be able to artificially keep inventory down?

Since the beginning of the summer the Westside real estate market has shown signs of price stabilization and some zip codes have seen an increase in the median price. The inventory of available homes has dropped and multiple offer situations have been popping up in every price range especially under a million dollars.

Though prices have dropped about 20-30% on the Westside (% depends on which Westside micro market you are referring too) over the past year, the recent price stabilization seems a little counter intuitive considering the California economy is on shaky ground and the unemployment rate continues to grow.

However, the government and financial institutions have done a marvelous job of propping up prices. According to a Goldman Sachs report released last Friday, the Government’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise.

The report goes onto further state "the government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates. As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common."

With the recent announcement that the tax credit program will continue and even be enhanced through the 1st part of 2010, the price stabilization is expected to continue through the beginning of next year. However, as I have explained many times in these reports, the Westside and the high-end market in general operate on a different scale than the rest of the market and the alarming back-log of shadow inventory building up in higher price ranges is startling.

Currently, Santa Monica has 236 properties that are either bank owned or in some part of the foreclosure process according to a foreclosure activity search through First American Title. Of those properties, only 20 are active on the Multiple Listing Service "MLS" and 6 are already in escrow. Couple this with about 30 properties being marketed as "short sales" on the MLS that are not currently in the foreclosure process and you almost have the same amount of properties showing economic strain than are currently available on the market.

Of the 65 bank owned properties in Santa Monica, only 8 are on the MLS. 107 properties are supposedly up for auction (they usually never get to that point) which means the properties are at the end of the foreclosure process. Undoubtedly the banks are working feverishly with property owners to modify mortgages and that will help knock these numbers down but they are still going to increase inventory in 2010. Bank of America expects 5 times as many foreclosures in 2010 and Citibank expects 3 times as many.

Low interest rates and increased inventory will make 2010 a good time to buy on the Westside. I will talk more about this in my 2010 forecast which will be out in late November.

Here is "shadow" inventory information for the Palisades, Brentwood and Culver City.

Palisades: 70 properties in foreclosure process. 4 active on the MLS and 4 are in escrow. Of the 17 bank owned properties, only 1 is active on the market.

Brentwood: 96 properties are in the foreclosure process. 6 are active on the MLS and 4 are in escrow. Of the 15 bank owned properties, only 2 are on the market. Culver City: Scary…173 properties in the foreclosure process.

Culver City only has 75 homes listed on the MLS, 12 of which are distressed properties. The potential shadow inventory is twice the size of what is on the market.

The Distressing Gap Between New and Existing Home Sales

Please click on the graph above provided by the Calculated Risk Blog to get a detailed look at new and existing sales since 1994. An alarming gap has opened up over the past few years.

Though the market has been picking up, the activity revolves around existing home sales and not new home sales which positively impacts the overall economy on a more significant level. The gap was initially caused by distressed sales but more recently the gap has been widened as a result of the first-time home buyer tax credit.

Hopefully this gap will begin to start closing over the next few years...

Homebuyer Tax Credit Extended

Summary of the main points of the extension:

* Income eligibility for home buyers increases to $125,000 for individuals and $225,000 for couples.

* The tax credit for first-time home buyers (anyone who has not owned in the last 3 years) will be the lesser of $8,000 or 10% of the purchase price.

* For move-up buyers - "who have lived in their current home for at least five years" - the credit would be limited to $6,500.

*The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)

Please see: Full Article

Price Declines and Lack of Sales Lead to Weak Sales Volume

Despite quite a few multiple offer situations in the lower price ranges on the Westside and stronger sales activity this summer, year to date sales volume is still incredibly weak compared to 2008. Per the MLS, please find the sales volume data for selected areas below for single family homes.

VENICE
$153,652,525 (2008)
$91,059,600 (2009)
-$62,592,925 (-40.74%)

BEVERLY HILLS
$445,558,325 (2008)
$289,248,000 (2009)
-$156,310,325 (-35.08%)

SANTA MONICA
$348,559,386 (2008)
$250,309,835 (2009)
-$98,289,551 (-28.20%)

PALMS - MAR VISTA
$169,192,186 (2008)
$122,798,275 (2009)
-$46,393,911 (-27.42%)

MALIBU BEACH
$177,203,000 (2008)
$133,293,685 (2009)
-$43,909,315 (-24.78%)

PACIFIC PALISADES
$454,723,597 (2008)
$349,596,775 (2009)
-$105,126,822 (-23.12%)

Sales Statistics: More Evidence of Increased Activity on the Westside

Please find below sales activity for August and September of this year compared to last year and in 2006 for Santa Monica, Brentwood, Beverly Hills, Pacific Palisades and Mar Vista. The number of pended sales as of 10-12-09 is also listed. SFR stands for Single Family Residence and the Condo sales for that time period immediately follow. *Please e-mail me if you would like this information for a different Westside/South Bay area:

Santa Monica

SFR Condos
September 09: 30 29
August 09: 23 30
Sept. 08: 15 39
Sept. 06: 23 48
Pended: 36 67

Brentwood

SFR Condos
September 09: 26 15
August 09: 16 6
Sept. 08: 10 7
Sept. 06: 18 18
Pended: 45 36

Pacific Palisades

SFR Condos
September 09: 13 4
August 09: 19 5
Sept. 08: 12 2
Sept. 06: 27 3
Pended: 32 15

Beverly Hills

SFR Condos
September 09: 9 6
August 09: 9 5
Sept. 08: 3 8
Sept. 06: 11 7
Pended: 24 10

Mar Vista

SFR Condos
September 09: 26 7
August 09: 20 10
Sept. 08: 29 8
Sept. 06: 24 14
Pended: 42 21

North of Montana Notes

**Buyers are jumping into the North of Montana market with prices finally starting to adjust correctly. I still think we will see more downward movement next year but the strong price drop of 2009 (20% +/- depending on property type) has encouraged patient buyers to step into the market.

Recap of a few sales within the past month:

**After being on the market for over a year, 209 25th Street sold for 1.525 million. The original asking price was 2.050. The house was a tear-down or major remodel candidate that gets discounted in comparison to other North of Montana lots due to its location. It is right next to San Vicente and shares a wall with Washington Mutual and the commercial district on 26th street. According to the MLS (Multiple Listing Service), This is the lowest tear-down sale of a lot that is at least 8,000 square feet since 2003.

**721 19th street originally listed for 2.050 million received at least 12 offers and countered the perspective buyer's at 2.150 with a request by the owner's to be able to lease the property back for a couple of months. The property is a 5+3, 2,418 sq. ft. home on an 8,900 sq. ft. lot. Though the home requires updating, it is in decent shape and has a solid floorplan. The property received so much interest because it is extremely difficult to find usable square footage over 2,000 sq. ft. on an 8,900 sq. ft. lot in this price range. Families looking to break into the Franklin Elementary School District were out in full force. A few years ago this home easily sells for around $2.6. . .

**231 18th street, a 1,829 sq. ft. home also on a 8,900 sq. ft. lot went into escrow within a week of coming on the market and sold for 1.968 slightly off the 1.994 list price. This Spanish style home is definitely a remodel candidate over time and will more than likely be expanded. However, it is an livable condition for now and on one of the nicest streets in the area. The house sold in March of 2008 to a developer for 2.325.

**340 21st place, a 1,728 sq. ft. home on a 9,000 sq. ft. lot sold for 1.810 in 35 days. The original list price was 2.095. The home will more than likely be torn down and is a solid comp for land value prices on 8,900 sq. ft. lots North of Montana. Lot values have gone from about 2.4-2.5 at the height of the market to between 1.7-1.9 based on the street.

**215 24th Street, a very nice 3,050 sq. ft. home on an 8,700 sq. ft. lot sold for 2.650 slightly off its 2.725 asking price. The home went into escrow in 27 days. It is in by far the best shape of the homes listed in this post and the back-yard has a very nice pool/spa. This is a solid mid-level entry home for the North of Montana area and is strong evidence to seller's the mid-level market is between 2.5 to 2.75 and not 3.0 to 3.25. . .

Calls to Renew Home Buyer Tax Credit. . .

The drumbeat is growing in Washington for extending -- even expanding -- the popular $8,000 tax credit for first-time home buyers, a soon-expiring benefit that some experts estimate is on its way to spurring as many as 400,000 additional sales this year.

The program has been a component in the federal effort to resuscitate the devastated real estate market. Reversing falling housing prices by stimulating sales is a key to halting the tide of foreclosures that have helped drag down the economy.

Realtors and home builders, along with many members of Congress, are pushing hard for an extension of the program. They argue that although the housing market has shown signs of recovery, it still needs the help. In fact, they are pushing to increase the tax credit to $15,000.

Full article from the LA Times: Calls to renew home buyer tax credit get louder in Washington

Santa Monica and Beverly Hills in top 10 of Nation's Most Expensive

California is home to eight of the 10 most expensive housing markets in the U.S., according to the 2009 Home Price Comparison Index produced by Coldwell Banker.

The annual survey compares the average sale prices of similar 2,200-square-foot houses in 310 markets nationwide.
Making the top 10 for 2009 were:

1. La Jolla, at $2,125,000 2. Beverly Hills, $1,981,750 3. Greenwich, Conn., $1,519,250 4. Palo Alto, $1,489,726 5. Santa Monica, $1,460,912 6. San Francisco, $1,363,250 7. Boston, $1,337,578 8. Newport Beach, $1,315,505 9. Palos Verdes, $1,237,041 10. San Mateo, Calif., $1,090,000

(*Source: LA Times)

Interest Rates at Historic Lows. . .

The home mortgage market, propped up by more than $1 trillion in government money, is flashing a strong "buy" sign to house hunters.

Extending a summer-long slide, the average interest rate on new 30-year fixed-rate loans nationwide has broken through the 5% barrier to 4.97%, nearing the lowest level in decades, the Mortgage Bankers Assn. reported this week.

And mortgage finance giant Freddie Mac, which separately tracks rates, reported Thursday that the average fixed rate on a 15-year home loan had dropped to 4.46%, the lowest level on record.Borrowers are taking notice. Loan applications jumped 13% last week and are up 50% from late June, the bankers group said. (Source: LA Times)

Please see full article: Borrowers Rush in as Mortgage Rates Slip below 5%

**Not a bad time to buy if you can take advantage of this historic situation (low interest rates and declining home prices) and plan on owning the property for at least 5 years. Please call 310-486-5962 or e-mail me john@skinnerestates.com if you would like to discuss your situation.

Quick Summer Recap. . .

The Westside/South Bay residential real estate market finally showed some life after being dormant for close to 18 months. Buyer's started to come off the sidelines this summer as the panic over the overall economy eased and seller's finally started to except a price decline of 20-30%.

The market below $1 million has stabilized and even shown some signs of slight appreciation but the market above $1 million (especially above $3 million) still has hurdles to navigate despite some faint signs of life this summer.

The Westside/South Bay Market Below $1 Million

If a Westside/South Bay seller of a non-tear down type property properly figured the correct price decline in a listing price, they didn't have a problem selling this summer. Record low interest rates for conforming loans up to $710,000, an $8,000 first time homebuyer tax credit (if they qualified), a foreclosure moratorium and FHA loans (also up to $710,000) that only require the buyer to put as little as 3 to 5% down helped fuel a stabilization and even a small uptick in the median price.

In fact, quite a few multiple offer situations popped up in areas like Mar Vista, Culver City, Westchester and South Torrance where homes selling for around $1 million two years ago were being listed for $750K-800K.

Typically, the spring and summer selling season is the busiest time of the year so I don't think people should think we are on track for a full recovery. Despite all of the incentives, sales activity is still off normal levels. For example, In August of 2005 (near the height of sales activity) 65 homes sold in the 90230 zip code of Culver City. Fast forward to August of 2008, only 25 sold and this year we have seen a jump to 38 sales. However, this number is still off the average sales number for the 90230 zip code and the activity seems very strong because we are coming off one of the slowest periods of sales growth Westside/South Bay real estate history.

The Westside/South Bay Market Above $1 Million

The high end home market is still declining in both volume and price but not nearly at the level it was in the 1st and 2nd quarter of the year. Despite a recent uptick in activity and a flock of foreign investors purchasing property sales activity is still miserable.

This segment of the market still deals with issues the conforming market does not. Very few banks are lending jumbo money and if they are a borrower's credit has to be excellent along with requiring them to put more than 25% down in most cases. The lending standards are so tight that more than 50% of the higher end deals are all cash.

In the 90402 zip code of Santa Monica where most homes sell for over $2.5 million dollars, only 4 homes sold in August compared to 13 sales in August of 2008 and 26 sales in 2005. The lot value (tear-down) for an 8,900 square foot home north of Montana has gone from about $2.45 million in 2007 to around $1.8 million today. A 7,500 square foot lot which was going for around 2.25 million is trending towards $1.6 million.

The high end Westside market is tough to categorize since it operates on more of a micro level based on superior location and schools. For example, some parts of Bel-Air and Brentwood have dropped 40% in price while other parts are only down 20-25%.

Overall, the market is definitely healthier than the 1st and 2nd quarter but I don't think we are at the bottom yet in terms of the South Bay/Westside. The drastic price drop we saw at the beginning of the year has definitely subsided and those days should be over. However, affluent areas are typically the last to recover and the California economy still needs to clear some hurdles before true price stabilization can begin.

The Skinny on Real Estate is back. . .

After taking a break to recharge the batteries and fortunately being very busy with clients and transactions, The Skinny on Real Estate is back and will provide you with statistics and important pertinent information regardng Westside Real Estate. . .

Westside pending sales 7-13-09 thru 7-17-09

Per the MLS, Santa Monica and Westwood clearly lead the way. Do you think it might have something to do with the top level elementary schools?

Notes on a Purchase Contract Part II

*Due to foreclosure activity and the overall economy, I predict that Westside/South Bay prices will start to bottom out in mid 2010 with sales activity getting very strong in the spring of 2010. If things stay status quo, 2011-2012 will be the beginning of a fairly long period of flat growth and low sales activity with homeowners handcuffed to interest rates we may never see again.

*With the Condo market off as much as 30% in some Westside areas it is not a bad time to start thinking about purchasing a condo to live-in and eventually become a long-term investment play. . .4th quarter of this year and 1st quarter of 2010 could be the time to strike. . .

*Notable Sale: A few weeks ago I wrote about the new construction "green" house located at 133 17th Street finally being in escrow. The 5 bed/6 bath 4,690 sq. ft home on a 8,900 lot officially sold a few days ago for $3,498,000. A pretty substantial drop from the original $4,800,000 list price.

*Talk about paying for a view: 859 Woodacres, a 1 acre flat lot overlooking Riviera Country Club hit the market last week for 13 million. The lot has sat empty for several years and projects that were supposed to start never got off the ground. It will be interesting to see what it sells for. My guess is around 8.5 to 9.0 million.

*Food for thought: There are 77 million Americans born between 1946-1964. One-third have zero retirement savings. The oldest are 62. How many must sell to retire effectively?

Notes on a Purchase Contract Part I

*The best house I have seen the past two weeks on the Broker Caravan was 16104 Northfield Street in the Palisades with a list price of $2.875 million. The 2005 construction home has great curb appeal, a very functional floor plan and does an excellent job of capturing natural light. One of the only negative things about the home is the lack of back-yard space which could turn off a family with young children. I still expect this home to sell fairly fast above 2.75 million. The home is over 4,000 sq. ft. and boasts 5 bedrooms.

Runner-up: 1208 Pacific Street in South Santa Monica. The 3 bed/2 bath 1,660 sq. ft. home on a 7,200 lot commanded multiple offers and went into escrow within 6 days of being on the market. The list price was $1,429,000

*The mood of most sales agents has improved dramatically with sales activity picking up tremendously over the past two months. In February you would have thought the grim reaper was taking hold of most real estate offices but things have definitely changed with the arrival of the spring/summer selling season and more realistic seller’s. Quality homes that only require a conventional or FHA loan (homes under a million dollars) have been seeing multiple offers. I expect activity to stay strong through the rest of the summer selling season before fading again as October approaches.

Foreclosures and the Westside

Pre-foreclosure data seems to suggest the Westside is going to get hit with a wave of foreclosures in 2010. Currently in Mar Vista, 97 homes are categorized as distressed and only 3 of them are currently on the MLS. If all of those homes came on the market, inventory would double for the area. However, the bank’s know this and they are doing everything they can to work with borrowers.

I already know of 2 examples in Santa Monica where the banks have agreed to lowering interest rates on mortgages to 3% for the next 3 to 5 years and then fixing them around the 5% mark. In one case the person's monthly mortgage payment was cut in half!

Inevitably, the foreclosures will continue to increase on Westside especially with the foreclosure moratorium period now passed. However, I don't believe we will see the tidal wave of foreclosures that some housing bloggers are predicting. The banks will do what they can to avoid that.

Condo Sales Statistics for June in select Westside areas

**CLICK ON ABOVE TABLE TO ENLARGE. . .

*Please contact me if you would like MLS statistical information for any Westside area.

Westside Single Family Sales above $5 million in June

According to the Multiple Listing Service "MLS", seven sales above five million closed escrow in June. The two highest sales were in the Malibu Beach area and they both were in the ten-million range.

A quick recap of five of the sales:

23330 Malibu Colony Road: 3,355 sq. ft./8,708 Lot 5 bed/5 bath plus 1bed/1bath guest house. The house is right on the sand. It was Originally listed for $14.5 in 2007, $12.995 in 2008 and sold for its 2009 list price of $10.950. Sold 6/17/09

25030 Malibu Road: 4,200 sq. ft./7,888 Lot 4 bed/5.5 bath. Just completed remodel in 2008. Located on "Old Malibu Road" with 3 levels and a rooftop deck. Originally listed for $16.950 and was on the market for 408 days. Sold for $10.6 on 6/2/09.

480 Homewood Road (Brentwood- North of Sunset): 9,210 sq. ft./20,710 Lot 6 bed/7 bath + Guest house and pool. New construction with East Coast traditional feel. Originally listed for $9.350 and sold for $8.350 on 6/10/09. It was on the market for 97 days.

1121 Shadow Hill Way (Beverly Hills Post Office): 11,679 sq. ft./44,800 Lot 6 bed/8 bath + Guest house, pool, putting green and gym. Originally listed late last year for $10.685 and and sold for $7.80 on 6/3/09. Built within the last 10 years.

*Quick sale: 375 North Saltair Avenue (Brentwood- North of Sunset): 6,700 sq. ft./27,755 Lot 6 bed/6.5 bath. Mediterranean style estate with 4 seasons feel. Excellent condition. Listed for $5.995 and sold for $5.677 and was only on the market for 29 days.

Commercial Real Estate Update. . .

U.S. apartment vacancies near historic high: Highest in 20 years

The vacancy rate for U.S. apartments reached its highest level in more than 20 years. The national vacancy rate rose to 7.5 percent. The record high was 7.8 percent in 1986.

Effective rent was down 1.9 percent from the prior year and 0.9 percent from the first quarter to $975, Reis said.

Article: Vacancies near historic high

US office market continues to spiral down

The U.S. office market vacancy rate reached 15.9 percent in the second quarter, the highest in four years and rent fell by the largest amount in more than seven years as demand from companies and other office renters remained weak, real estate research firm Reis said Inc.

The Reis forecast is for the U.S. office vacancy rate to top out at 18.2 percent in 2010 and for rent to continue to fall through 2011.

Article: US office market continues to spiral down

Strip Mall Vacancy Rate Hits 10%, Highest Since 1992

Reis reports the strip mall vacancy rate hit 10% in Q2 2009, the highest vacancy rate since 1992. Effective rent declined 3.2 percent year-over-year to $17.01 per square foot.

About 7.9 million square feet of space was returned to the market during the quarter. The amount was second only to the 8.1 million square feet in the first quarter. In U.S. regional malls, vacancy rate rose to 8.4 percent, the highest vacancy level since Reis began tracking regional malls in 2000.

"Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest."

Article: U.S. mall vacancy rate soars, rent dives

Most home buyers expect to put 10% or less down

Despite tougher lending standards, a poll commissioned by Zillow finds that 17% of those planning to buy a home within two years expect to do so with zero down payment. Another 36% expect to make down payments from 1% to 10% of their home purchase price. That means 53% plan to buy a home with a down payment of 10% or less.

Isn't this the same mentality that helped create all of the current housing troubles?

Zillow's Amy Bohutinsky said of the nearly one-fifth of buyers who plan to put no money down, "Given the fact that home values are still declining in most markets, this surprises us."

(Source: LA Times)

L.A. County's May default rate almost double of last year

The percentage of Los Angeles County mortgages delinquent by 90 days or more in May was nearly double the rate last year, First American CoreLogic reported this week.

May's 9.5% delinquency rate for L.A. County was up from 5% of mortgages late by 90 days or more in May 2008. First American bases its foreclosure analyses on public records.

(Source: LA Times)

West Manhattan Beach Analysis

The median price for Single Family Residence's "SFRs" west of Sepulveda was down 22.4% ($1.980m to $1.535m), comparing the first half of 2007 with the first half of 2009.

There are two major factors with the median price drop. Obviously, due to the economy and less demand, the same properties are trading for less money. For example, a standard Tree Section new construction home built on speck might have gotten $2.1m-$2.4m in 2007, will now go for between $1.6m to $1.8m.

The other and more significant change, which is the case in all coastal communities, is the amount of sales in specific price ranges.

In 2009, the bulk of sales are at the lower end for the area West of Sepulveda (under $1m), pulling the median price down while sales at the higher end ($2m-$3m) are stagnant with the super high end (above $3m) staying fairly steady over the past 3 years.

About half of the Jan.-June sales in both 2007 and 2008 occurred below $2m. In 2009, fully 75% of sales were in that range. That's a significant, 50% increase!

Another number that really stands out is the share of sales priced below $1m. Accounting for only 2-5% of all sales in 2007-08, low-end sales hit 21% of all sales in 2009.

The biggest drop in sales happened between $2.5m-$3.0m, which have accounted for 1% this year, in 2007 and 2008 it was at 12% and 15%. If you look at the range of sales between $2.0m-$3.0m, it shrank from 30% in 2007-08 to around 13% this year.

Here are the numbers of sales in the 2 categories with the greatest change:
Sales Priced At $1m or Below

2007: 6
2008: 2
2009: 16

Sales Priced Above $2.51m, up to $3.0m

2007: 15
2008: 13
2009: 1

Please note, this is from MLS data and excludes off-market sales.

The sales pace for the area is off 41% from the first half of 2007 (129 closed sales vs. 76). The scary thing is the first half of 2007 from an historical perspective was one of the worst performing periods compared to the prior 20 years.

Due to lower interest rates, higher inventory and the over 20% price adjustment in the market, I predict sales volume in West Manhattan Beach to pick up throughout the rest of 2009 and into 2010 while the median sales price continues to decrease at a slower, steadier pace.

(*Sources: The MLS, Manhattan Beach Confidential)

Background on some sales in Santa Monica

A quick review of some of the sales and pending sales in Santa Monica:

1352 Hill Street: Went into escrow on May 12th, just 11 days after it was listed with a list price of 1.595. It is a remodeled home that is 3 bed/2 bath, 1,940 sq. ft. on a 7,140 lot.

133 17th Street: A new construction home foused on being environmentally friendly that finally went into escrow on June 8th with a 3.695 list price. It will be intresting to see what the sale price ends up being. This 5 bed/6 bath, 4,700 sq. ft home on an 8,900 lot originally listed for 4.8 in November of last year.

2127 Marine Street: Went into escrow on May 23rd, within eight days of being listed for $1.699. This 3 bed/2.5 bath, 2,400 sq. ft. home on a 7,000 lot is remodeled and in great condition.

919 Centinela: This contemporary home that was updated in 2004 went into escrow just 12 days after being listed at 1.999. 4 bed/3/5 bath, 4,024 sq. ft, 9,000 lot but the back-yard is not usable.

1736 Oak Street: Sold for $885,000 on June 12th. Originally listed for 1.060 in February. *Remodel/tear-down candidate

1024 23rd Street: (New construction)Sold for 2.425 on May 22nd.

659 East Channel: Sold for 3.683 on June 9th. Originally listed for 4.495 on March 24th. No price reduction. 3 bed/3 bath, 3,000 sq. ft. on 3/4 acre lot (not all useable). Awkward floorplan.

Please contact me if you would like more detailed information. HAVE A HAPPY AND SAFE 4TH OF JULY WEEKEND!!

Westside sales statistics for June

**click on graph or table for larger image.

The Westside market has definitely picked up in sales activity compared to earlier this year which is a good sign. The market is still off the activity of 2005 but signs of slight stabilization are showing. As long as the homes currently in escrow close in the next 60 days, it will end up being the best summer of sales activity in most Westside areas in the past two years.

This information was gathered from the Multiple Listing Service "MLS" as of July 2, 2009.

Palisades Riviera Update

Over the past eight months I have been closely monitoring the lack of sales activity in the Palisades Riviera. I am happy to report that over the past two months activity has finally picked up with 5 homes currently in escrow and 1 recorded sale. Quick review:

609 Amalfi: In Escrow as of 6/28/09 at a list price of 7.6. Originally listed at 9.5 and had been on the market for 250 days. Description: 8,065 sq. ft./18,325 Lot/6 bed/7 bath/Built in 2000.

1117 Napoli: In Escrow since 6/26/09 at a list price of 2.895. Originally listed at 3.7 and had been on the market for 136 days. Description: Tear-down or re-build. 3,945 sq. ft/13,119

965 Napoli: In Escrow since 6/22/09 at original list price of 6.495. Was on the market for 94 days. Description: 5,716 sq. ft./13,200 Lot/5 bed/5.5 bath/*New Construction (2009). Built simultaneously with 981 Napoli (see below) by developer.

1511 Amalfi: In Escrow since 5/6/09 at original list price of 2.995. Only on market for 26 days. Description: 3,300 sq. ft./21,175 Lot/4 bed/3.5 bath/*remodel candidate

972 Corsica: In Escrow since 5/21/09 at original list price of 2.995. Only on market for 15 days. Description: 12,998 Lot/4 bed/3.5 bath *remodel candidate

981 Napoli: SOLD for 6.744 on 5/22/09. Originally listed for 8.60 and on the market for 180 days. Description: 6,725 sq. ft./12,913 Lot/5 bed/6.5 bath/*New Construction (2008)

The Riviera has dropped about 20% in price over the past year and list prices are finally starting to reflect that correction which is leading to quicker sales.

Please contact me if you would like any additional information.

Deviation of new and existing home sales

This graph provided by the calculated risk blog is a great visual representation of the gap between new and existing home sales since 1975. This is clearly the largest disconnect we have seen:

Review of the last So Cal Housing Bust: 14 years until full recovery

Los Angeles-Glendale-Long Beach: Peak: 2nd quarter 1989 Bottom: 2nd quarter 1997 Depreciation: 36.7% Full Recovery: 2nd quarter 2003

Background:

The California economy expanded rapidly in the 1980s. Gross state product grew at an annual rate of 5.1% from 1983 to 1989, well above the national growth rate of 3.6%. The state's economic growth was accompanied by substantial population growth, which led to a construction boom and large increases in real-estate prices.

By 1989, a substantial decline in national defense spending seriously hurt California's booming defense industry. In addition, the national recession of 1990-91 reduced the demand for goods and services produced in California. Unemployment increased, and the California real-estate market subsequently collapsed.

California's downturn in the early 1990s had a speedy recovery of less than five years to its previous peak.

In the early 2000s, California experienced a particularly large home price boom fueled by a marked increase in the availability of mortgage credit. Home prices in California peaked in the first quarter of 2006. The ensuing subprime-mortgage crisis has hit California particularly hard. As of the first quarter of 2009, home prices have fallen almost 44%, adjusted for inflation, far more than the 32% drop from 1989 to 1997.

The Federal Housing Finance Agency last week released a study of real-estate downturns since 1975, tracking home prices from the quarter in which the declines began to the quarter in which inflation-adjusted prices returned to their previous highs.

Prices typically fell for three years and nine months, the agency said, but the average recovery took nearly twice that long: six years and eight months.

With such a quick and steep drop in the median Southern California home price since 2006, will a recovery be quicker than seven years?

Source: MSN Money: 4 of America's nastiest housing busts

Commercial Real Estate: Top analyst says office market is getting worse

A grim forecast for the U.S. office market was offered by a top analyst at Deutsche Bank, who predicted that urban business districts won't recover until 2017.

"The froth is still working itself out," Richard Parkus, the bank's head of commercial securities research, said at a New York event hosted and reported by Reuters news service. "We are currently in something which is comparable to what we saw in the 1990s and potentially worse."

Recovery is not imminent. The commercial market is getting worse, not better, he said. Demand for office space is falling, so rents and the income landlords receive from rents are also falling. That means many borrowers are now struggling to make mortgage payments on their properties

Real estate values could fall as much as 50% from their 2007 peak, Parkus said. "We are not only not approaching stability, we are at a period of maximum deterioration," he said.

Source: Reuters News Service

Loft Deflation in Hollywood and Downtown LA

It's still rough going for developers who overestimated demand for urban condominiums.

The owners of the Lofts at Hollywood and Vine are cutting prices over 40% in some cases.

A 1,200-square-foot unit in the building is now listed for $549,000, down from an earlier list price of $979,000. Those are list prices, so the original figure isn't a price someone actually ever paid.

This building opened in 2007 and is still about half-empty. It had been the Equitable office building.

A couple of months ago, developers of the Evo high rise in Downtown Los Angeles began cutting prices 15% to 20%. Units in the 24-story tower at 12th and Grand now sell from the mid-$300,000 range into the $800,000 zone, with some seven-figure penthouses.

The Evo development has been open for over 15 months and has 155 units sold or under contract. The building has 311 units. . .Lots of blood still in the water.

California's median home sales price rises 4%

California's median home sales price rose 4% in May, nudged up by an increase in sales volume (still mediocre) of higher-priced homes. The statewide median sale price was $230,000 in May, up from $221,000 in April. That's a 52% drop from the state's peak median price of $484,000 in 2007.

Despite the momentary pick up in higher-priced homes, foreclosures still comprised 51% of May sales and 1 out of every 5 homes sold was from the foreclosure ridden Inland Empire.

The high end momentarily picked up due to the typical spring selling season and seller’s realizing the reality of the market. After six months of very little activity, it is nice to see a faint heartbeat in this market.

Housing Inventory Chart

April 2008 (left side) vs. April 2009 (right side).

(*Source: Bloomberg)

High-End Price Decline Through 2012?

Prices for the most expensive U.S. homes may not reach bottom through 2012, according to JPMorgan Chase & Co. analysts. Compelling data backs up these claims even if most of it is not included in the Bloomberg article.

Besides some of the salient points the article makes, check out the graph posted above from the Bloomberg article that shows the months needed to clear inventory in each price range in Southern California in comparison to last year. The inventory levels for homes valued for more than $1 million dollars continues to escalate towards 20 months while homes worth $750,000 or less have shown a solid decrease in inventory levels. This is further evidence that the high end market is hit last in the cycle. It is safe to say the high end is 1.5 to 2 years behind the lower priced markets.

Furthermore, history seems to have away of repeating itself. In the late 1980s, the market was going strong before it started a downward trend and values dropped 40% on the high-end over a seven-year period. It was about 10 year period before prices got back to 1989 levels.

The average Westside home has declined approximately 20-25% since 2007, only 2 years into what is historically a 7-8 year cycle. With Financial, Insurance and Real Estate sectors losing many high paying jobs and the entertainment market slowing down, where will the new high paying jobs come from?

Couple this with the shift in lending practices back to fundamentals such as verifiable income and sales/price/rent ratios and the bevy of ALT-A and Prime loans set to reset after this summer and it looks like more of a fall will come in the millionaire home market.

With market activity showing signs of life on the high-end and the financial markets up over 30% from recent lows, this summer is the best time to sell your home if you are looking to move in the next 2 to 3 years. Selling at a realistic price this summer will leave more money in your pocket.

Please contact me if you would like to discuss your current situation and what your best options are.

Home Equity and the Economy

If homeowners did not use their homes as an ATM machine between 2002-2006 the American economy would not have had positive growth. The economy would not have prospered like it did during that stretch but the economy would not be in the mess it is right now. Question: How are we going to replace the borrow against your home ATM and spur economic growth in the near future?

Rates come back down after spiking 75 basis points

Rates had been skyrocketing the past few weeks (rising about 75 basis points) but the bond market has been sending slightly better news to mortgage borrowers as investors in securities carved out of home loans have been accepting lower returns. Yields on Freddie Mac and Fannie Mae mortgage securities fell last week meaning the buyers are OK with lower rates on the loans backing the securities.

The typical rate on a fixed-rate 30-year loan rose to 5.59% last week, up from a record low of 4.78% in late April, according to Freddie Mac. Yields on Fannie Mae 30-year fixed-rate mortgage bonds dropped to 4.71%, down from 5.07% last Wednesday and the lowest since June 3. Rising rates have throttled the home refinancing spree that took hold last fall and continued through the winter. While rates under 6% are still great by historic standards, the recent increase also made it tougher to qualify for home purchases, and higher rates generally can put the brakes on the economy

2 North Santa Monica Sales Worth Noting

415 17^th street finally sold on June 15^th for $1,600,000. In December of last year it was listed for $2,245,000. . .17^th street is one of the busier streets north of Montana so it will take a little more of a hit (100K or so) than if it was located on another street. However, I think this presents strong evidence that 8,900 lots once selling for 2.25 will be selling in the 1.5 to 1.6 range within the next 4-6 months.

854 23^rd Street sold in May for $2,800,000. The previous purchase was in April of 2006 for $3,500,000. This is a 20% drop from the 2006 purchase price and that does not include closing costs, carrying costs, taxes, etc.

2006 vs. 2009. . .Talk About Dropping Off A Cliff

Since the market peaked in 2006, a steady decline in sales volume and increase in housing inventory is substantially apparent. You can see through a small representative sample of three entry level zip codes on the Westside, [Mar Vista (90066), Culver City (90232) and Santa Monica (90405)], exactly how much the market has slowed in May (year over year) the past four years.

Mar Vista 90066
(2006) 49 sales x $782K = $38,318K
(2007) 34 sales x $824K = $28, 016K (-26.9%)
(2008) 13 sales x $843K = $10,959K (-71.4%)
(2009) 11 sales x $569K = $6,259K (-83.7%)

Culver City 90232
(2006) 14 sales x $795K = $11,305K
(2007) 4 sales x $676K = $2,704K (-75.7%)
(2008) 5 sales x $805K = $4,025K (-63.9%)
(2009) 1 sale x $675K = $675K (-93.9%)

Santa Monica 90405
(2006) 26 sales x $1,178K = $30,628K
(2007) 17 sales x $1,020K = $17,340K (-43.4%)
(2008) 15 sales x $789K = $11,835K (-61.4%)
(2009) 8 sales x $734K = $5,872K (-81.8%)

With the last real estate recession continuing for 7 years, how long will this last?

(*Sources: Melissa Data and Westside Meltdown)

Forecasting Firm: L.A. Home Prices Undervalued? Not on the High End. . .

Economic forecasting firm IHS Global Insight says the real estate crash has now put home prices in Southern California below their historic norms.

IHS bases its forecast on prices, interest rates, incomes, population density, and historic premiums and discounts in given markets.

By those measures, Los Angeles County home prices are now 6% undervalued, the firm says. Orange County is 11% undervalued, and the Inland Empire is 16% undervalued.

San Diego is 21% undervalued and San Francisco is 25% below normal, IHS says.

"The deceleration in the rate of decline may indicate the market is beginning to stabilize," the report says. But it warns that "it is too early to call a bottoming," as "job losses continue, housing inventories remain elevated and consumers remain wary in light of economic uncertainty."

It is important to note that with home values in areas such as Lancaster falling as much as 65%, good long-term investment opportunities exist. However, the Westside/South Bay and other higher end locales started to decline in value anywhere from 12-18 months later than areas that are currently stablizing and showing signs of a potentially good value.

When reading broad articles about the Los Angeles real estate market remember how large LA County is and the numbers you are reading may have nothing to do with your situation (especially if you are in a high end market). The markets differ so much in LA County that you really only want to pay attention to your specific area (i.e. your micro market).

The high end has yet to feel any type of foreclosure pinch and is down 20-25% from market heights. In some desirable areas that number is only a 15% decline while an other desirable areas it is over 30%! Ultimately, these numbers will continue a downward trend on the high end but they will not come close to the losses we have seen happen in areas like Lancaster.

Have We Seen The Last Of Sub 5% Mortgages?

As the government continues to print money inflation fears are flaring up and we have seen interest rates climb over 75 basis point in the past two weeks.

Rates for conforming 30-year fixed loans -- the plain vanilla mortgages that make up most of the market -- jumped from an average of under 5% two weeks ago to over 5.7% this week.

The bond market, which ultimately determines what happens to interest rates, tends to drive rates down when the economic outlook is bad. Signs that the economy may no longer be getting worse contributed to the shift away from the rates under 5% seen in recent months.

However, some financial analyst are cautioning against the idea that we are going to see a major jump in rates. The economy will have to improve to support higher price points and realistically that will probably not happen until 2010.

Bankrate.com senior analyst Greg McBride said federal government borrowing to fund its huge deficit spending is driving up borrowing costs for everyone, "and for consumers that means higher mortgage rates."

"If you wanted a sub-5% rate, that opportunity has passed you by," McBride aid.

Analysis of Single Family Westside Sales Statistics

Activity on the Westside has picked up quite a bit compared to the prior two months. Most of the increase can be attributed to the spring/summer selling season (perfect time for families to move without disrupting school for the kids), low interest rates and banks finally beginning to loan jumbo money a little more frequently.

I don't see this trend continuing on a long-term basis once the summer is over. As you will see in future postings, I believe inventory will continue to rise and any near future increase in activity will be at lower price points.

Per the MLS and the article I sent out last week in The Skinny on Real Estate, please see the data below for selected Westside areas comparing recent activity with activity earlier this year and for the same period last year and in 2005 which is very insightful to show the difference in the markets. This data is through May 27th, 2009.

Beverly Hills
April/May 09: Sold 19 (58% increase over Feb/March total of 12)
In Escrow: 21
April/May 08: Sold 19
April/May 05: Sold 28
**829 Whittier Drive finally sold for $10 million after originally being listed for $17 million! A 42% reduction from the Original listing price (OLP).

Beverly Hills Post Office
April/May 09: Sold 8 (Feb/March total 14)
In Escrow: 31!
April/May 08: Sold 1
April/May 05: Sold 37
**40 Beverly Park Circle sold for $31.5 million after having an OLP of 45 million.

Brentwood
April/May 09: Sold 19 (same as Feb/March total)
**However, 46 homes in escrow!!
April/May 08: Sold: 34
April/May 05: Sold: 53

Bel Air
April/May 09: Sold 4 (Feb/March total 10)
In Escrow: 20
April/May 08: Sold 22
April/May 05: Sold 43
**1030 Stone Canyon Rd. sold for $2.162 after having an OLP 3.695 (41% drop).

Malibu Beach
April/May 09: Sold 2 (Feb/March 4)
In Escrow: 7! (the most in escrow at the same time in Malibu Beach in six months)
April/May 08: Sold 7
April/May 05: Sold 13

Santa Monica
April/May 09: Sold 22 (Over 100% increase over Feb/March total 10)
In Escrow: 38
April/May 08: Sold 33
April/May 05: Sold 44

Pacific Palisades
April/May 09: Sold 29 (Feb/March total 24)
In Escrow: 26
April/May 08: Sold 36
April/May 05: Sold 58

*Less pricier locales:

Mar Vista
April/May 09: Sold 16 (Almost 50% drop from Feb/March total of 31)
In Escrow: 56!
April/May 08: Sold 35
April/May 05: Sold 60

Culver City
April/May 09: Sold 23 (Feb/March 18)
In Escrow: 29
April/May 08: Sold 17
April/May 05: Sold 36

Westchester
April/May 09: Sold 24 (Feb/March 26)
In Escrow: 40
April/May 08: Sold 36
April/May 05: Sold 54

Mortgage Rates Increase Almost .5% The Past 7 Days

If you have waited to refinance your loan, you may have waited too long. . .

Rates for conforming 30-year fixed loans jumped from an average 5.03% last Tuesday to 5.44% on Thursday before slipping to 5.30% Friday, according to HSH Associates of Pompton Plains, N.J. Monday they edged up again, to 5.38%.

The bond market, which ultimately determines what happens to interest rates, tends to drive them down when the economic outlook is bad. Signs that the economy may no longer be getting worse contributed to the shift away from the rates under 5% seen in recent months, Gumbinger said.

Other reasons for the move include bond investors' demands for higher rates because of worries that inflation may return sooner than anticipated and a flood of new sovereign debt being issued.

Bankrate.com senior analyst Greg McBride said federal government borrowing to fund its huge deficit spending is driving up borrowing costs for everyone, "If you wanted a sub-5% rate, that opportunity has passed you by," McBride aid.

But heavy Federal Reserve purchases of Treasury bonds and mortgage-backed securities should in the short term keep the cost of home loans at what historically are extraordinarily low levels, he said.

"They may not necessarily be able to bring rates to sub-5%," McBride said, "but they can keep a lid on mortgage rates."

The upward tick is expected to slow refinancings more than home purchases, because, as Gumbinger put it, "The interest rate is just one of a number of planets which must align" for a home to get sold.

Still, the higher rates, if sustained, could put some additional downward pressure on home prices, since interest rates do affect affordability.

(*Sources: LA Times, Wall Street Journal)

Graph outlines sales activity on high end since 1988

This graph was compiled by the Manhattan Beach Confidential blog and plots high-end home sales in six affluent markets (Beverly Hills, Rancho Palos Verdes, Manhattan Beach, pacific Palisades and the 90402 Zip code in Santa Monica) dating back to 1988.

The sales activity in these wealthy areas has been on a strong decline since 2004 despite prices continuing to rise into 2007.

I expect activity in these areas to continue to slow through 2009 and then begin to pick up in 2010/2011 after further price declines motivate those that are on the sidelines.

The last major real estate downturn occurred in the early 1990's and didn't start to appreciate again until that late 1990's. . .How will this downturn be any different?

Manhattan Beach school district cuts athletic funding

Because of cost cutting in the Manhattan Beach Unified School District, Athletic Director Bob Fish has been reassigned to teach full time, leaving Paula Spence, Vice Principal to coordinate Mira Costa High School's 64 teams and 1,200 athletes.

The reassignment of athletic director duties is only one of sweeping changes approved by the district's board of trustees, who voted to eliminate all of the school's coaching stipends and its athletic trainer beginning next school year.

To pay for the $180,000 in coaching stipends and more than $60,000 for a trainer, plus other costs, the school's booster clubs have joined forces with the Manhattan Beach Athletic Foundation to ask parents for a donation of $325 per athlete for the first sport he or she participates in and $200 for each additional sport.

*Source: LA Times: For the full article plus more information on budget cuts regarding athletic programs across the region, please read: Budget cuts affecting athletic department funding

Beverly Hills and Santa Monica Schools look to Alumni

If you grew up in Santa Monica or Beverly Hills and attended publich schools for at least four years, your child could attend schools in these high acheiving districts even if you live outside the boundaries.

The Beverly Hills Unified School District and the Santa Monica-Malibu Unified School District have adopted legacy admissions policies for children of former students who live outside their enrollment boundaries. The policies appear to be the first in the nation at public schools.

The programs vary slightly, but leaders of both districts say they hope to raise money by forging closer ties with alumni who may be priced out of their hometowns as well as with grandparents who still live there. In each district, nonresident legacy students will make up a tiny percentage of the student population, officials said.

Beverly Hills adopted its legacy policy on a 3-2 vote last spring, allowing the children of anyone who attended city schools at least four years and whose grandparents have lived in the city for at least a decade to apply for permits. Eleven students, among 5,100 enrolled in district schools, attend school under the program.

Fenton said he proposed the idea to reconnect the district with grandparents who live within its borders and no longer have a direct stake in the city's schools yet are asked to vote on school measures, such as a $334-million facilities bond passed in November. Fenton also said the district needed to forge closer ties with its alumni.

To round out classes and maximize state funding, the 12,000-student Santa Monica-Malibu district has long offered permits to the children of district, city and community college employees, siblings of current students and others who moved away. After those, it also has given permits to some nonresident students without connections to the district.But the board voted unanimously in April to give alumni children priority over this last category of students, starting next school year.

"If we're going to be giving out additional permits to students who live outside the community, the board felt we wanted to give them to people who had a tangible connection to our community," said board member Ben Allen.

He also said the policy was a response to soaring housing prices that have hurt diversity in the district and priced out younger families. Bill Koski, a Stanford University law professor who specializes in education policy, said the preferences could widen the gap between affluent and poor districts. "The adequacy of education funding in California is problematic when even our wealthiest school districts feel they must resort to this type of thing," Koski said.

Source: LA Times; Full Article: http://www.latimes.com/news/local/la-me-legacy16-2009may16,0,474770.story

Plan to widen Sunset Boulevard in Brentwood is halted

Los Angeles city traffic officials have abruptly dropped a plan to widen congested Sunset Boulevard in Brentwood after the proposal generated widespread community outcry.

The controversy underscores the challenges traffic planners face in attempting to improve traffic flow -- even in notoriously clogged areas such as the Westside. City officials say this stretch of Sunset is one of the most congested in the region.

The Los Angeles Department of Transportation last month proposed adding one eastbound lane on Sunset, from Barrington Avenue to Gunston Drive, about a 0.4-mile stretch. Officials had asked the Los Angeles County Metropolitan Transportation Authority to fund about $4 million of the project's estimated $6.1-million price tag. Hundreds of residents questioned whether adding a lane would effectively ease traffic congestion. They also said the proposal was not properly vetted, and that widening Sunset violated existing community plans to preserve the scenic highway.

This is at least the second time in recent years that L.A. has tried to widen this stretch of Sunset.

The Brentwood homeowners association, along with the Bel-Air Assn., in 2004 commissioned traffic consulting firm Linscott Law and Greenspan to conduct a study of congestion on Sunset Boulevard.

One of the study's conclusions was that an additional eastbound lane on the road could ease gridlock. The proposed lane would decrease delay time by an estimated 39% in the morning and 50% in the evening in the 0.4-mile zone.

The time estimates were based on pending changes to the 405 Freeway, including a reconfigured Sunset Boulevard overpass and on and off ramps. Construction for the Sunset project would have begun after the 405 Freeway changes were complete.

*Source: LA Times: Full Article: http://www.latimes.com/news/local/la-me-sunset22-2009may22,0,6939868.story

Are signs of a So Cal bottom misleading?

UBS Investment research recently met with Bruce Norris, founder of The Norris Group & an expert on So Cal housing.

On May 27th, they reported the key takeaways: 1) recent signs of stability in this market were likely premature; 2) driven by the expiration of the foreclosure moratorium in April ‘09, they expect foreclosures this year to exceed ‘08 levels; & 3) efforts taken by the Fed gov’t to encourage loan modifications aren’t working in CA, as homeowners are too far underwater to make this viable. Accordingly, they expect prices to decline further through the remainder of the year.

So Cal real estate notes to ponder

- The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,030 last month, down from $1,074 the previous month, and down from $1,831 a year ago. Adjusted for inflation, current payments are 52.9% below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.4% below the current cycle's peak in July 2007.

- Southern California's median home price in April was $247,000, down slightly from the previous month, a real estate research firm reported.The price drop -- a decline of 51% from the 2007 peak -- came after three months in which the median price had held steady at $250,000, according to the data from San Diego-based MDA DataQuick.

- First American CoreLogic, which has a vast store of data on actual mortgages, reports that Los Angeles County mortgages delinquent by 90 days or more in March were up to 8.9% of the total -- more than double the percentage of March last year.
Foreclosure filings, the next step in the foreclosure process, were issued on 2.3% of L.A. County mortgages in March, up from 1.9% in March 2008.
Repossessions, the final step in foreclosure, which results in a property being taken by the lender, were done on 1.6% of L.A. County mortgages in March, up from 1.2% in March 2008.

New rules are raising appraisal costs yet the quality gets worse

The rules, intended to improve the accuracy of home valuations, push most large lenders to use third-party appraisal management companies.

How about this scenario the next time you refinance or apply for a mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.Plus, your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.

Worse yet, the person conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.

**I have received three calls from fellow real estate agents in the past month regarding recent sales I was involved in asking for additional info to provide the bank because the appraisal was botched by somebody who was not familiar with the area. This helps create multiple appraisals and broker-price opinions.

The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.

Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, say Fannie's and Freddie's rules are adding 20% to 30% to consumers' appraisal costs.

Jeffrey T. Hawk, vice president of Maryland Mutual Mortgage in Forest Hill, Md., says a standard appraisal that previously went for $325 jumped to $400 or more May 1 when he was forced to use management company appraisers.

(Source LA Times: Full Article: http://www.latimes.com/classified/realestate/news/la-fi-harney17-2009may17,0,5903005.story

Regular Postings are back!

After making some administrative upgrades and getting some new systems in place to improve client satisfaction, the Skinny on Real Estate is back and will be consistently updated at least two times a week with pertinent news impacting the Westside/South Bay Southern California real estate market. The Skinny on Real Estate E-Newsletter will also go out every two to three weeks. We hope you find the information we provide to be very informative and that you will think of us whenever you require assistance with your real estate needs.

-Skinner Estates

Mortgage rates still below 5%

Freddie Mac's weekly survey of home loans show that rates remain under 5%, and have fallen slightly from the previous week.

The typical interest rate on a 30-year fixed mortgage was 4.82% for the week, down from 4.87% last week. Points and fees charged by lenders dropped from an average 0.7% of the loan amount to 0.6%, Freddie Mac said.

Driven down by aggressive actions at the Federal Reserve and Treasury Department, the rates dipped below 5% last month and bottomed out at 4.78% during the week that ended April 2. Last year at this time, a 30-year fixed rate loan averaged 5.88%, according to Freddie Mac.

Rates on 15-year fixed loans this week averaged 4.48% with 0.6% in average lender charges.

The survey looks at borrowers who can qualify for the loans that Freddie Mac will buy or guarantee. Obviously, jumbo loans above $729,750 are not included in this survey.

(*Source: LA Times)

Los Angeles rents are lower by 4%

The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. According to the annual USC Casden Forecast, the decline should continue this year as more renters lose their jobs.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.

To keep their units occupied, some landlords are lowering rents or offering concessions for signing a lease, such as a month of free rent or a reduced deposit, she said.

Rents should level out in 2010 as the economy recovers, the report said. The average one-bedroom apartment in Los Angeles rented for $1,397 a month at the end of last year.

The Westside remains the priciest, while Pasadena and Burbank are stable with little change in occupancy or rents. Rents in Hollywood and central neighborhoods such as downtown Los Angeles are being weakened by new condominiums that are being leased rather than occupied by owners.

(*Source: LA Times)

Montana Avenue strongly feels retail distress

Montana Avenue which has been called a "mini Rodeo Drive" and the home to high-end boutiques has fallen victim to a combination of high rent, low patronage and retail distress due to the tough economic times.

This has spelled doom for a substantial portion of the businesses on Montana Avenue. From June 2008 to the end of April, roughly 35 businesses -- representing almost 20 percent of the total merchants on Montana -- will have left the shopping district, leaving empty storefronts up and down the street, the majority of which are between Seventh and 17th streets.

The kind of conspicuous consumption that used to be done at boutiques has come to a screeching halt. Department stores, which carry similar items are discounting deeply and boutiques typically don't have the financial resources of bigger stores.

People working in many of the stores say that business has been slow for months and many shops are devoid of customers on weekends that would have been very busy a year ago.

Montana Avenue has some of the highest rents in the city, from about $6 per square feet to more than $9.

Notable store closings: Babystyle, La Partie, Saylor, KidsBiz, Starbucks, II Primo Passo, Jane Smith and Miel

(*Sources: Santa Monica Daily Press and Los Angeles Business Journal)

Speaking of loan modifications

The Federal Housing Finance Agency, said that Fannie and Freddie modified the terms of nearly 24,000 loans during the fourth quarter of 2008. That was a 76% increase over the third quarter, according to James B. Lockhart, director of the agency.

The figures were contained in a quarterly report on foreclosure prevention by the agency.

The number of foreclosures during the quarter fell by nearly 27%. But he noted that various federal and state moratoriums on repossessing homes played a big role in that statistic. Those moratoriums are now expiring, causing foreclosures to shoot higher once again.

Tips on the loan modification process

The loan modification process can easily take up to 90 days and requires careful note-taking, a calendar to mark, and a willingness to use the telephone again and again. The process is not fun but the old adage of "persistence pays off" definitely rings true when dealing with modifying a loan.

The article below by real estate agent and speaker Ralph R. Roberts advises borrowers to ask several questions upfront, whether they are dealing directly with a lender or working through a loan modification specialist.

Besides the questions he provides, Roberts also strongly counsels to not expect lenders to call you back to keep you current on your situation. They will not. If a deadline to hear something passes, get on the phone yourself, the next day, and ask why.

In addition, other options may be better than a loan modification like consulting a real estate agent about listing your home for sale or talking to a mortgage broker or loan officer about refinancing. Speaking with a bankruptcy attorney to find out whether filing bankruptcy is also a last resort option.

Roberts also advises to have all default and foreclosure actions frozen while you are trying to restructure the loan, but adds: Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place.

Article: Tips on the loan modification process

Home market under $850,000 springs into action

The number of homes and condos sold and in escrow throughout March is higher than January and February combined. . FHA financing helps buyers get off the sidelines. .

After a brutal start to 2009, the housing market has finally sprung into action, especially in the home and condo market under $850,000. Besides the typical spring time activity surge, the market has been aided by record low interest rates and the availability of FHA financing (up to $729,000 in California) requiring borrowers to only put 3 to 5% down for a purchase. FHA loans also allow buyers without superior credit to still qualify for competitive mortgage rates.

I have represented clients in five deals in over the past three weeks. Each property ended up getting multiple offers and they were located in Mar Vista, Culver City and Westchester. All of these situations involved a seller that priced the home at or below the true market value. Buyers in this market must perceive a good value in the property for them to write an offer within the first two weeks.

The majority of the offers being submitted are through FHA financing. In fact, the deal in Westchester initially wanted to only accept offers from buyers qualified with conforming loans. They did not receive any offers. Once they lifted that requirement they promptly received three offers and are in escrow at very close to the asking price.

Overall activity has picked up substantially in March compared to the previous four months. However, it is still below normal volume levels.

Please see the statistics of single family residences (SFR) and condos (CC) for selected areas below from March 1st thru March 26th. This information was gathered from the Multiple Listing Service (MLS)

Pacific Palisades: 20 In Escrow; 11 Sold (25 SFR and 6 CC)
Manhattan Beach: 27 In Escrow; 16 Sold (34 SFR and 9 CC)
Santa Monica: 42 In Escrow; 22 Sold (15 SFR and 49 CC)
Mar Vista: 16 In Escrow; 20 Sold (24 SFR and 12 CC)
West Hollywood Hills/Sunset Strip: 30 In Escrow: 10 Sold (38 SFR and 2 CC)
Brentwood: 25 In Escrow: 14 Sold (20 SFR and 19 CC)
Culver City: 30 In Escrow: 18 Sold (26 SFR and 22 CC)
Westchester: 19 In Escrow: 12 Sold (26 SFR and 5 CC)
Marina Del Rey: 18 In Escrow: 13 Sold (2 SFR and 29 CC)
Beverly Hills: 13 In Escrow: 7 Sold (13 SFR and 7 CC)
Beverly Hills Post Office: 5 In Escrow: 10 Sold (15 SFR)
Playa Vista: 5 In Escrow: 3 Sold (8 CC)
Hermosa Beach: 13 In Escrow: 6 Sold (13 SFR and 6 CC)
North Redondo: 22 In Escrow: 26 Sold (11 SFR and 37 CC)

* One glaring exception is Malibu Beach. According to the MLS the area has only 1 deal in escrow and zero sales for March!

New construction plagues Palisades Riviera

After shrugging off the real estate downturn and showing appreciation when the market as a whole was down, the Palisades Riviera is headed towards a significant downturn in 2009.

Sitting on the mesas above the famed Riviera Country Club, The Palisades Riviera is a neighborhood of homes with gracious lot sizes, wide streets and a climate that has attracted the wealthy and famous for over 75 years. Most home sales in the Riviera are above 4 million and can be 20 million plus.

The tough economic times and lack of jumbo financing is obviously the main cause for a stagnant market. However, adding further downward pressure is 6 newly built homes that are on the market from $6,495,000 to $11,850,000.

In the past few weeks, 981 Napoli was reduced to $6,995,000 from an original asking price of $8,600,000. The same developer just finished the house next door and that debut this week at $6,495,000 (1,000 sq. ft. smaller 981 Napoli). According to sources, 981 Napoli has received offers but not at a price and terms the developer is comfortable with. After closing costs, it looks like both of these properties could sell at a loss.

532 Spoleto Drive (over 10K square feet) has been reduced within 70 days from an initial asking price of $13,850,000 to $11,850,000. This property could easily see a further reduction into the low $10,000,000 range before they start getting serious interest.

The cause for the Spoleto and Napoli properties is further hindered by two newly built homes hitting the market within the past three weeks priced at $8,995,000 and $9,495,000.

With developers having equity tied up in these homes and construction financing being extremely difficult to find, the tear down lots available in the Riviera are also stagnant and seeing price reductions. Currently, the Riviera has eight tear down lots available with half of them providing views. Slightly over a year ago most of these lots would be sold before they even hit the market.

According to the MLS, only 1 home in the Riviera is in escrow. 3 sales have closed in the area (1 off market) this year.

The good news for the Riviera residents is that buyers are out looking. The broker caravan this week was the busiest it has been all year with people touring properties with realtors.

The high end is starting to pick-up with a flow of jumbo money becoming available in the next few weeks. A few Westside properties priced over $4,00,000 went into escrow this past week.

The bad news for the neighborhood is that buyers have plenty of options, leaving the developers to continue to drop their prices at an accelerated pace if they want to get out of this market anytime soon.