Friday, March 26, 2010

Latest Real-Time Market Data

*click to enlarge image

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Wednesday, March 24, 2010

Time Is Still On The Buyer's Side

With mortgage rates still near generational lows, national home prices down more than 20% from the peak and the government providing tax incentives for homebuyers, it seems like a great time to buy a house to many homeowners. The number of multiple offers that buyers have been encountering in every price range in the Westside/South Bay markets would lead one to think they may have missed the boat to buy last year. . .but did they?

According to Zillow chief economist Stan Humphries, those people who can afford to wait to buy a house are probably better off. Based on the most recent data which this blog has been forecasting for months, Humphries notes the official inventory numbers "don't capture all the foreclosures that are out there" or the so-called shadow inventory of homes waiting to come on the market.

A recent survey shows 8% of homeowners, or about 10 million Americans, are very likely to sell as conditions improve.

Humphries doesn't expect anywhere near 10 million more homes to come on the market in the near term. But this "pent-up supply" combined with foreclosures already in the pipeline and those yet to come because of negative equity and job losses means it will take three-to-five years "before we see more normal appreciation rates return to the market," the economist predicts.

"If you've got good credit and can put a down payment down...and you're planning to stay in the house for an extended period of time [like] seven-to-10 years, then now could be an attractive time to buy"

A few other things to consider: The end of the Federal Reserve’s subsidy of the mortgage market interest rates in a few weeks which could push rates up to 5.5% by mid-summer which is right when Foreclosure sales and real estate owned (REO) properties are on track to spike.

Furthermore, real estate prices are not determined simply by the availability of properties listed for sale. The home-buying population’s purchasing power, limited to 31% of a prospective homebuyer’s income, is directly related employment. In California, 2.5 to 3 million people remain jobless.

Given the facts and trends before us, time is still on the buyer’s side.

Bank of America to reduce mortgage principal for some homeowners

The $3-billion program involves borrowers with certain adjustable-rate loans written by Countrywide Financial, which BofA acquired in 2008. Please click on the link below to read the full LA Times article:

Bank of America to reduce mortgage principal for some homeowners

$10,000 Tax Credit For Californians Extended...

California lawmakers have voted to extend a $10,000 tax credit for first-time homebuyers.

The credit will apply to first-time buyers who purchase new or existing homes between May 1 and Dec. 31 of this year. It is for 5 percent of the purchase price, or up to $10,000.

However, this is a first come first serve program. Once the program cumulatively reaches One-Hundred Million Dollars in credits it will be suspended.

Good News for Downtown LA: Evo Condo Tower Moving Units

(*cliff notes version of article in LA Business Journal by Daniel Miller)

After cutting prices by as much as 30% last year, 193 of the South Park building’s 311 units were sold in 2009, making it one of the fastest selling condo buildings in the country.

With the market showing signs of life, the developer South Group, said it has raised prices by as much as 20% from the lows hit last year and sold 15 more in January and February. They are hopeful they will sell the remaining 81 units before the year is out.

The news of the Evo sales is encouraging in the midlevel and high-end condo market which has taken a huge hit over the past few years.

The evidence is not just anecdotal that there has been a pickup in the market.

Condo sales rose last year as developers slashed prices. The trend continued in February, when 1,393 condos were sold in Los Angeles County, nearly 50 percent more than in February 2009. The median price of $295,000 is about where it was a year earlier – well off the $460,000 high hit in mid-2007.

Thanks to condo projects being converted into apartment building and little to no construction, a strong reduction in inventory has helped condo projects recover from the lows of last year.

Evo, at 1155 S. Grand Ave., features a 24th-floor open-air lounge, a sixth-floor pool deck and amenities typically reserved for Wilshire Corridor condo properties, such as concierge and bellman services. Units include terraces, oak floors, exposed concrete walls and stainless steel European appliances.

The original plan called for Evo to be nearly sold-out by the September 2008 opening. The worst case envisioned was that perhaps 20 percent of buyers wouldn’t get approved for loans and those units would be sold later. But the reality was far worse. At one point, about 200 units had been presold, but as the economy cratered, people backed away from the deals, despite deposits and executed contracts. Ultimately, no more than a dozen units were sold to original presale buyers.

30 offers for 11820 Stanwood in Palms/Mar Vista

That's right, 30 offers were submitted for this 1,467 sq. ft. property situated on a 9,088 sq. ft. lot. The list price of $699K was about $50,000 lower than market value and the tactic of auctioning it off ended up working well with sources close to the situation saying it went to an all cash buyer for $810K!

Will see if it stays in escrow. The charming home is nice but is a remodel candidate and was hugely popular due to the lot size and prime Mar Vista location.

Thursday, March 18, 2010

Manhattan Beach Keeping Pace With Strong February Sales

Single family homes sales west of Sepulveda in Manhattan Beach have maintained the strong sales pace set in February with 17 homes going into escrow in the second half of February, and 11 more in the first 15 days of March according to the Multiple Listing Service "MLS".

17 new listings hit the market in March so new offerings are still outpacing sales but this uptick in activity is showing an upward market trend in the area.

With new offerings, sales, failed escrows, total inventory rose by just 5 listings over the end of February, to 83 SFRs by mid-March. Broken into sections, The Hill Section has 18, Sand Section 34 and the Tree section 31.

The builder's seem to be getting back into the game in the sand section as homes being sold for land value are beginning to move. 405 9th sold in 6 weeks despite the very high list price of 2.3m (probably sold for less than 2m) and 416 6th listed at 1.799 two weeks ago, quickly went into multiple offers and is in escrow.

sources: Multiple Listing Service/Manhattan Beach Confidential

Jumbo Mortgage Rates Slip Below 6%...(*Edited)

(*edited from original post...)
Interest rates on jumbo loans over $729,750 are down from well above 7% in late 2008 to an average of 5.9% in mid-March, signifying a possible return to lending fundamentals in high-cost areas as jumbo mortgage rates are within 1 percentage point of standard prime loans.

During the height of the market, between 2005 and 2006, jumbo loan interest rates were typically a quarter of a point higher than standard conforming loans. Due to the foreclosure meltdown, the interest rate spread between a standard and a jumbo loan expanded to about 1.7 percentage points in early 2009 as lenders were reluctant to issue high-risk loans.

Down payment requirements have also been relaxed. The average down payment requirement for jumbo loans last year was 25-35%. Some larger lenders are now requiring only 20% on loans under a million.

However, if you are purchasing a property with a loan for over a million dollars, still expect a 25-35% downpayment and two appraisals will be needed. Most purchasers on the high end end up going with Hybrid ARM's and face heavy scrutiny from the banks. The environment is better for purchasers than it was last year but still a very tough process to get through.

As the Fed begins withdrawing its support of the mortgage loan market this month, rates may creep back up but expect them to stay around the 6% mark for the next few months.

Though the banks are finally working with jumbo borrowers, please keep in mind the delinquency rate for California jumbo loans has shot up from 4.1% to 11.3% in the past year.

The increased delinquency rate for jumbo loans is no surprise. Many expensive homes were bought with adjustable rate mortgages (ARMs) in 2005-2006. The majority of the popular 5-year ARM’s are adjusting upward with the peak between now and 2011.

Tuesday, March 16, 2010

Benchmark Short-Term Rate To Stay Low For Extended Period

Federal Reserve policymakers left their benchmark short-term interest rate unchanged in the range of zero to 0.25% and once again pledged to keep it low for an “extended period”.

The central bank continued to sound relatively upbeat about the economy, saying the data it looks at suggest that “economic activity has continued to strengthen and that the labor market is stabilizing.”

The Fed also said it would end, on schedule, its program of buying mortgage-backed bonds to help keep home loan rates low. That program will conclude at the end of this month when the Fed’s mortgage bond holdings reach the $1.25-trillion limit it set last year.

Even though the market obviously knows that the end of Fed bond purchases is near, average 30-year mortgage rates have remained around 5% for the last nine weeks.

Chris Rupkey, economist at Bank of Tokyo-Mitsubishi, says some Fed policymakers have suggested that the phrase equates to three to four Fed meetings. If that’s true, “This means the Fed consensus today thinks they will not need to move interest rates until the Sept. 21 meeting,” Rupkey said.

For a second straight meeting, one Fed official dissented in the statement. Thomas Hoenig, president of the Fed’s Kansas City bank, objected to the pledge on low rates.

Hoenig “believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability,” the Fed said. Summed up, he’s worried about inflation...

*Source: LA Times

Street Beat: North of Montana Brimming With Activity

The strong market activity we have seen for the past six months in the market under a million dollars is now happening with homes up to 3 million dollars. The spring selling season is in full effect especially with families looking to get into better school districts.

The highly desirable North of Montana section of Santa Monica, one of the top 10 wealthiest zip codes in the world, had 6 homes hit the market since March 2nd. Four of them are currently in multiple offers…

512 Georgina- LP: $3,100,000 *fixer but great sq. ft. on a 11,500 Lot. It has been on the market for a few days and already have 3 offers…

111 Esparta Way- LP: $6,195,000 *old world charm but the buyer at this price probably remodels. 4,500 sq. ft. on a flat ½ acre lot! Apparently they have received multiple offers.

610 24th Street- LP: $2,695,000 *Clean East Coast traditional that boasts 3,116 sq. ft. on a 8,700 sq. ft. lot. They have received 5 offers in 7 days.

508 10th Street- LP: $2,195,000 *2,400 sq. ft. Spanish in decent condition that needs cosmetic updating. Situated on a 7,500 sq. ft. lot. Have not confirmed but apparently they are also in multiples.

Westside realtors are the busiest we have been in 5 years and most Westside real estate offices have put help wanted signs up on the door to keep up with the amount of buyers looking for property. I didn't foresee this happening but this is the reality of the current market with the cheap dollar, a lack of inventory and Jumbo rates becoming more competitive.

LA Times: So Cal home prices rise 10% in February

In a post last week about Westside/South Bay sales activity, I stated market activity was significantly stronger compared to February 2009. Today, The Los Angeles Times took it one step further proclaiming a 10% rise in the median sale price compared to February 2009. Below is a cliff notes guide to the full article.

In February 2009, foreclosure sales as a percentage of the Southland's resale market hit a record of 56.7%, dragging down prices. Though foreclosure sales have ticked up slightly, they accounted for 42.3% of the market last month, well below the high.

"Because of that change in mix we are going to get median prices that would be year-over-year positive in double digits," said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University.

Adibi said the key point to get across to sellers, mainly, is that the increase in sales of higher-end homes may be skewing the median numbers and distorting what other homes may really be worth. He expects prices for more expensive homes to fall again.

Though more higher-end homes were sold, much of the buying activity still remains in the low end.

Southern California's housing recovery last year was spurred by a very active low-end market as investors with cash snapped up cheap foreclosure properties and first-time buyers with government-insured financing also stepped in.

Southern California's market is not likely to return to full health until jumbo loans make up a larger share of the market, experts said.

With sales of cheap foreclosure properties becoming increasingly competitive, real estate agents said inventory on the low end has now grown tight -- even though many homeowners in California continue to fall behind on their house payments.

Glenn Kelman, chief executive of online brokerage RedFin, said he was "bullish" on California's prospects.

"California, right now, is its own market," he said. "It started improving ahead of everyone else last winter . . . and I am not sure there is going to be another dip because there is so much demand."

Friday, March 12, 2010

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Thursday, March 11, 2010

Significant Rise In Westside/South Bay Sales Compared to Feb 09

*click image to enlarge

I am not a big fan of comparing months from a year to year basis in terms of median price since a few sales can skew the numbers dramatically. However, comparing February 09 and February 10 sales activity provides clear evidence that activity is much stronger than it was last year and that price points are either stabilizing or trending up for the time being.

The median price information is providd but DO NOT read into median price points dramatic rise in certain area like the Palisades (up 43%) or Hermosa Beach (up 40%) because the sample of homes sold is small. One high-end sale can skew the numbers. Median price information should be looked at over a 6 month or yearly period.
Please note this is data for single family homes and data relating to Condos in a specific zip code is clearly marked.

Norris Group Weary of Optimistic Cali Real Estate Forecasts

Real estate investment advisor Bruce Norris of the Norris Group advised real estate investors at a recent seminar in Costa Mesa to be weary of optimistic reports forecasting an immediate bottom in the housing market.

According to Norris, numerous foreclosures must still be processed before the market approaches anything resembling equilibrium, much less growth. He attributes current lowered foreclosure numbers to Government loan modification programs, but notes that most modified loans tend to redefault, especially in an economy in which unemployment remains at unprecedented highs.

Government and lender efforts have forestalled defaults and foreclosures by the hundreds of thousands, but their main accomplishment has merely been the creation of a shadow inventory of over 350,000 to 500,000 likely future foreclosures in California alone.

Real estate investors with readily available cash can find good prices in the market right now, but shouldn’t expect to become profitable overnight. Opportunities exist at auctions to make a profit on a flip in this market, but you need to have experience and be a real pro to pull that off.

Breaking News: LAUSD No Longer Allowing Inter-District Permits

Most Southland school districts are scrambling to find ways to close this year's enormous and unprecedented budget gaps. Los Angeles Unified School District, the state's largest school district, recently announced a highly contentious way of recouping some of those funds: LAUSD plans to eliminate some 12,000 interdistrict permits for the coming academic year, 2010-2011.

What this means in practical terms for the parents of those 12,000+ students is that, while schools in other districts may still welcome them with open arms, LAUSD will not issue the required exit permits releasing them from the "home" schools. A student who lives in Mar Vista but attends school in Santa Monica is expected to withdraw from the Santa Monica school and attend the neighborhood schools as of September 2010. According to some sources, 400 students will be impacted that are currently attending the city of Santa Monica.

For years, these interdistrict permits have been a mere formality; any student receiving a place in another school district - whether it be for reasons of curriculum, convenience, sibling connections, or continuity - has been granted an exit permit from LAUSD. This year, the families of students who "permit out" of their neighborhood schools in favor of another district have an unpleasant surprise awaiting them when they apply for renewal.

Superintendent Ramon Cortines has announced that exceptions will be made only for pupils entering the last year of a school (i.e. fifth, eighth, or twelfth grade) or for parents who work in the city of the desired school district (as mandated by law).

The new application for interdistrict permits will be available starting April 15. Information about the new process and requirements is available by contacting Melissa Schoonmaker at LAUSD's Office of Permits and Student Transfers.

Although this policy has been implemented by the superintendent, many parents are hoping that the LAUSD Board of Education will get involved and mitigate some of the fallout for families and students.

Friday, March 5, 2010

Westside/Manhattan Beach Foreclosure Data Analysis

Though the amount of notices of defaults seems to be slowing, the "extend and pretend" mentality of property owners and the banks is in full effect. The gap between properties that are in trouble or owned by the banks compared to what is available on the market is enormous.

If you combine homes with a notice of default filed and bank owned properties you get 861. Of those 861, only 51 are on the market! Furthermore, if you want to throw in properties that are waiting to be auctioned (most of these are delayed over a 6 month period), the number of properties jumps to 1,431 with only 78 on the market!

The gap in quite a few zip codes is about 25 properties for every 1 on the market with Westchester, Mar Vista, Culver City and Santa Monica leading the way.

Not all of these properties will come on the market due to loan modifications and people working to becoming current on their payments but it is safe to say that at least 60% of these properties will eventually change hands.

Unfortunately for buyers who are dealing with low inventory levels on the Westside, the current environment does not incentivize the banks to put these properties on the market. The banks are deliberately slowing the foreclosure process down to keep inventory levels low and prices stable.

The banks are not being penalized on Wall Street for non-performing loans and are better off keeping property A on the books at its $800,000 loan level than selling it for $650,000 and having to report the loss.

Since the foreclosure process is being dealt with in a slow and deliberate manner, expect foreclosures and short sales to be above normal levels through 2013.

My office is continually tracking all of this information and is well versed on the short-sale and foreclosure process. Please feel free to contact us for any advice or consultation. As you know from reading this blog, the market has been strong lately due to government incentives and low interest rates making this not a bad time to put your home on the market if you are in a tough scenario.

*The information below was pulled from Realty Trac, one of the leaders in providing real time foreclosure data.

*Please note that these numbers are only based on notices of defaults filed and properties taken back by the bank (bank owned) since November 1st, 2009. These numbers DO NOT include properties where the bank became the owner or notices of defaults were filed prior to November 1st. E-mail us if you would like data that dates further back or specific information on potential investment opportunities.

*The data is a compilation of Single Family Homes (SFR), Condo/Townhouses and multi-family properties. Commercial properties are NOT included.

Notice of Defaults Filed Since November Westside/Manhattan Beach

- Cllick image to enlarge

*Please read analysis above

Amount Of Homes On The Auction Block Westside/Manhattan Beach

-Click image to enlarge

*please read analysis on this information above.

Bank Owned Westside/Manhattan Beach Properties Since 11/1/09

-Click image to enlarge

*Read analysis above

Mortgage Rates Below 5% This Week...

The typical rate that lenders were offering for 30-year home loans slipped below 5% again this week, the mortgage company Freddie Mac said Thursday.

For 30-year fixed-rate home loans, the combination this week was an average 4.97% in interest with an average of 0.7% of the loan balance in points, according to the survey, conducted Monday through Wednesday.

The low rates have been engineered by the federal government in response to the deep recession. Not since the 1950s have rates remained so low for so long.

The 15-year fixed-rate mortgage this week averaged 4.33% with an average of 0.7% in points, down from 4.40% a week ago.

The five-year Treasury-indexed hybrid adjustable-rate loan, which has a fixed rate for the initial five years, averaged 4.11% with 0.6% of the loan balance in points. It averaged 4.16% a week earlier.

Buffett Sees End To Residential Real Estate Slump in 2011

In his annual letter to Berkshire Hathaway shareholders, billionaire investor Warren Buffett predicted the U.S. residential real estate market will recover from its current doldrums by next year, which is when he predicts demand for houses will catch up with the excess supply created in the housing bubble.

"Within a year or so, residential housing problems should largely be behind us," Buffett wrote in the letter. "Prices will remain far below 'bubble' levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits. Indeed, many families that couldn't afford to buy an appropriate home a few years ago now find it well within their means."

Buffett cautioned in his letter that "high-value houses and those in certain localities where overbuilding was particularly egregious" will take longer to recover from the slump. He identified overbuilding as a prime cause of the housing market crash, noting that in a recent year when housing starts were running at an annual pace of two million units, new household formation lagged seriously behind the supply, at only 1.2 million.

He said that the resulting halt in housing construction was the best of three possible ways to correct the imbalance.

Wednesday, March 3, 2010

The Westside/South Bay Market Is On Fire. . .Especially Under A Million

Realtors working with buyers looking for homes in the Westside/South Bay market that are listed for under a million dollars feel like they are in a time warp as today's market is reminding many of us what the 2004-2005 market was like. Thanks to the $8,000 tax credit, FHA financing, low interest rates and limited inventory, buyers are constantly facing multiple offer situations on market priced homes and having to provide proof of funds to cover the down-payment, full loan approval and anything else they can do to garner favor with the seller.

In the past seven days I have written 6 offers for clients ranging from $400,000 to $950,000 and all of them ended up in multiple offer situations that went over the asking price. Despite FHA financing allowing for buyer's to only have to put down as low as 3.5% of the asking price, most of the buyers seem to have at least 20% down which is a good sign for the economy and shows that buyers who were on the sideline during the dramatic rise of the market have decided its time to jump in.

The first time homebuyer market under $750,000 is absolutely packed with buyers. This past weekend, a 3-bedroom 1,069 square foot new listing for $589,000 in the South Kentwood area of Westchester had around 200 people attend the Sunday open house and received 12 offers as of Wednesday morning. Each market priced home seems to have at least 3 buyers vying for the property.

I was caught a little off guard by this activity and don't think it will last when the stimulus is no longer in play. However, even if the market dips again in the less than million dollar Westside/South Bay market, the lows of 2009 will not be surpassed.

Though I don't believe we have seen the absolute bottom in terms of prices in the market above a million dollars, activity is definitely heating up. A new listing last week in the 300 block of 11th street in Santa Monica, which is approximately 3,800 square feet on a 7,500 square foot lot, received 5 offers and is supposedly in escrow well above the $2.675M list price. Furthermore, during yesterday's broker caravan a house on Terryhill Place in Brentwood listed for $1.795M had over 170 agents and buyers tour it in a three hour period. . .

**Please note this only pertains to single family homes and not condos. Some condos are moving fast but this segment of the market is not as strong as the single family market.

February Sales Data For Single Family Homes + Analysis

-click on the above image for an enlarged view.

Quick Analysis:

*The most expensive sale of the month 1141 Summit Drive in Beverly Hills sold for $16.5 million. The 16,800 sq. ft. home sitting on one acre debut on the market in September of last year for $23.5 million. . .a 30% hair-cut from the original listing price.

*The second most expensive purchase was made by Alethia Research and Management (high-net worth money management firm) founder Peter Eichler for $15,000,000. The Malibu Road home boasts 4,459 sq. ft. and is brand new construction. . .

*Other than the high-end sales above, activity above 5 million still remains light. No sales in the high-end neighborhoods of Manhattan Beach, Pacific Palisades, Brentwood and Santa Monica surpassed the $3.4 million mark according to the MLS.

*Most sales recorded under a million dollars were on the market for less than 30 days.

*With the exception of Cheviot Hills and Manhattan Beach most areas saw a healthy increase in sales compared to February of last year.

New Listings and Pended Sales Data For February from Malibu to Manhattan Beach