Friday, November 4, 2011

Westside October sales volume lagging

*click to enlarge image

The recent run of slow sales volume on the Westside for Single Family Homes continued into October with Santa Monica leading the way with only 7 sales which is almost three times less than last month’s number of 19 and last year’s number of 20. Most of the areas stayed fairly consistent compared to last year with Beverly Hills Post Office and Bel-Air the only areas seeing a solid increase over last year’s numbers.

Overall, sales volume for the areas calculated dropped 17 % compared to last month and 8% compared to last year. Sales are still firmly ahead of the dreadful 2008 numbers by 20%. Overall, it has been a frustrating market for serious buyers with very little inventory on top of having to deal with a tough lending market. The influx of tech companies to the Westside along with garnering a strong interest from international investors bodes well for property owners on the Westside at this time.

A look at some individual sales:

932 Chautauqua sells in 3 days- This Pacific Palisades 5 bed/6 bath, 6,500 sq. ft. home on a 9,452 sq. ft. lot hit the market for $4.695M in early August. After about three days the seller’s accepted a $4.5M sale price and closed in early October. This resort style home was build in 2009 and featured great indoor/outdoor flow, chef’s kitchen, pool, wine room and workshop. An entertainer’s home with a family twist.

1513 Sorrento sells for over asking- LOCATION, LOCATION, LOCATION! This view property situated in the Palisades Riviera on over a 22,651 sq. ft. lot with phenomenal views sold for $5.0M in multiple offers with a $4.395M asking price. Lots this size with views are a rare commodity on the Westside and always garner a ton of interest from the elite in Los Angeles. Unless a seller is asking for an outrageous sum properties like these go pretty fast.

820 Princeton sells for 100K over asking- This quaint and charming Santa Monica Tudor just south of Montana boasts 3 bed/1.75 baths, 1,584 sq. ft. on a 8,800 sq. ft. lot. It sold for $1.408M and closed October 21st. It was listed at $1.295M and the low asking price fetched a multitude of offers.

12495 Promontory sells for $1.7M- About 10 years ago the 24 hour guard gated Moutaingate estates was considered a hot place to buy on the Westside. Nestled above the 405 freeway near the Getty Center the location provides equal access to the Valley and the Westside along with resort like amenities. However, since its heyday this area that used to attract a decent amount of celebrities has fallen on some difficult times and you can pretty much pick up a home that is a bit dated but with good bones for under $400 a sq. ft. 12495 Promontory just sold for $1.7M after debuting on the market for $2.250M. We sold a home in the area that was completely updated for $2.0M in late 2010 so this sales price makes sense. The area is saddle with high HOA dues ($700+) per month but not a bad alternative for a large family looking for a Brentwood address.

These two took a huge hit-

130 Delfern Drive in Bel-Air sells for $8.4M…nearly ½ off the original $16.5M list price- This 1.2 acre estate in Holmby Hills that boast 4 separate structures but in need of updating originally made its debut on the market at the ridiculous price of $16.5M in May of 2010. After finally being dropped to a $9.995M list price in July of this year it sold on October 25th. A good buy for over 1 acre of land in prime Holmby Hills

9550 Heather Road in BHPO sells for $8.194M…just slightly off the original $15.5M ask price…LOL- Situated on over 1.7 acres this 6 bed/9 bath home (sq. ft. not reported) finally sold on October 24th after being on the market for 254 days. I have never understood why seller’s, especially in sophisticated neighborhoods think someone will just magically appear and pay them way over market. Most buyers who can afford multi-million dollar homes tend to make good financial decisions or have people working for them who do…

Interest Rates back below 4%

Investor worries over the European debt crisis helped drive the average rate for a 30-year fixed home loan down to 4% this week, according to Freddie Mac.

The figure, down from 4.1% last week, was the second lowest in the 40 years Freddie has been conducting a weekly survey of the terms being offered by home lenders. The lowest average rate recorded was 3.94% four weeks ago.

Freddie Mac said lenders were offering 15-year loans, a popular choice for homeowners who are refinancing, at an average rate of 3.31%, down from 3.38% a week earlier. That rate was below 3.3% for three weeks in late September and early October.

To obtain the loans at the rates being offered this week, a borrower would have to pay upfront fees averaging 0.7% of the amount borrowed.

*Source: LA Times

Real Estate articles you should review

Here are some recent articles from the LA Times that are worth taking a look at:

Victims of improper foreclosure practices can submit claims
Fourteen mortgage servicers have begun mailing out 4.3 million letters to potential victims of robo-signing. The letters will invite borrowers to submit their cases for a free review by independent consultants.

Mortgage refinancing to get easier under revised U.S. program
The plan could help 1 million to 2 million people get significantly lower monthly payments in hopes of stabilizing the real estate market.

Factoring energy efficiency into a home's value
Under the SAVE (Sensible Accounting to Value Energy) Act, estimated energy-consumption expenses for a house would be included as a mandatory new underwriting factor.

Dot-coms want the beach in their address
The commercial real estate rental market is booming in Santa Monica, where the office vacancy rate is a fraction of the L.A. County average. Tech and entertainment firms like the lifestyle.
**We wrote about this impact on the residential market 6 months ago. No doubt the “Silicon Beach” effect is impacting the residential market on the Westside in a very positive way.

Friday, September 30, 2011

Tight inventory and record low rates making it tough for Westside buyers

You can characterize the Westside real estate inventory as pretty tight these days. There’s plenty to choose from in some categories and at some price points, but much of what is available has some kind of issue – from location to price – that causes buyers to put on the breaks and if we were playing Monopoly it is like the seller is being sent to jail.

On the flip side, quality offerings priced appropriately usually see multiple offers and pretty easy escrows thanks to record low interest rates and buyers from all over the world seeking property in this particular market.

We are seeing quite a bit of purchasing activity in price points that can be considered “entry level” depending on the micro market. Entry level for the 90402 zip code in Santa Monica for a non-tear down home is usually around 2-million (give or take based on sq. ft.) while in the 90066 zip code of Mar Vista north of Venice and West of Centinela it is around 750K. –Quick insert: With the current conforming loan limit dropping from $729,500 to $625,500 on October 1st look for markets like Mar Vista, Culver City and South Santa Monica to lose some buyers who will no longer be able to afford the higher payment.

Due to many potential sellers being financially handcuffed and unable to sell their homes the inventory that is available to buyers throughout the Westside is minimal leading to some segments of the market seeing a 5-10% uptick over the past 12 months, despite the economy. High-end buyers are taking advantage of a 15-20% drop in price from the height of the market along with record low interest rates around 4%. They feel it is a tremendous buying opportunity with some real estate analysts calculating that if you take the current interest rates combined with the drop in value of the past five years in actuality you have more like a 40-45% drop in Westside real estate value from the heights of 2005.

The best way to track value: A look at recent re-sales in SM and the Palisades

Though we have seen an uptick in the market as of late due to the factors mentioned in a previous post we still have seen quite a bit of price erosion. One of the best ways to look at value in certain market segments is to look at homes that have sold twice in the past 7 years that are in similar condition. Here are some great examples from the Pacific Palisades and North Santa Monica markets:

215 24th Street, Santa Monica- 9.8% drop in value since 2009 purchase- This beautiful 3K sq. ft. Spanish style home on a 8,700 sq. ft. lot recently sold for $2.3905M after debuting on the market for $2.745M in February of this year with a different broker. Unfortunately for the seller the home seemed to fall out of escrow on two different times before finally settling on a buyer. This leads us to believe that the home may have had some type of inspection issue pop up. The home is updated and light/bright. It features a pool/spa and was a good buy at this price. The home was sold in 2009 for $2.650M.

Ouch- 1436 Floresta, Pacific Palisades, sells for 25% less than 2007 purchase price and well below 2005 purchase price- This 4 bed/4 bath, 5,130 sq. ft. home on a 16K sq. ft. lot recently sold for $2.580M after being originally listed for $2.795M. It was on the market for 48 days. The same house was purchased for $3.450M in July of 2007. It was sold in 2005 for $3.130M so the home has dropped to around its 2003/2004 value.

On the upswing- 458 Toyopa, Pacific Palisades- sells for more than 2010 purchase price- This 6 bed/9 bath, 9K sq. ft. house on a 24,742 sq. ft. lot (home sq. ft. not reported) built in 2008 featuring many high end amenities including huge master with his/her’s baths, pool, spa and putting green recently sold for $9.8 Million after being on the market for 161 days. The house was sold in 2010 for $8,750,000 resulting in over a 10% increase in sales price. Even after brokerage fees not a bad return for a 1 year investment in a bad economy. Further proof that inventory is not great on the Westside and we have seen prices increase for properties of this nature.

710 23rd Street, Santa Monica- 9% drop since 2008 with only one agent involved- The seller got a fair price at $2.650M for this home but did it get exposed to the whole market? It was pretty difficult to set up a showing and a little surprised they would take a $250K reduction and go into escrow after only being on the market for 11 days. However the list price was high and the reduction in purchase price may have taken the place of repairs that are needed.
This is a 4 bed/4 bath, remodeled architectural style home that is 2,848 sq. ft. on a 8,851 sq. ft. lot with a pool and Gourmet kitchen. It was purchased in April of 2008 for $2.9M.

942 Galloway, Pacific Palisades- Still worth more than 2004 purchase price- The Palisades definitely functions as a micro market. On one hand you have a house in the Marquez Knolls dropping below its 2004 price point but this house in the alphabet street is still holding its value about its late 2004 purchase price. This 4 bed/3 bath home on a 5,200 sq. ft. lot (sq. ft. of house not reported) was on the market for just 13 days and sold in late August for $2.120M above its $1.965M purchase in price in November of 2004.

SELLER AND BUYER BEWARE: buyer non-representation can lead to a myriad of issues.

After closely examining closed transactions on the Westside over the past few months the occurrence of the same sales agent(s) representing both sides of the deal stood out. This trend is a little alarming to some seasoned real estate agents and hope buyers and sellers understand the substantial risks involved with dual agency to try and save a few bucks.

The seller and buyer will argue they can potentially drop the commission amount and it can be beneficial for both sides of the transaction. Furthermore, the agent will state it is easier for them to manage the deal as it eliminates another agent and they can “control” things more easily. Everybody will save money and the agent will pocket more money meaning everyone is happy is right? Not so fast.

Oftentimes these deals can get quite messy for a myriad of reasons. First and foremost the agent has a fiduciary responsibility to both sides of the transaction and a duty to disclose all facts and be honest and deal in good faith with loyalty. How can an agent who was initially employed by the seller (and will be paid by the seller) fulfill its fiduciary responsibility to the buyer? How can they be loyal to both sides when they have conflicting interests?

When an agent representing both sides of a transaction discusses a purchase price with the buyer and what they are willing to pay, wouldn’t that provide the agent intimate knowledge of where they can get a deal with the seller even though the buyer/seller might be willing to pay more? How does an agent properly juggle that? Throw in the fact the agent will make at least 1% to 2% more by getting the deal done as opposed to having another agent involved or even worse not properly disclosing known facts.

Where does the agent’s priority lay? On a typical $1.5 million dollar purchase on the Westside the difference to the agent could be an extra $15-20k.

The agent will literally have to walk the line perfectly to pull this off and many of the agents who are partaking in this are not the types to do this and frankly most have a reputation for being greedy. Many will justify their actions and say they referred the buyer to a buyer’s agent in their office. In this case the agent is getting a major cut of the “buyer’s agent” commission which still leads you to wonder where the fiduciary responsibility lies.

The language of the Real Estate Agency Relationships Disclosure is somewhat fuzzy when it comes to this. After being in this business for over 8 years I find it fascinating that one sales agent can represent both sides. In legal cases does the same lawyer represent both sides? In the case of referring the buyer to a buyer’s agent it is the same thing. Would the other side of a case go to an associate working under the partner who has the other side?

In the end it is the agent that ends up with the best deal and the buyer and seller in a potential lawsuit as lawsuit occurrences where one agent is involved is much higher than in a normal transaction.

A good buyer’s agent will earn their commission and also give the seller piece of mind that they have been properly represented.

Anybody who is looking to list a home with a sales agent should always ask the sales agent how they feel about representing both sides and how frequent they do it. Be wary of agents who tout the ability to represent both sides. A few successful Westside agents have a reputation for not making properties readily available for other agents to show to clients and have also gone to the lengths of not even presenting offers to the seller that were made by other agents. This is especially prevalent with short sales and lender owned properties where the listing agent is dealing with a negotiator on the other end that is working on 100 other transactions.

As a seller you have to completely trust that your agent is presenting every offer and most importantly that other agents want to show your property since they might be prejudicial toward your agent due to the “shelving” of contracts in the past.

Unfortunately greed is king in real estate and as much as I hate to say it this industry is full of people who will stop at nothing to take advantage of a situation where they can control everything and make more money doing it without much concern for either side.

Many reputable agents do not represent both sides in a transaction unless explicitly told to do so by the seller. We applaud those agents who understand the fiduciary responsibility they have to their clients and do not let greed interfere.

**Please note this only pertains to sales agent’s and not brokerage houses. Many brokerage houses like Prudential employ thousands of agents as Independent Contractors so having a company like Prudential represent both sides is not the issue. The issue is having the same sales associate represent both sides.

Typical 30 year Mortgage back above 4%

Blink and you may have missed it -- the average rate on a 30-year fixed mortgage rate has crept higher since plunging to a record low of less than 4% late last week.

On Thursday Freddie Mac stated the 30-year loan was being offered at 4.01% on average for solid borrowers who paid 0.7% of the loan balance upfront in lender fees and points.

In the Western U.S., including California, the typical rate was lower at 3.95% early this week. Both figures are record lows.

*Source: LA Times

Sales volume increases in Manhattan Beach but median price down 6%

Sales volume is the highest it has been in Manhattan Beach since 2007 despite the tight inventory of appropriately priced listings. The rise in sales volume doesn’t mean prices have gone up as the median price was down 6% for the city compared to last year. Check out the sales volume graph below comparing the past four years:

Source: Manhattan Beach Confidential

Governator's old compound in Pacific Palisades back on the market

14209 West Evans Road-Pacific Palisades- The Pacific Palisades home once owned by Former Governor Arnold Schwarzenegger and soon to be ex-wife Maria Shriver is back on the market with another broker but interestingly at a much higher price. This 9 bed/9 bath 10k sq. ft. house on approximately 2.5 acres has been on a pricing roller coaster since it was listed in 2006 for $26 Million. For the past five years the house has traded brokers and zig zagged on price. The house dropped to a list price of $23M and then again to 21.9M in late 2007 to 18.9M in 2009 and then dropped to $15.9M later that year and then up to $23.5M early this year and now dropped once again to $19.5M…umm, if it didn’t sell at $15.9M doesn’t common sense say that listing it at this price is a waste of time??

A titanic drop in Malibu

31634 Sea Level Dr- Malibu- This ocean front Architectural modern on a gated street off Broad Beach is a 4 bed/4 bath home built in 2008. Designed by David Grey this home originally appeared on the market at the crazy high price of $15M in early 2009 when the Malibu Beach market was absolutely dead. Over the next year and a half the list price was reduced all the way down to $6.495M before going into foreclosure and falling into the banks hands. The property was listed by the bank in May for $5.750M and finally sold in late August for $5.350M.

Dropping almost 300% from its original list price this is a prime example of the greed and non-rational thinking that touched every segment of the real estate market.

Important real estate articles you should be aware of

Conforming Loan Limit Officially Drops to $625,500 October 1st: The loan limit officially drops October 1st.

Troubled Homeowners, Beware of “Mass Joinder” Lawsuit Invitations: All trouble homeowners should read.

Federal Agencies 20% down plan faces political hurdles: Legislation requiring all purchases to have 20% down will face a ton of opposition.

Friday, August 5, 2011

In-Depth Look at Single Family Home Sales Data for July

The summer keeps humming along on the Westside and in Manhattan Beach. Sales were down slightly compared to last month but thanks to record low interest rates and tight inventory, multiple offers are still the buzz. The overall average difference between original list price and selling price was -8.33%, which is lower than last months’ -10.07%.

Both of those numbers are inflated by sales on the ultra high end that were way overpriced. For instance, you will notice that in Bel-Air the % difference between the original list price to the selling price is an alarming -39%. This is due to one sale that occurred @ 594 S. Mapleton Drive between heiress Petra Eccelstone and Caro Spelling. This huge 14 bedroom, 27 bath, 56,500 sq ft. house was listed on 9/1/10 for $150M and sold on 7/14/11 for $85M. If you dismiss some of these larger sales that should have never been listed at the current list price, the difference between original list price and sale price shrinks to around -6.5% which is close to the -5% in a healthy market.

Sales dropped slightly from the previous month, however, most areas stayed consistent with last months’ numbers with the following exceptions:

Santa Monica had a great month with 21 more sales then last month. Half of the homes sold within 60 days of the list price, and the average% difference between the original list price and the selling price was only 6%. Almost all the homes in Santa Monica that sold for more than $2.5M sold within two weeks of coming on the market.

Culver City sales were also up from last month with the average% difference between the original list price and the selling price only 5%.

On the other side of the spectrum, Pacific Palisades sales were lower than last month with the majority of properties selling within 90 days of the listing date. Brentwood sales were considerably lower as well and the average % difference between the original list price and the selling price was much higher at 11% with properties on the market for a longer period of time.

Though Manhattan Beach and Mar Vista dipped against last month’s numbers they are still holding strong in terms of volume. In fact this is the second straight month that Manhattan Beach outpaced sales for the month compared to 2007 and 2005.

Condo/Townhouse Sales Data for July

Mortgage Rates Down in the Basement Again

The typical rate on a 30-year fixed mortgage fell this week to 4.39%, the lowest level since November, according to home finance giant Freddie Mac, while other popular loans were at all-time lows in Freddie's weekly survey of lenders.

That trend drove the yield on the 10-year Treasury note to 2.58% Thursday morning -- it had been above 3.7% in February -- and home lending rates followed suit.

The record lows were for 15-year fixed mortgages, a popular option for people refinancing their homes, and for loans with a fixed rate for five years that then become variable. The previous records for these mortgages also were set in November.

Lenders were offering the 15-year loan at an average of 3.54%, down from last week's 3.66% and eclipsing the previous low of 3.57% in the Freddie Mac survey.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.18% this week, down from 3.25% a week earlier, which had tied the previous low.

The average offering rate for 30-year fixed-rate mortgages had briefly dropped below 4.2% in the survey last fall. The 4.39% rate that Freddie reported Thursday was sharply below last week's 4.55%.

Borrowers would have paid less than 1% of the loan amount in upfront lender fees to obtain the rates, Freddie Mac said. Solid borrowers often can find slightly better rates by shopping around, and it's also possible to lower mortgage rates by paying more upfront.

The Freddie Mac survey asks lenders what terms they are offering to borrowers with good credit ratings who have 20% down payments or 20% equity in their homes.

Source: USA Today

Articles You Should Read

More home buyers are walking away from signed contracts - According to the National Assn. of Realtors, 1 in 6 realty agents polled in June reported having signed contracts canceled before closing, up from just 1 in 25 the month before. The surging numbers of pending short sales clogging local markets are another cause of contract cancellations…

Debunking popular real estate myths - Read about popular misconceptions and myths

Home prices rise again, but experts are unimpressed - The Standard & Poor's/Case-Shiller index of home prices in 20 metropolitan areas rose 1% from April to May. Some economists dismiss the uptick as seasonal.

Homeowners who want to trade up are stuck waiting - Before the bust, rising prices fueled the housing market, enabling buyers to start small and climb the ladder. Now that promise of upward mobility is on shaky ground and many potential sellers are underwater and can’t afford to sell

Homeowners are Optimistic Amid Mixed Signals

A recent survey conducted by the Home Buying Institute showed that homebuyers expected marked improvements in home prices over the next few years. Activity on the Westside is certainly showing optimism with open houses buzzing with people and multiple offers being the buzz phrase throughout the summer. At our first open house two weeks ago in Westwood on Fairburn Ave., we had over 60 parties attend and we were in escrow with multiple offers within a week of hitting the market.

The summer survey by HBI asked 25,000 consumers how they felt about the value of their homes, and an overwhelming 69 percent stated that they expected their home price to rise in the next 24 months. Some of this optimism could be due to a brighter Standard & Poor's Case/Shiller Home Price Index, according to HBI.

The most current S&P Home Index stated that home prices had risen for the second consecutive month in several cities.

"This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities," explained Index Committee chairman David Blitzer.

However, an abundance of foreclosure and shadow properties could curb rising home values. The vast number of bank-owned properties may continue to drag home prices down, as demand lags behind inventory in many regions.

Unsteady unemployment rates and increased difficulty qualifying for mortgages may also work against these positive housing market indicators, the source reports.

Source: Home Buying Institute

Buyers Should be Aware of Mortgage Fees

Record low interest rates are helping to spur a little bit of a housing comeback. Who knows whether the comeback will last but one this is for sure: record low interest rates are helping create a ton of buzz in the residential market. However, consumers must be aware that what you see advertised may not necessarily be the case and buyers should be aware of mortgage fees that could bump up their monthly payments.

Those that provide homebuyer education stress that fees can make a considerable difference in the cost of a home loan, and that buyers should be educated on how they impact a sale. Savvy individuals should look not just at the interest rate, but also at the APR, or annual percentage rate.

Consumers should also be aware that many of these fees are negotiable. While closing procedures differ in every region, some fees can be paid by or split with the sellers, according to The Federal Reserve Board.

If you have any further questions about this topic, please feel free to call our office at 310-255-3447.

Friday, July 22, 2011

1910 Fairburn Avenue, Los Angeles 90025


Open Sunday, July 24th 2-5

Phenomenal opportunity to own a charming 3 bed/2 bath home located on one of Westwood’s most desirable streets. Character and warmth fills this traditional style home with beautiful dark hardwood floors throughout.

Spacious living room with fireplace and built-in shelves, formal dining room w/ French doors leading to back patio and private landscaped back-yard. Large master suite with French doors to back-yard and front bedroom with bay window. Laundry inside off kitchen. Updated plumbing. Easy walk to Century City shopping center, dining, houses of worship and much more. Located in the Westwood Charter school district!

Visit Virtual Tour:

Thursday, July 14, 2011

In-Depth Look at Single Family Sales in June –Manhattan Beach Leads the Way

Total Single Family Residence “SFR” sales on the Westside and Manhattan Beach were higher than May (258 vs. 225) but still trail last year’s June output (286). Though sales have slowed down we must remember that last summer buyer’s were incentivized with tax credits that are no longer in play. The average % difference between original list price “OLP” and sale price is still shrinking. In some areas such as Bel-Air and Malibu Beach where the difference was over 25%, quite a few homes that were on the market for over 9 months finally sold and were originally priced way too high. If you take those numbers out, the average difference ends up being around 6%.

Home sales under a million dollars are on fire right now and garnering a lot of attention. Buyers are taking advantage of record low interest rates and want to get into the market before the conforming loan limit of $729,000 is pushed back to $625,000 on October 1st. 2039 Linnington Ave. in Westwood came on the market late last week for $985,000 and reportedly had over 200 people at the Open House. An appropriately priced home that does not require a lot of work does not have much competition in the current marketplace and should sell quickly with favorable terms to the seller.

A quick glance at the numbers shows that Manhattan Beach had a phenomenal month in terms of sales volume and blew away all the other areas we cover with 45 sales! This is a higher number than the sales volume during the peak bubble year of 2005. 11 of the homes sold at asking or higher than the OLP. 19 sold for 1-7% below OLP and 14 sold 8%-16% above OLP.

Pacific Palisades had a very solid month selling 9 more homes than it did last month and the sales numbers were roughly the same as the peak bubble years. Six of the sales were above the OLP and 17 sold within 4% of the OLP.

Santa Monica is still dragging along in terms of sales volume with ½ as many sales as in 2010, 2007 and 2005. However, the average sales price is staying consistent and if you eliminate two homes that sold way below OLP, the difference between OLP and sales price is only 5%.

A look at a few individual sales:

1021 Wellesley and 1025 Wellesley- Brentwood- These two 10,130 sq. ft. lots were purchased together creating a once in a blue moon opportunity to have almost a ½ acre of flat land north of Wilshire. The properties were listed for $2.050M and sold for $2.510M, 23% above the list price. Over time this will be an incredible buy as flat lots like this are extremely rare. 10 to 15 years from now this buyer will look like a genius.

2317 Ocean Ave- Venice- A great case study in comparison to 2007 prices. This 2+2, 1,280 sq. ft. home on a 2,700 sq. ft. lot was built in 2007. It is situated just south of Venice is in a bit of a hectic location but the amenities of the beach and Abbot Kinney are a small walk away. This house sold for $1.033M after being on the market for 79 days. It was originally listed for $1.195M. In 2007 it was bought for $1.235M. Since 2007 the value for this home has dropped 19.5%.

3665 May Street- Mar Vista- Another good case study. This classic New England farmhouse is a 4+3, 2,467 sq. ft. home on a 5,850 sq. ft. lot just north of Venice Blvd. The house is in great condition and sold for the list price of $1.580M in just 9 days. The house was sold in 2006 for $1.512M showing that prices seem to be holding around 2007 prices for this type of home in Mar Vista.

32052 PCH & 20962 PCH- Malibu Beach- Oops! These two houses had seller’s and possibly agent’s who were out of touch with reality when originally listing these homes, especially 20962 PCH. This 2+1 is a tear-down located on Las Flores beach on a 7,928 lot. It took over 3 years to sell and was originally listed at $9.950M before finally selling on June 6th for $2.950M! 32052 PCH a 4+4 on a 18,300 sq. ft. beach situated on a private street above El Matador beach in very good condition was originally listed in 2009 for $4.0M and finally sold after 562 days for $2.1M!

Condo/Townhouse Sales Data for June

23 more units were sold compared to last month with Mar Vista, Westchester and Westwood showing the most improvement over the previous month. The average loss from OLP for all areas combined was only 5.92%. This is further evidence the market is an even playing field as the difference between OLP and sales price was around 10% this time last year. Though sales were up over last month they are still off by 65% in comparison to 2005. For some perspective, Westwood had the most sales with 32 this month…in June 2007, Westwood had 95 sales!

Market Falling into Consistent Pattern

According to Altos’ market action index we have multiple areas that show stability several years in a row. The # 30 is a representation of a baseline for equal supply and demand, based on the absorption rate of inventory. For purposes of this post we are using Pacific Palisades as an example. Most of the areas we cover on this blog are trending in the same manner.

Although this graph shows there is quite a bit more inventory than there are buyers, it also clearly shows (look at the darker line for the 90 day rolling average) that we have had very consistent activity for over 3 years! On the graph you will see where the MAI was in January, 2008. Take a line and draw it straight across to today’s MAI. The inventory has been stable for about three years. It may appear be a buyer’s market, but the inventory that is there, is steadily and consistently absorbed.

As of July 1st: California Law Requires Carbon Monoxide Detector

California residents must have carbon monoxide detectors in their homes as of July 1, 2011. This timeline applies only to single-family homes that have appliances that burn fossil fuels or homes that have attached garages or fireplaces. For all other types of housing, such as apartments and hotels, detectors should be in place as of January 1, 2013. Types of fossil fuels include wood, gas and oil.

According to the senate bill, the detector must sound an audible warning once carbon monoxide is detected. It also must be powered by a battery, or if it is plugged in, have a battery for a backup. The detector also must be certified by national testing labs, such as the Underwriters Laboratories. The packaging on the carbon monoxide detector will state this. If the CO detector is also a smoke detector, it must still meet the above standards and must sound an alarm that is different than the smoke alarm. Carbon monoxide detectors typically can be purchased for about $20 and up.
Although the law targets units that are occupied by humans, the law exempts state and local government property, as well as property owned by the University of California Regents. The law requires local jurisdictions to comply; however, they may amend their current ordinances to fall more in line with the law.
California law states that anyone who does not comply with the law may face a $200 fine. However, residents will receive a notice of 30 days to correct any violations before they will be fined.

Links to Articles You Should Read

  1. Sales of $20-million-plus L.A. homes are rising
    According to the LA Times a diamond-encrusted lining is emerging in Southern California's cloudy real estate market.

    At least a half-dozen Westside mega-estates have sold for more than $20 million so far this year — creating a deafening buzz in local realty circles. Only a few home sales in other Southland counties have surpassed the $20-million mark.

  2. Banks gearing up to fill looming gap in jumbo loans
    Fannie Mae, Freddie Mac and the FHA are facing an upcoming cutback in mortgage limits, but banks say they're planning to expand their jumbo loan business in high-cost housing markets, according to the LA Times.

  3. Pending Home Sales Turn Around in May
    Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of Realtors.

  4. Obama administration boosts aid for unemployed homeowners
    An interesting article from the LA Times on how unemployed homeowners with government-insured mortgages will be allowed to miss a year of payments while they try to find a job which is not only good for the economy but will help lower the number of foreclosures on the market.

Friday, June 24, 2011

A quick look at some recent Westside sales

310 Avondale Ave. a 3+3, 2,927 sq. ft. fixer in Brentwood Park with a lot size of 2,927 square feet, listed on 5/25 at $2.99M and sold quickly for $3.15M. $155K above asking price

Santa Monica – only 7 homes have sold as of 6/23 – of those, 4 went for over asking!

560 16th St. a 4+4, 3,128 sq. ft. remodeled 1930’s Spanish style home on a large 11,670 lot, went on the market 4/8/11 for $3.798 and sold in 2 months above asking for $3.940M

740 21st Place- A rare foreclosure/bank owned property North of Montana. This 4+4, 2,913 sq. ft. Spanish house on a 8,940 sq. ft. lot with a pool in solid condition sold right away and over asking. The bank was smart to price this property attractively. It was listed for $2.299M and sold on 6/10 for $2.325M. The property was bought in 2004 by the foreclosed owner for $2.180M.

Pacific Palisades - in comparison with Santa Monica, a much busier month thus far with 26 homes selling since 6/23. Most homes sold near or over asking price.

733 El Medio Ave. a 2+2.5, 1,495 sq. ft. house on a 6,920 sq. ft. lot was put on the market on 4/25/11 and sold on 6/1/11 for $1.1M which was 16% above the original list price of $950K. This house was a fixer/teardown and sold for lot value.

Culver City-
11343 Utopia- PHENOMENAL BUY: A 2+1, 905 sq. ft. house on a 8,088 sq. ft. lot was originally listed for $629K in November 2010 and finally sold as a short sale for $300K. It was bought in 2003 for $449K. A great Culver City market as a whole has not dropped nearly that far.

South Bay Sales Trends Since March-May 2009

Here is a chart that appeared in last week’s Daily Breeze comparing sales data in the South Bay between March 1st and May 31st over the past three years.

Looking only at the 3-month period, Manhattan Beach had a median price down 1% from 2009 while the whole of the Beach Cities region was down 5% from '09.
(*Source: Manhattan Beach Confidential, chart - Daily Breeze)

Mortgage Rates Hold Steady at 4.5%

Mortgage rates changed little in the past week, snapping a streak of weekly declines that had taken fixed rates to the lowest points of 2011.

While the 30-year fixed-rate mortgage rate ticked up to 4.50% from 4.49% last week, still well below last year's 4.75% average. Rates on 15-year fixed-rate mortgages ticked down to 3.67% from 3.68% the previous week and 4.20% a year earlier. .

Meantime, the Mortgage Bankers Association on Wednesday said the volume of mortgage applications jumped a seasonally adjusted 13% last week from the previous week. Refinancing activity jumped nearly 17%, according to the weekly survey.

In the latest week, five-year Treasury-indexed hybrid adjustable-rate mortgages fell to 3.27% from 3.28% last week and 3.89% rate a year earlier.

To obtain the rates, fixed-rate borrowers required an average payment of 0.7 point. The five-year hybrid adjustable rate mortgages required a 0.6-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

Beware Loan-Modification, Foreclosure Scams

One in nine homeowners nationwide are more than 90 days behind on their mortgage payments and fear of foreclosure has desperate homeowners turning to loan modifications or foreclosure rescue companies for help. But that may be a recipe to falling prey to a foreclosure scam.

Foreclosure scammers will promise you everything while using a wide variety of tactics and targets like asking for an upfront fee and then disappearing with your money. Since foreclosure laws can be complex and confusing, almost anyone can become a victim.

Here are some red flags to help you spot a scam:

  • They ask for an upfront fee to start work, which is illegal in California.

  • They'll promise, even guarantee, to secure a loan modification even before learning about the homeowner's financial limitations.

  • They'll tell you to stop making your mortgage payments, going as far as encouraging you to provide fraudulent information to your lender.

    1. Articles you should Read

      How to Tell if Your House Market Has Hit Bottom: A good article by David Crook of the Wall Street Journal. The fundamentals of the Westside/South Bay markets are different than the examples they use but still a good educational piece.

      California home sales extend their slide in May: An LA Times article about the overall California market and the struggles it continues to face amongst financial chaos.

      Friday, June 10, 2011

      In-Depth Look at May Single Family May Sales Data Westside/Manhattan Beach

      Though on a national level inventory is at an all-time high, the Westside has clearly bucked that trend. Inventory continues to decrease and homes that are priced appropriately are attracting a frenzy of buyers and leading to price stabilization. Due to the lack of inventory, sales volume has decreased month over month for the third straight month in the areas we track. Bel-Air, Pacific Palisades and Malibu Beach were the only areas to truly buck the trend of declining sales volume. Santa Monica (down almost 50%), Westchester and Brentwood fell off in sales volume significantly compared to last month.

      Overall, sale volume is slightly off last year’s number’s (225 vs. 242) and 47% off the hey-day of 2005 and 2007.

      The average difference between original list price and sale price continues to shrink back to normal levels (4-6%) in most areas. The pricey locales of Bel-Air and Malibu Beach had a large discrepancy but those can be attributed to a few high priced listings that were severely overpriced and finally sold for market value. If you take those out of the equation the average would drop in the 7-9% range.

      A quick look at a few individual sales:

      627 Grand View (Mar Vista)- This 6+6, 3,792 sq. ft. 3-story recently updated craftsman home on a 11,786 sq. ft. lot sold for $1.685M. At first glance one would think it sold for well over the asking price of $1.495M. However, it was originally listed under a different agent for $1.8M late last year and they did not find a buyer. The new list price created a buzz and helped the seller get market price with strong terms.

      1105 Centinela Ave. (Santa Monica)- This 4+ 2, 2,111 sq. ft. house on a 9K sq. ft. lot sold for 8% higher than its list price at $1.623M. This ranch style home is a fixer and was priced around land value.

      11434 Ayrshire Road (Brentwood)- This 4+4.5, 4,258 sq. ft. house on a sizable lot of 18,817 sq. ft. sold for $2.225M. The home is in need of cosmetic remodeling but does boast very good bones with sizable living areas and bedrooms. It was originally listed in September of last year for $3.195M which denotes a 30% loss in an 8 month period.

      1056 Iliff Street (Pacific Palisades)- This 2+2, 1,641 sq. ft. house was a short sale that was listed at $1.2M in January, increased to $1.3928M in February and sold in probate court for $1.326M. This is a classic case of what can happen in probate and short sale situation. The listing agent prices the house below market value and gets an accepted offer. Since the offer has to be fully approved by the court or bank, it is still listed as active in the MLS but at the price of the accepted offer. 60% of the time the original offer falls out as was the case in this instance.
      *Source: MLS

      In-Depth look at May Condo sales data for Westside/Manhattan Beach

      Sales volume matched last month’s at 155. Compared to last year, sales volume is down 35% and good inventory is hard to find with many willing seller’s unable sell their place since they would be short to the bank.

      To give you some perspective, sales volume for May is off 85% since 2007 when we saw record volume. With the market declining at least 20% since then and many people refinancing many people can’t afford to sell. The good news is a seller that is priced appropriately will attract a lot of attention and command a strong buyer.

      Since inventory is declining, so is the gap between list price and sale price. The average difference is around 6% when you take into account areas with more than ten sales. This difference was over 12% a year ago.

      Mortgage Rates Slide for a 7th Straight Week

      Home loan rates continue to fall as does mortgage demand

      Responding to sluggish economic and housing data, mortgage rates have fallen for the seventh straight week, following the yield on Treasury bonds to new lows for the year.

      But many people remain on the sidelines of the housing market, expecting further price declines or unable to refinance their existing home because they have little or no remaining home equity.

      The yield on the 10-year Treasury note, a benchmark for home lending rates, dropped below 3% on Wednesday for the first time since early December and mortgage rates also fell to levels not seen since then, according to the widely watched Freddie Mac Survey of lender offering rates.

      Freddie Mac said Thursday that the typical rate for a 30-year fixed-rate home loan declined to 4.55% this week from 4.60% a week earlier. Not since the week of Dec. 2, when the survey showed the 30-year mortgage at 4.46%, have rates in the survey been lower.

      The 15-year fixed loan averaged 3.74% in the latest survey, down from 3.78% a week ago and the lowest since Nov. 11, when it was at 3.57%.

      Borrowers in the survey would have needed good credit and 20% down payments or 20% home equity in the case of refinancing to obtain the rates. They would have paid 0.6% of the loan amount on average in upfront lender fees to obtain the 30-year loan and 0.7% for the 15-year loan, Freddie Mac said.

      A weekly survey by the Mortgage Bankers Assn., released Wednesday, found that applications for new mortgages decreased by 4% during the week that ended May 27, compared with the previous week. Refinance applications were down by 5.7%.

      "The last time mortgage rates were this low, refinance volume was more than 20% higher," said Mike Fratantoni, the mortgage trade group's vice president of research and economics. "It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes."
      Source: LA TIMES, CNN

      Wall Street Journal: Why It’s Time to Buy?

      A great article appeared in the Wall Street Journal this past Saturday that everyone with any interest in purchasing or selling real estate should read. It provides a balanced look and some great tips on how market dynamics lead to a great time to buy.

      Here is a quick intro and the link is at the bottom: There are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average.

      A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.

      Article: Why It’s time To Buy

      Why Buyer’s Need Reputable Representation

      It seems like it would be a simple thing to do – look at a house on the internet, go and see it and enlist that agent to make a deal and represent both sides. Let’s look at this more closely.

      In an analysis of homes that were bought between 2003 and 2006 in Manhattan Beach and then sold again in the past year, we generally see that prices are back to 2004 levels or are very close to those numbers. The good news for seller’s is the market has firmed up quite a bit around mid to late 2004 prices after trending toward 2003 numbers. Now, you will always have exceptions to the rule in either direction but one particular sale caught the attention of the Manhattan Beach Confidential blog.

      Look at 319 S. Poinsettia in the Hill Section, a big (6br/6ba, 4825 sq. ft.) Craftsman that is positioned as far south as you can get – it borders Boundary Place, the alley/street that divides Manhattan Beach from Hermosa. The home has no views, is positioned on an odd slanted lot and hasn’t been improved from its 2004 condition.

      In 0ctober 2004 it sold for $2.137M and in the past week it sold for $2.495M, a 17% mark-up from late 2004 levels. This mark-up is a bit alarming and one thing that can be noted right away is the buyer used the listing agent on the deal. Some buyers will go through a listing agent to try and make sure they get the deal and possibly save a little money.

      ***However, buyers that go through the listing agent need to clearly understand the listing agent’s fiduciary responsibility is to the seller! Had the buyers on this particular property used a reputable local agent, they possibly could have saved themselves $130-200K on this transaction. Plus, a buyer’s agent acting in the best interest of their client is invaluable when it comes to the request for repairs process and having a strong pulse on the trend of that particular market. Local areas such as Manhattan Beach and Santa Monica operate on a micro level and could be trending far differently than what people read about nationally or regionally in the newspaper.

      Another area where it is important to work with a reputable agent is internet errors and wading through the misinformation that can be found online regarding comparable properties. Around 21% of the data realtors individually submit for posting on real estate web sites is not updated or erroneous when changes are made to the price or when the property is sold, according to a report released last month by Trulia. Though the data available online is undoubtedly helpful, misinformation and properties that are listed on the web but aren't actually for sale can add up to a handicap for buyers. "You're probably going to get exposed to inaccurate information," says H. Pike Oliver, executive director for industry outreach at Cornell University's Program in Real Estate. "There's no real assurance."

      Always make sure you consult with a reputable agent before making any major decisions.
      Source: Manhattan Beach Confidential, Smart Money

      Friday, May 20, 2011

      Hillside Ordinance Will Have Major Impact on Hillside Areas of the Westside

      The landmark Baseline Hillside Ordinance, approved by the City Council, was signed by Mayor Villaraigosa on March 25 and went into effect May 9. This ordinance will have a major impact on future single family building projects in hillside locations much like the approval of the Baseline Mansionization Ordinance that was past a few years ago limiting the size of a home that can be built based on a calculation involving the size and width of the lot. Hillside properties were previously exempt from the Baseline Mansionization Ordinance.

      This is the third step in the City's attempt to prevent out-of-scale single-family development in the city of Los Angeles. The ordinance will apply to approximately 133,000 lots.

      The Baseline Hillside Ordinance will reduce the allowable area for a site, change the way in which area is calculated, change the height limits and how they are calculated, and create limits on the amount of grading that can be done to a site. Like the Baseline Mansionization Ordinance, this ordinance will allow individual neighborhoods to adjust the baseline limits to better fit their community's character and scale through an overlay option.

      The ordinance's proposed FAR (building size to lot size ratio) is based on lot size, zone, and steepness of slopes on the property.

      A survey is currently required for a hillside lot. The new ordinance  requires that the surveyor prepare a Slope Analysis Map that delineates the portions of the property which fall under each Slope Band (interval) and include a tabulation of the total area of the lot (in square feet) within each interval.

      To determine the Maximum Residential Floor Area, one must multiply the area of each Slope Band times the percentage allowed for that slope. Then, add up all the amounts to get the total area allowed for the site. Residential Floor Area bonuses are also provided for (as in the Baseline Mansionization Ordinance), with additional options related to hillside massing and grading.
      Important exemptions and criteria have been established but they are difficult to explain. You are strongly encouraged to an architect who specializes in the Los Angeles area and you can also visit the City of Los Angles City Planning Web-site.

      (Source: Palisades Post, LA Times)

      Friendly Reminder: Get your Air Conditioner Maintenance and Sewer Line Snaked and while you are at it…

      While June gloom hangs around LA, it is a great time to get maintenance done on some key systems in your house.

    2. Air Conditioner- Prepare early for summer heat waves and call your local licensed Air Conditioning professional to make sure your system is operating properly. Yearly maintenance cuts down on future expensive repairs and also helps you avoid the untimely breakdown during a heat wave. While they are out checking the Air Conditioner, kill two birds with one stone and have them check the heater as well if you don’t have a combo unit.

    3. Clean out the Sewer Line- An item that is often forgotten about after purchasing a property is the sewer line which can become a very costly problem if a blockage pops up and a section needs to be replaced. Having the sewer line snaked every 1 to 2 years at a fairly negligible cost ($100-$200) will help you avoid a $3k-7k problem.

    4. Check Fire Extinguishers- Every house should have a fire extinguisher, especially in the kitchen area. Check the date and make sure it is not time to get a new one.

    5. Test the Smoke Alarms in your house to make sure they are operating properly.

    6. Clean out Gutters- Make sure your gutters are free of any major build-up of leaves and dirt that would lead to a blockage during a rain storm.

    7. Protect your house from unwanted moisture- Check to make sure sprinklers aren’t spraying up against the house, especially those with wood siding as this leads to dry rot and potential moisture intrusion into the foundation.

    8. Clean your Refrigerator Coils- Dirty coils (usually on the back of a refrig), which easily attract dust, hair, etc. is the #1 cause of refrigerator malfunctions. This only takes a few minutes with a handheld vacuum and will extend the life of the unit.

    9. If you have any questions or need a referral for any work that needs to be done around the house, please feel free to contact us and will be happy to line you up with someone who has been highly recommended.

      Mortgage Rates Fall to Lowest Level of 2011

      Fixed-rate mortgages are at their lowest point of the year, declining for the fifth consecutive week amid mixed economic and housing data.

      The 30-year fixed-rate loans averaged 4.61% and the 15-year, 3.80%. Borrowers would have paid 0.7% of the loan amount in upfront lender fees to obtain the rate, Freddie Mac said.

      Last year at this time, the 30-year fixed-rate mortgage averaged 4.84%, according to Freddie Mac, which surveys rates lenders are offering to well-qualified borrowers who make down payments of at least 20% or have that much equity in their homes if they are refinancing.

      As rates fall, applications for home loans have risen. The Mortgage Bankers Assn. said Wednesday that applications for new loans last week were 7.8% higher than in the previous week.
      Source: LA Times

      PLAN AHEAD: 405 Closed July 16th thru early morning of the 18th!!

      Starting just after midnight July 15, the San Diego (405) Freeway will be shut down in both directions from Getty Center Drive to the 101 Freeway for 53 hours, so that the south side of the Mulholland Bridge can be demolished.

      The freeway section is expected to reopen at 5 a.m. July 18, according to Metro officials.

      An estimated half-million cars, trucks and buses use this freeway on a typical summer weekend. The closure is part of the ongoing freeway-widening project, which will create a 10-mile northbound carpool lane on the 405 between the Westside and the San Fernando Valley.

      Supervisor Zev Yaroslavsky's refers to this planned shutdown as a "midsummer night's nightmare for motorists heading to LAX, the beach, or other destinations."

      Two Articles Worth Checking Out

      Here are two articles that we felt were particularly good reads from the LA Times:

      April home sales prove lackluster in Southern California: This article discusses the current “macro” market situation as increasingly dire with sales falling 5.5% from March to April. This is obviously not the case in higher end areas where activity has picked up.

      Foreclosure rate slows as repossession timeline lengthens: This article discusses the length of time it is taking for borrowers to be pushed into foreclosures, resulting in fewer bank-owned properties being released into the market

      Friday, May 6, 2011

      Pacific Palisades Full of Multiple Offer Activity

      This past week has felt like a trip back to 2004-2007 for many realtors that work the Pacific Palisades market. Four homes hit the market and all have multiple offers with rumors having at least three of the four going for over asking. Here is a look.

      555 Muskingum- Major Fixer/Tear Down on a 8,799 sq. ft. lot hit the market for $1.295M and immediately received multiple offers and is currently in escrow at over asking.

      527 Muskingum- 3+2, approx. 2K sq. ft. on a 7,870 sq. ft. lot with ocean views. $1.849M list price. Cute beach cottage home in very good condition with strong emotional appeal. Word on the street is this property received four offers and they accepted an offer yesterday. We do not know the price range.

      737 Almar- 4+4, 2,954 sq. ft. on a 5,837 sq. ft. lot located in the El Medio bluffs. $1.949M list price. Cute Mediterranean style home that has a nice lay-out and needs a little bit of updating but something someone can easily move into. Limited yard space but good appeal. They received two offers right after the broker caravan on Tuesday and are rumored to be in escrow at asking or above.

      878 Galloway- 4+3.5, 2,958 sq. ft. on a 5,867 sq. ft. lot located in the Alphabet streets in a prime walking location. Beautiful East Coast traditional with a ton of emotional appeal. It was bought in 2007 for $2.725 and was listed at $2.295M. Apparently they received 5 offers and are in counters above the asking price…

      SFR Sales Data for April

      *click graph to enlarge
      Unlike the Condo market, sales volume increased in April compared to last month and was stronger than April 2010 in the areas we track. With inventory decreasing and demand continuing to pick up, the market is definitely the hottest it has been in the last 4 years. Homes in good condition that are priced anywhere from 17-20% off the market heights of 2006-2007 are usually garnering multiple offers. The difference between original list price and sale price continues to decrease though Beverly Hills and Marina Del Rey increased in the discrepancy. Sales volume has increased % over April of last year while still % behind sales volume in 2007.

      In looking at the broad picture the graph presents, Pacific Palisades, Westchester and Venice doubled its sales volume compared to last April while Cuvler City, Marina Del Rey and Bel-Air doubled sales volume compared to last month.

      A quick look at a few individual sales:

      Brentwood-510 North Kenter, a 4+3, 2,150 sq. ft. house on a 20,298 size lot sold for $1.775M – 7% above the asking price and went out in multiple offers after being on the market in twelve days. This was a very stylish contemporary home with a pool and open kitchen.

      Pacific Palisades- 15976 Alcima Ave- 5 +3.5, 2,982 sq. ft. house on a 18,300 size lot. This was a tear down and sold for $1.90M, 21% below the original list price .

      Down the street, 15920 Alcima, a 4+4, 5,241 sq. ft. house on a 20,470 lot sold for $3.185M, just below the $3.195 M list price and was only on the market for 5 days. This was a well-maintained home with great ocean views and only needed a little cosmetic work.

      The bottom line is that people are paying a premium to move into homes that don’t require much work while the better deals are falling into the hands of those willing to remodel.

      Condo Sales Data for April

      *click graph to enlarge
      According to the MLS, overall sales volume for condos in the areas we cover decreased in April and was lower than sales in April of last year by 5.5%. However, this is not surprising since we have been writing about decreasing inventory. In fact, the market has heated up with the spring and summer selling season and that is evident with the average days on market and % difference between original list price “OLP” and sales price is decreasing significantly. For example, the % difference between OLP and sales price in March had 3 areas in the double digit range and many hovering around 7-9%. April only had one area in double digit % (Westwood/Century City 11%) and most were around 4-6%. Earlier in the year, the majority of the areas we cover had a double digit discrepancy.

      As many of you know from reading this blog, the recent surge in buyer demand has been fueled by low interest rates, an influx of buyer’s from tech companies relocating office space to the Westside and a general feeling that the economy seems to be on solid ground. The frustrating thing for buyer’s is that inventory is artificially low because so many people have a loan that is higher than what the property is worth and the bank’s continue to unload properties at a snail’s pace.

      A quick look at the overall volume of sales shows that Beverly Hills and Mar Vista saw a drastic reduction in sales compared to last month and only Westwood and Brentwood showed an increase in sales volume over last month. In comparison to April 2007, sales are off 88%.

      Mortgage Rates Drift Lower

      Freddie Mac reported on Thursday the lenders it surveys were offering 30-year fixed-rate mortgages at an average rate of 4.71% early this week, compared with 4.78% the week before.
      Rates for 15-year fixed loans, a popular option for homeowners looking to refinance mortgages, averaged 3.89%, down from 3.97%.

      Buyers would have paid 0.7% of the loan amount upfront to the lenders to obtain the rates, according to Freddie Mac.

      The initial rates for floating-rate mortgages fell as well, Freddie Mac said.

      WSJ: Buyer’s Market? Stressed Sellers Say Not So Fast

      This article that appeared in Monday’s Wall Street Journal is in line with articles that we have been writing lately in regards to the difficulty buyer’s are currently having. Though this article paints a broader stroke and touches on some issues that are not impacting the Westside market, it is a good read - Article

      Friday, April 22, 2011

      Lack of Inventory Causing Headache for Buyers in Westside/South Bay Markets

      Usually when one picks up the LA Times and reads about a fledgling housing market or tunes to the business networks on TV and sees signs of national distress, they naturally believe a buyer in this market would have all of the leverage. Unfortunately for buyers searching for phenomenal deals on the Westside and Manhattan Beach deals are extremely hard to come by thanks to a severe lack of inventory.

      Westside prices which in our estimation are higher than they should in the grand scheme of things have stabilized and even gone up in some areas this year. Our recent Townhouse listing at 2922 Montana Ave. Unit B recently sold in three weeks for $1.1M, 70K higher than a similar unit in the building sold four months prior. Though we would love to take all of the credit for the uptick as the agent (will take some along with the stellar job of staging by our client), the reality is we were helped by the fact that we did not have much competition for a stylish unit in a great location.

      In the 90402 zip there are only 15 new listings since March 1st. Of those, 3 are already in escrow. Areas like Mar Vista have seen 30% of new listings sell within 20 days of coming on the market and we can give you individual examples of clients recently losing out in multiple offer situations to bids that appeared to be above market. Multiple offer situations have been feverishly popping up in all price ranges as long as the property is priced at market.

      This has been frustrating many buyers who have recently moved to the area or have been waiting for an opportunity to buy prime real estate. It doesn’t make logical sense in comparison to the economy as a whole and here are the reasons as to why this is happening.

      Massive amount of purchases during the bubble peak: Most high priced areas like the Westside and Manhattan Beach saw historical sales volume between 2004 and 2007, at or near the top of the peak. Many of these purchases were done with less than 20% down (many at 5-10% even in the jumbo markets) and buyers were turning around and refinancing if prices trended upward after they bought. These purchasers now owe quite a bit more than the home is worth and are simply not in position where they can afford to sell. They also refinanced at historically low rates and if they are in a similar position from a job standpoint they are simply stuck and “hanging on” until a significant jump in the market happens. Short sales and foreclosures are happening but only with people in dire financial straits and many on the Westside tend to have jobs or family money to help them. Speaking of foreclosures and short sales…

      Shadow inventory has not appeared: Bank owned homes and short sales have been slow to hit prominent markets like the Westside. Banks are incentivized to slowly release high priced assets. Until they lose a loan valued at $2.5M, the banks can report it as an asset at that value even though it may only be worth $1.8M. Once that asset sells for $1.8M, the bank not only loses a $2.5M asset but also reports a loss of $700K. Legislation slowing down foreclosures in California has also hurt this pipeline. I am currently working on one short sale where the seller has been in default for over 15 months and we have yet to reach an auction date. The short sale process has also contributed to this mess with some taking over a year to close from beginning to end. Expect the shadow inventory to continue to hit the market at a snail’s pace.

      Buyers are anxious: Due to the lack of opportunity for purchasers cited above the leverage they enjoyed in 2009 and the first part of 2010 is dissipating for now. Many purchasers have been waiting for the right opportunity to buy on the Westside and feel now is the time with interest rates at or near record lows with the looming threat of rates going higher as the economy seems to recover.

      When you couple this mentality with a strong pool of international buyers (most notably all cash buyers China and Europe taking advantage of the weak dollar) and tech companies like Google and Facebook strategically opening offices on the Westside, you end up with a strong pool of purchasers competing for a limited product causing quite a bit of frustration.

      Another factor pushing buyers valued in the $800K-$1M range is the conforming loan rate of $729,500 is expiring October 1st and being replaced by a rate limit of only $625,000. Loans above $625K will be a a higher rate and that $100K+ difference will definitely impact the market and what one can afford to buy.

      For now, purchasers have to understand what they are dealing with due to the circumstances above. The days of trying to “steal” a property have been suspended for the time being and replaced with patience and knowing they are not the only ones out there. It is a good time for a seller to list a home and get good terms from a buyer if they are willing to acknowledge about a 20% cut from bubble prices.

      1st Quarter Sales trends compare favorably to 2010 in Manhattan Beach

      *Note on graph: WoS only stands for West of Sepulveda

      There were more closed sales in the first quarter of 2011 than in any year since 2007,when the bubble was starting to super inflate and get ready to pop, which is extremely apparent when examining the above graphic.

      The boost in sales was +9 for Manhattan Beach as a whole and when you look at the micro market West of Sepulveda. Though sales increased, the median price of sales West of Sepulveda dropped 7% from $1.607M in the first quarter of last year to $1.50M this year.

      Overall, the whole city of Manhattan Beach saw an increase in sale price from $1.430M in the 1st quarter of 2010 to $1.5M this year. Though prices declined West of Sepulveda, the increase in overall price is directly related in the increase in sales in the higher priced area.

      Please note that tracking sales on a quarterly basis can skew the numbers especially when sales volume is relatively low. For example, the 4th quarter of 2010 median price was $1.362M west of Sepulveda, and $1.252M for all of MB. If you were to compare the most recent quarters to quarters, you would think Manhattan Beach prices went up 20% at the snap of a finger. Obviously that is not the case.

      Another interesting and important thing to look at is how the % of Single Family Residences selling above $1M has changed dramatically since 2008 when the bubble started to officially burst.

      In the first quarter of 2006, just 6% of all homes sold in Manhattan Beach sold for less than $1M. This year 27% of homes sold for less than $1M, statistically, that is a 450% increase in homes selling below $1M.

      In terms of sales above $2M, during the late-boom year of 2006, almost half the homes sold in Q1 went for $2M oe more (44%). The median price that quarter was $1,972,500.

      This year 83% of the homes sold in Manhattan Beach in Q1 sold for less than $2M.

      Manhattan Beach West of Sepulveda fared about the same over this 6-year period. Sales above $2M were 22% of the sales in the first part of 2011, down from 48% in 2006. Sales above $2M are at a six year low.

      (*Source: Manhattan Beach Confidential - article and graph)

      Articles You Should Read

      1- So Cal rents are likely to remain flat according to USC study: The steep declines in rent that were seen the past few years are beginning to ebb and places to rent on the Westside are becoming difficult to find. We believe renters on the Westside and in areas like Manhattan Beach should expect a 1-3% increase over the next 12 months. Here is an article about the broad So Cal rental market from the LA Times: Southern California rents are likely to remain flat, study says

      2- Changes in mortgage finance rules will hurt housing recovery: Some of the requirements that federal agencies and the Obama administration are proposing will prove troublesome for consumers as you would need to spend no more than 28% of your gross monthly income on housing-related expenses, and you couldn't have total monthly household debt that exceeds 36% of your income. There would be not flexibility beyond these ceilings. This is just one of the myriad of changes proposed that you can read about in this article from the LA Times.

      3- Experienced appraisers getting priced out by banks: Accurate appraisals are extremely important in the current market and can be deal breakers when inexperienced appraisers get assigned to areas they do not know how to valuate. Lenders are not paying experienced appraisers enough ($200-$250) to cover their overhead costs yet they are charging the consumer $450. Less-experienced appraisers who sometimes have to travel long distances from their home markets tend to be more willing to work for the lower amounts and can create nightmare scenarios for transactions on the Westside and Manhattan Beach where the sale price can change 150-300K one street over. LA Times article: Are you getting your money's worth with appraisal?

      New Legislation Would Make Short Sale Process Quicker

      Legislation proposed last week in the House of Representatives would make short sales faster.

      The bill, with bipartisan backing would require banks and mortgage servicers to respond to requests for a short sale within 45 days of the request. This would be great news as getting negotiators on short sales to call back in this time frame is a nightmare even with daily phone calls to them.

      A short sale is when a bank allows a borrower with negative equity to sell their home for less than is owed on the mortgage. The difference between the sale price and what is owed on the mortgage is usually then forgiven by the lender. They are most common in markets such as California where home prices have declined dramatically since the market peaked.

      The problem is that in the era of mortgage securitization, multiple parties (investors, servicers, insurers, etc.) need to acquiesce to a short sale in order to complete the deal.

      It can take an extremely long time for all involved parties to get back to the buyer and seller with an answer. It was recently found that in California, 4 out of 10 short sales that go under contract end up falling through. This is a direct result of the lengthy short sale process.

      Friday, April 8, 2011

      In-Depth Look at Single Family Sales in March for the Westside/Manhattan Beach

      Sales volume increased 57% in March compared to February but only increased 4.2% over last March and down 33% and 60% when compared with the Wild West days of 2007 and 2005.

      The difference between the average original list price and sales price also improved dramatically compared to February. With the exception of February, the recent trend shows Seller’s are being more realistic with their initial sales price and due to a lack of inventory we are seeing quite few multiple offer situations. Like the condo market, the buyer still has the leverage but it is not nearly as lopsided as previous years.

      Every area saw an increase in sales except Culver City and Bel-Air.

      Manhattan Beach increased in sales 4x’s with 34 in March compared to 11 in February. Most of these sales were on the lower end for Manhattan Beach. This past March was also 36% better than March 2010. They still fall short of the robust 50 sales in March of 2007 but definitely showing signs of life especially with first time homebuyers itching to enjoy that unparalleled Manhattan Beach lifestyle.

      Beverly Hills Post Office popped with 14 sales, almost doubling last month’s output and beating March 2010 by about 40%. Sales ranged from $500k to 7M.

      A look at a few individual sales that stood out:

      12218 Octagon St- Brentwood: This North of Sunset home in need of major remodeling sold 10% above the original list price at $1.302M. It sold in 7 days and is a 3+2, 1,688 sq. ft. on a 9,583 sq. ft. lot. The low list price created an auction like atmosphere with multiple all cash buyers vying for the property.

      11930 Currituck Dr- Brentwood: In between Montana and Sunset, this woodsy 2+1.75, 1,218 sq. ft. home on a 5,488 sq. ft. lot sold for $1.01M, 26% below its original list price! However, most would make you believe it sold for over asking with a last list price of $999K. This could may have been a short sale as it was bought in 2005 for $1,275,000.

      2425 Frey Ave- Venice: Bank owned sale ends up going for 31% below ($895K) the original list price of $1.3M. This contemporary and recently updated 3+2, 2,640 sq. ft. home ended up being a terrific buy.

      746 26th street- Santa Monica- This frantic auction brought out the builders looking for a deal. Despite being on a busy street, the 8,700 sq. ft. lot is coveted and the “auction” list price of $799K brought buyers in by the droves. It ended up selling for $1.1M, 38% above asking. . .

      616 25th Street- Santa Monica- Lot values North of Montana still trending lower. In our estimation, this tear down approximately sold for $1.684M even though they only reported a $1 sale price (shame on them). The most important info…8,700 sq. lot near Franklin Schol…

      7049 Birdview- Malibu- After being on the market for close to three years, 7049 Birdview finally sold for $9.045M, less than half its original asking price in 2008 of $19,950,000. How the mighty have fallen. This 6,397 sq. ft. home sits on an acre of land and boasts endless coastline and ocean views…

      In-Depth Look at Condo/Townhouse Sales in March for the Westside and Manhattan Beach

      Overall, we saw a solid increase in sales volume over February, which was expected. However, the increase in sales of 62% over last month was unexpected and the 12% growth in sales over March 2010 continues to show the market is growing steadily out of the Great Recession. Though the numbers look good, we are still off nearly 63% from sales volume 2007 and 73% from the Wild West days of 2005.

      In looking at particular areas, Santa Monica had a great month of sales with 38 compared to a dismal February of 17. Santa Monica is up 40% in sales volume compared to March 2010. Most of the seller’s did a good job of pricing the property with the difference in Original List Price to Sale Price at -7% and the difference in List Price to Sale price being around -5%.

      Marina Del Rey had a phenomenal month with increasing sales over February by 73% and having a better month than March 2007 which is very rare. Some of this can be attributed to quite a few short sales going through in some of the mid 2005 constructed towers that were flooded with liar loans.

      Both Santa Monica and Marina Del Rey are being aided by an influx of buyers thanks to the multitude of tech companies opening offices in the area. It is still considered a buyer’s market but the leverage buyer’s have enjoyed over the past few years is receding somewhat. The good news for sellers is that if they price the unit at or around market value they should be able to sell quickly with good terms.

      A look at a few individual sales in Santa Monica:

      914 14th Street #101- Built in 2008 along with 4 other units, this 2+2.5, 1,580 sq. ft. unit sold for above asking at $1.150M and was on the market for just 11 days. The asking price was $1.125M. This is the fourth unit to sell in the building with two others selling in 2010 for $687 and $677 per sq. ft. This was the front unit and it sold for $727.85 a square foot. This unit debut on the market for $1.299M in 2008 before being rented out.

      1033 Ocean Ave.#401- After being on the market for 304 days, this luxurious 2+2, 1,396 sq. ft. unit with amazing ocean views finally sold for $1.550M. It was originally listed at $1.850M and went for $1,110 per sq. ft.