Mar Vista and Santa Monica- A look inside the September numbers

Mar Vista: The hysteria of multiple offer madness is definitely dying down compared to last year. In 2013, Mar Vista had 25 sales for September with 19 of them over asking and the average sale going for 4% of the list price. The average days on market “DOM”, was 40. The median sale price was $945,000. This year, Mar Vista had 29 sales with only 11 over asking. Of those, 8 were at asking and only three were 5% over the asking price. The DOM increased to 51 as did the median sale price to $972,500. The average sale went for about 2% under the list price, a 6% difference compared to September 2013. Price have exploded so much in Mar Vista that a premium is already priced into the market and seller cannot expect the crazy multiples of last year unless they price it under market.

An example of an undervalued list price is 3031 Midvale, which was listed for $1.095M. The 3+2, 1700 sq. ft. (approximate) home on a 6,098 lot, is in escrow for around $1.2M which is around what I thought it would sell for when offering a price opinion. It was an all cash buyer and they received eight offers.



Santa Monica: Santa Monica saw a nice increase in sales compared to September 2013 with most of the sales in the southern part of the city.  Last September, Santa Monica had 18 sales with 6 over asking and a median sales price of $2.431M, a sign that most of the sales were in the more expensive northern part of the city. The DOM was 56. The average sale was 2% under the list price.

This year, Santa Monica had 27 sales, 11 over asking with 3 at least 5% over. DOM matched last year’s with 56 and the median sales price was $1.979M. The average sale was just under 1% of the list price.

The craziest sale of the month was 2223 Cloverfield. The authentic Spanish 3+3, 2,132 sq. ft home on a 6,263 sq. ft. lot received over 10 offers. The list price was $1.699M and sold for 2.001M, 300K over the list price, despite being fairly close to Pico Blvd. The house had a strong emotional pull combining old world Spain with today’s modern amenities.

The sale of 881 Berkeley to a developer for 225K over asking shows developers are not slowing down in acquiring properties. The 11K lot was in high demand as large lots with ocean views are hard to come by in Santa Monica. It was listed for 2.375M and sold for 2.6M.





 *Source- Multiple Listing Service- does not include any off-market activity

Westwood and Westchester both have a strong September compared to last year

Westwood: September was a strong month. The lack of inventory only led to 19 sales (11 over asking- 5 that were 5% over list), but that was five more than last year. The DOM of 44 days was less than the 54 of 2013 and homes sold for 2% over list price compared with .5% above list last year.

This is unique since Westwood had quite a few high-end home sales with a median sales price of $2.05M compared with last year’s $1.567M. Typically you see a little more of a premium paid when the median for the month is lower as more affordable properties were sold.

The most noteworthy sale was 10737 Le Conte, which sold for $500K over the asking price. The classic traditional 4+4, 3,469 sq. ft. home on a spacious 8,235 lot, received33 offers. It is in good shape but the kitchen and some bathrooms could use updating. The property was listed for $2.095M and sold for $2.615M. It is located in a premier Westwood location within walking distance to UCLA and the village.
  
Westchester: Viewed as an affordable alternative to the pricier neighboring communities of Mar Vista and El Segundo, Westchester is one of the most popular areas with buyers right now. Once people visit areas like Kentwood and Loyola village, they are hooked and ready to buy.

September only saw 29 sales compared to 32 in 2013, but average sale price was 1% over the asking price, increasing from .65% the year before. The median sale price was $880K with a DOM of 51. The median sale price in 2013 was $760K with a DOM of 48.

Two sales stood out this month. They both feature large lots and are very inviting to medium to large families. 6415 Riggs Place, which sits on a bluff overlooking the city, is a 3+3, 2,948 sq. ft. traditional on a 14,630 lot with a phenomenal back-yard. Riggs is one of the most desirable streets in Westchester. The house was listed in an auction type manner at $1.550M and perspective buyers were asked to submit best and final right away with no possibility for a counter. The winning buyer paid $200K over asking settling at $1.750M. The house was in solid shape but will most likely be remodeled and expanded. It was a steep price to pay but worth it when you can grab that combination of lot size and views.

634 West 78th street, a 3+2, 1,913 sq. ft. traditional on a 9,597 lot also has a great back-yard which caught the attention of multiple buyers. The home is in need of some cosmetic upgrades but in good enough shape to move into without any work. It was listed for $1.195M and sold for $1.235M.

*Source- Multiple Listing Service- does not include any off-market activity

Interest rates hit low for the year

Earlier this week lenders offered a 30-year fixed-rate loan at an average interest rate of 3.81%, down from 3.96% last week. This week’s average was the lowest since the week of June 20, 2013, when they were offered at 3.93%. Just a few weeks ago rates were going in the opposite direction and rising to around 4.23%. These rates are on loans up to $417,000.  Jumbo loan rates (above $417K) will be higher but in the same ball park.  

The average rate for a 15-year fixed loan was 3.18%, down from 3.3% last week. The 5/1 adjustable rate mortgages also feel from 2.83% to 2.7%.

Sources: LA Times, Zillow and Housing Wire

Santa Monica Ballot Measure H proposes to triple transfer tax in Santa Monica

The City of Santa Monica wants to triple the transfer tax on homes sold for over $1 million dollars beginning January 1, 2015. The current transfer tax in the city is $3.00 per $1,000. On the sale of a million dollar property, the transfer tax is $3,000. The new proposal wants to raise it to $9.00 per $1,000 making it $9,000 on the same million dollar property.

The city states they need the extra funds to further enhance the quality of life in the community of Santa Monica and help redevelopment efforts. In 2012 all city redevelopment agencies in California were dissolved due to budget cuts. Currently, Santa Monica has a lower transfer tax compared to Los Angeles ($4.50 per $1,000), but the new proposal would double that of Los Angeles.

With property values increasing over 40% in the Santa Monica over the past three years, the city is already seeing increased revenues from the transfer tax. The average median home sale in Santa Monica is approaching $1.3M and the large majority of residences in Santa Monica will be impacted by this increase.

Further, how fair is this to the people who bought at the height of the 2005 market. The market has recovered above those numbers but this unexpectedly cuts into a seller’s bottom line and ability to purchase an up-leg property. Sellers in Southern California are expected to pay the transfer tax (though it is negotiable) and this would increase the total closing costs for Santa Monica residents about .7%. The county of Los Angeles also receives $1.10 per $1,00.00 as well. Assuming a 5% brokerage fee and the numerous fees that go with selling a home, Santa Monica residents are looking at 9% in sale expenses.

If you are going to increase the transfer tax, why not make it less daunting, maybe $5.50 per $1,000.00? This seems like a dramatic jump for a city that already levies increased taxes on the purchase of a car and charges a 9.5% sales tax compared to LA’s 9.0%. A good chance exists this measure will pass with a majority of renters in Santa Monica and the powerful group Santa Monican’s for Renters Rights pushing to get this passed. Feel free to read more about Measure H.

The days of trying to hide the sale price of a home officially ends January 1st, 2015

Years ago it was a common practice for celebrities and developers to try and hide what they bought a property for. This was done by having the tax stamps put on the back of the deed instead of the front.

Lately, the Multiple Listing Service “MLS” and the county of Los Angeles have been combating this tactic and checking the back of the documents and able to produce the sale price within six months.

Effective January 1st, 2015 AB 1888 requires the amount of tax due and the location of the property to show on the face of the document on ALL properties. You can no longer close escrow and try and
withhold the sales price from the public. The MLS and various realtor groups have been campaigning for this as it makes the valuation of properties more accurate and puts everyone on a level playing field.

Articles you should read- So Cal rents to jump; Sales pick-up in September; Downtown LA drawing New York investors

Informative articles from the LA Times you should be aware of:

Southern California Rents to climb over the next two years- The average cost of rent over the next two years in Southern California is expected to climb 8% over the next two years. Economists predict vacancy rates to stay low with an improving economy. Wages are not increasing at this rate which could impact whether rates will increase to the predicted level.

Home Sales pick up pace in So Cal for September- It’s the latest sign of a housing market that’s reaching equilibrium after years of big swings. Real estate agents and other market watchers this summer have reported growing inventory, price cuts and a shift in the market toward regular buyers, instead of the flood of investors and cash-only purchasers.

Downtown LA real estate is drawing New York Investor’s interest- New York investors love the growth potential and recent progress in the multiple dynamics that Downtown LA is offering

 

Mortgage rates rise at fastest pace of the year

Mortgage rates rose this week at the fastest pace of the year, with lenders offering 30-year fixed-rate loans at an average of 4.23%, up from 4.12% last week. Translated into the terms borrowers actually receive, the increase would mean a loan at 4.25% interest per year instead of 4.125%.

The monthly payment on a 30-year, $350,000 fixed-rate loan would rise from $1,696 to $1,722. The average for a 15-year fixed-rate loan rose to 3.37% from 3.26%. The start rate for mortgages that become adjustable after five years at a fixed rate rose to 3.06% from 2.99%.

(Source: LA Times)

Quick Snapshot of the Westside market and what 2015 may have in store

Over the past week I have taken an informal poll of realtors from the Palisades to Westchester and the general sentiment is the market has definitely slowed down.  Listing agents have seen a pick-up in open house traffic in September over July and August, but offer activity has not increased much.

Offers are still being written but not in the aggressive manner we were seeing over the past 18 months in which buyers were willing to pay a strong premium to get a home.  With tight inventory, buyers are still writing offers but closer to the true value of the property.  The higher end ($3 million +) has slowed down the most with some unrealistic sellers and others who want to sell but are having a hard time finding an up-leg property.

We do have a few exceptions.   The price point around $1 million (areas like Westchester, parts of Play Del Rey, Culver City) is still fairly hot with multiple offer activity. However, unless a list price is under market, the offers are close to the true value of the property with a slight premium. 

 

Inventory should continue to pick up (we are still low compared to historical numbers) and with interest rates seeming on a steady climb, the feeling is that price appreciation will be relatively flat in 2015. 

Homeowners obviously want to see double digit gains every year. However, price appreciation slowing down and the market becoming balanced is healthy from a long-term perspective.  A 3-5% annual return on a leveraged investment with a tax write-off is still a wonderful thing.  Less volatility over the next seven to ten years is good when you consider homeownership is the largest investment most people make.  Avoiding another major downturn is critical to the overall economy. 

Two articles you should read- So Cal market downshift; Tough time for renters

As we have noted on this blog lately, the rapid pace of the market has slowed on the micro markets of the Westside. Last week, the LA Times published an article talking about the subject on broader Southern California terms. Home prices hit their highest level in nearly seven years this summer, but the gains are slowing down and here is an article outlining some of the reasons why.

Article: Southern California Market Downshifts in August 


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The sharp increase in home values over the past few years, without wages increasing is making the ability to afford a home in Los Angeles very difficult. Strong investor interest along with international money flooding into the market are a few of the other reasons why it is a struggle for first time homeowners. The frustration for renters is that rents continue to increase while owners are able to take advantage of low interest rates and tax write offs. Check out the informative article below.

Article: The divide between homeowners and renters is growing

Traffic nightmare to hit PCH- rebuilding of California Incline will begin early 2015

The repair and repaving project of the Moomat Ahiko bridge (connects Ocean Blvd. with PCH North near the Santa Monica pier) is underway as city official expect that it will serve as one of the primary detour routes during the construction of the California Incline Bridge project set to begin in early 2015. That’s right, the main artery providing north and southbound access to PCH from the heart of Santa Monica will be closed for 12-18 months while the incline is properly retrofitted.

The incline rests on unstable soil and a significant earthquake would likely decimate the incline. The project is expected to take 12-18 months. Construction hours will not be around the clock to maintain the sanity of those living on PCH and Ocean Avenue. However, the hours will be extended to 7AM thru 10PM Monday through Friday and 7AM to 9PM on Saturday.  The extended hours will lead to the project being completed 25% faster than under standard construction hours. A closure of one southbound lane on PCH will be needed during construction.

Between 7am and 10am- they will provide two northbound lanes and three southbound lanes and left turns to coastal properties will be prohibited.

Between 10am-4pm, two northbound and southbound lanes will be available and left turn access will be available.

Between 4pm-7pm, they will provide three northbound lanes, two southbound lanes and left turns will be prohibited.

Between 9pm-5am, two southbound lanes will be closed.

An average of 20,000 cars use the incline daily. To avoid the construction, people will be asked to use Chautauqua in Santa Monica Canyon, and Sunset Blvd. in the Palisades with Moomat Ahiko and Lincoln Blvd. for south Santa Monica.

I can’t imagine what beach traffic will be like next summer when people escape the heat from the mid-city and visit beaches near the Santa Monica and Venice piers. From a real estate perspective, this will not be welcome in Malibu and to a lesser extent the Palisades.

Expo Light Rail expansion into Santa Monica to be completed in late 2015

The Expo Light Rail Project, a 15-mile rail line connecting Downtown LA with Santa Monica is expected to be completed in late 2015. The line currently only connects Culver City with Downtown. The extension into Santa Monica will have 7 new stations and it will take 45 minutes to get to Downtown from Santa Monica.

(Sources- City of Santa Monica and PT Voice Blog)

August Slowdown in Pacific Palisades and Santa Monica

The red hot real estate market that has engulfed the Westside over the past two years is beginning to slow down. We still have multiple offers on well-priced properties and the housing demand is still healthy. However, with some Westside zip codes up over 40% in just 24 months, buyers are proceeding with more caution unless it is a trophy property. Another factor impacting August sales is that many schools started earlier than ever, leaving many families with July as the only viable summer vacation month. This helped lead to less inventory and a smaller pool of buyers to put a home in escrow. Typical escrow periods this year have been between 28-40 days.

Let’s take a quick look at sale activity per the Multiple Listing Service "MLS" statistics.

Pacific Palisades- Only 23 single-family homes (“SFR”) sold in August and six of them were over asking. Compare that to July, in which 45 SFR’s sold (12 over asking) and August 2013 in which 40 SFR’s sold (also with 12 over asking).

Highlight Sales: In July, 1495 Capri Drive sold for $4.88M, after being listed for $3.995M. Almost $1 Million over asking! The 5+5 house measuring at just under 4K sq. ft., has an ideal family floor plan. The location north of Sunset in prime Palisades Riviera, situated on a 18,260 sq. ft., attracted over a dozen serious buyers despite limited showings due to a tenant. The house was built in 1964 and will require some updating. The house was obviously listed under market value to create a bidding process. The buyer paid a strong premium due to the idea location and lot size.

1379 Piedra Morada- This Palisades Highlands 5+6 traditional measuring 4,689 Sq. ft. on a mostly useable 22K lot, also attracted multiple offers from families looking for more space that is difficult to find in the flats (see above). The home has a great floor plan with vaulted ceilings and an exquisite master suite that has the feel of a Four Seasons Hotel. The grounds include a pool, spa, tennis court and grassy area. The property was listed for $2.995M and sold for $3.145M. They received multiple offers within a week of being on the market.

Santa Monica didn’t have quite the fluctuation in sales volume as the Palisades, but it still experienced a decent drop. August saw 22 SFR’s sell (5 over asking) compared to 28 last August. July of this year had 30 sales with a whopping 14 over asking! We are definitely seeing a cooling trend.

Highlight Sale: 492 East Channel Road, a 3+3, 1,927 Sq. ft. home on a 6,021 sq. ft. lot sold for $2.461M in July after being listed for $2.049M. The beach-chic bungalow in the exclusive Santa Monica Canyon has solar panels and remodeled to be a model of energy efficiency and eco-friendliness. The house was a hit with a young families who created a multiple offer frenzy thanks in part to the home being located in the highly coveted Canyon Elementary attendance area.

Articles you should read- Mortgage rates may be poised to rise and what you should know about appraisals!

Interest rates have been bouncing around 4% for the past year, but at some point, and fairly soon some forecasters say, these cheap money days will end.  At this time next year, the Mortgage Bankers Association projects, the average interest rate on a 30-year fixed-rate mortgage will be 5.2%, its highest level since early 2010.  However, will that really happen? Check out the full article via the LA Times: Mortgage rates may be poised to rise





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When it comes to real estate, the appraisal is usually the linchpin around which all else revolves. Check out this informative article on what home buyers and sellers should know about real estate appraisals: What home buyers and sellers should know about appraisals

Equity credit lines are making a comeback…

With the strong appreciation in the housing market over the past couple of year, homeowners across the country have begun taking out home equity credit lines at a rapidly accelerating pace.  Check out the article via the LA Times:  Equity credit lines are making a comeback

Westside Market Trend Notes- Westchester HOT...market above $1.7M+ cooling a bit...lenders making it tough

Westside Market Trend Notes- Westchester hot…market $1.7M+ cooling a bit…Lenders making it tough…

- Tight inventory is still tilting the market in the seller’s favor but things slowed down a bit in July. Since most schools are starting the year early this could be a product of families traveling as we have seen buyer activity picking up this past week.  In fact, traffic at open houses in Westchester, Culver City and Santa Monica was pretty strong on Sunday.  One house in particular in Westchester had over 50 parties through in the first hour...


 - The market above 1.7M in Mar Vista and above $2M in Brentwood has slowed down and we have seen more reductions in listing prices compared to last quarter. In fact, a nice home like 12035 Dewey could possibly be had for around 1.9M and it is tough to find that combination of architecture and views under $2M. They have reduced $150K. A really nice remodel with a captivating view to the ocean at 3360 Beethoven went into escrow last week after a $100K reduction. . .they originally had multiple offers and the original buyer who was in for over asking walked away and opened escrow on a different but similar property in the area.

 - With Mar Vista and South Santa Monica to the north and Manhattan Beach and El Segundo to the south seeing such strong price appreciation over the past 24 months, buyers around the $900-1.1M mark are focusing on Westchester and neighboring areas of Playa Del Rey. They are finding great family friendly pockets like Kentwood and Loyola Village. I feel Westchester is a strong long-term investment choice especially with the expansion of the Playa Vista project providing more amenities and the availability of charter schools popping up in the area.  The large builder/flip companies like Thomas James Capital and Anchor Homes are both aggressively pursuing homes in the area.

 - If you are going through a re-finance or purchase, you already know the amount of paperwork and detail the lenders are asking for is extremely detailed. The lenders cut back on staff during the great recession and have not re-hired making the process longer and frustrating for all involved. The good news is we have well-qualified buyers during this recent run up in pricing. However, it can be extremely frustrating and time consuming when going through the process. Be Prepared!

Feel free to contact me directly at 310-486-5962 if you need any assistance or have some real estate related questions. Make it a great day!

Today's Luxury Homes Must Haves

What makes a home truly luxurious? Today’s builders are constantly adapting to the needs of future homeowners, staying ahead of design trends but also considering the larger questions of what types of homes will meet the demands of our ever-changing world.

In many ways, true luxury defies definition. There are certain determining factors such as the latest in smart home technology or the best high-end finishes, but what truly takes a home to the next level is both more simple and more complex. What do my friends feel like when they come into my home? Do I have art walls? A comfortable environment?”

The biggest key is the importance of “micro-environments” within the home — picture-perfect settings throughout today’s luxury homes, vignettes that draw the eye and bring a sigh of delight. Here in Los Angeles we prize indoor/outdoor spaces. Smart homes with command centers that can be accessed remotely are increasingly popular because they provide a combination of security and comfort that resonates with today’s buyer.

What makes the best view in Los Angeles? The Partners Trust View Criteria

Los Angeles is a city built on views. The abundant hillsides and valleys make for plenty of opportunities to view the surrounding landscape all the way to the Pacific Ocean. There are, however, views that stand out from the rest–views that are peerless in their expansiveness and beauty. These are the views that are talked about, whispered about, and shown off by proud property owners who proclaim that they have “the best view” around.

What really makes a view extraordinary? Intrigued by claims of hearing about the “Best view in Los Angeles” for years without a true measuring rod for comparison, Partners Trust decided to create a grading criteria to better define the ultimate bragging rights within the City of Angels.

Based on six core criteria with a grading scale from 1-10, the average of those six scores reveals where the property fits on the overall scale. With a grade of one being a modestly desirable view and ten representing the small handful of top-tier properties in Los Angeles that offer a truly extraordinary vantage point, we can now start to better articulate who may actually claim that their view represents the “Best of Los Angeles”.

The Partners Trust View Standard Criteria: 

Explosiveness—Explosiveness is defined as the ‘wow’ factor, the type of jaw-dropping view that offers both height and breadth with an expansive vista showcasing the city. A panoramic expanse along the lines of a 270-degree view would warrant a 9 or 10 on our scale. However, unsightly obstructions like power lines or poles would cause a reduction in points. Massive ocean views can also be considered as explosive provided that they are dramatic and wide-ranging however in our opinion, they won’t receive as high a rating as the staggering city lights view because these views go “dark” at night. The best views dazzle by day and by night.

Texture—Texture can be described as a type of softness, a gradation of local hillsides, light and shadow, and differing vantage points that add character to a view. The view from a tall building or hillside property can be explosive but still lack the type of texture t

hat makes a view pleasing at all times of day or night. A view that is both explosive and textured creates tremendous view enhancement and must be awarded points on our scale.

Exclusivity—Does the property offer relief from the street? Is it accessed via a private drive or through a set of gates? Does it occupy a promontory or other spot that is not accessible to others? The longer the drive and the more unique and rare the view, the more points it receives in this category. The more exclusive the view, the higher the ranking and if no one else can claim the same vantage point then you can add 10 points to your score.

Proximity—An ideal view property also offers reasonable proximity to civilization. If there are many switchbacks up a twisting, narrow road, miles to travel, and a level of inaccessibility, points are to be deducted against the view’s ultimate dynamic composition. No one wants to drive a long distance for the proverbial quart of milk. If you can get easy access to your convenience store without burning through much gas, rank your property accordingly.

Iconography—Los Angeles is a town defined by both its natural beauty and its landmarks. The ideal view should include as many of these landmarks as possible: the Hollywood sign, the Griffith Observatory, Dodger Stadium, the downtown Los Angeles skyline, and the Capitol Records tower. The view should also extend all the way to the Pacific Ocean. If you can pick up 10 iconic “Hollywood” landmarks in your view, go ahead and give yourself a 10 in this category.

Privacy—Does the property offer the utmost in privacy? Are there houses nearby at the same height? Is it easy for someone to look in the windows or observe you on the deck, balcony or lawn? Is anyone looking down onto the property? The ideal view property is one that offers complete protection from prying eyes. If your view affords a “paparazzi-proof” vantage point, go ahead and tack on another “10” on our scale.

To illustrate the use of this scale, Nick Segal applies it to The Gary Johns House on Los Tilos Road (pictured) in the Hollywood Hills. This property defines what makes a stellar view on the Partners Trust scale. It has jaw-dropping views that sweep from the city to the ocean (10 points) and yet it also offers exposure to softer, more intimate hillside vistas (9 points). It is situated on a promontory accessed via a long private drive (10 points). It is located in an area that offers relatively easy access to the city (8 points). The city’s landmarks can be easily pointed out in the view (10 points) and the property is beautifully situated so that residents can enjoy the views with limited access to voyeurism (7 points). Tallying our score, The Gary Johns House delivers a score total of 54 for an average “9” on the Partners Trust View Standard.

-Source- Partners Trust Voice Blog

Partners Trust Acquires Malibu Firm

Partners Trust Real Estate Brokerage & Acquisitions in Beverly Hills purchased Arete Estates, a Malibu firm specializing in high-end real estate. The purchase price was not disclosed.  

Partners Trust was founded in 2009 by a five-person partnership. The company has some 200 associates and annual sales of greater than $1.7 billion.  Arete Estates’ nine employees will join the bigger firm and Arete will take the Partners Trust name.

(Source: Los Angeles Business Journal)

Foreign Buyer Activity Hotter Than Ever

A record amount of foreign money is flowing into the U.S. housing market. And the Southland is a prime destination. Overseas buyers and new immigrants accounted for $92 billion worth of home purchases in the U.S. in the 12 months ended in March.  That's up 35% from the year before, and the most ever. 

Nearly one-fourth of those purchases came from Chinese buyers with a 55% increase in total purchase compared to last year. And the place they're looking most is Southern California. Among U.S. cities, Los Angeles was the top destination for real estate searches from China, San Francisco was second; followed by Irvine.

Some families are buying houses for their children attending California universities, or even high schools in some top districts. Others see the U.S. as a smarter investment than the overheated Chinese housing market. 

"These are famous cities they know," said Liu, an immigrant from China who is a realtor and estimates that half her business now comes from Chinese buyers. "They know San Francisco. They know Los Angeles. They know Irvine."  Good schools certainly help. Liu said many of her clients are families with children, planning to immigrate to the U.S. and looking for a top-ranked school district. And the high-cost Chinese housing market means that even neighborhoods in the U.S. where the median price is pushing $900,000 can look like a steal.

Not just Asians- The weather of Southern California appeals to Europeans; the glamour to buyers from Russia; and the economic stability to Latin Americans looking for a haven.

"The world has really opened its eyes to California," he said. 

Still, he noted, these global elite are only active in a certain slice of the market. And while that may keep driving up prices at the high end, it probably won't make much difference to the average first-time home-buyer in a middle-class neighborhood.

 Sources- LA Times/Calculated Risk Blog

Understanding Debt to income ratio…A very important factor when qualifying for a home loan

Since they are so important to a successful mortgage application, here's a quick overview on what goes into DTIs and why they are such a big red flag. Debt-to-income ratios for home loans are the most direct indication to a bank about whether you are going to be able to afford to repay the money you want to borrow.

Debt ratios for home loans have two components.

The first measures your gross income from all sources before taxes against your proposed monthly housing expenses, including the principal, interest, taxes and insurance that you'd be paying if the lender granted the mortgage you sought.

As a general target, lenders like to see your housing expense ratio come in at no higher than 28% of gross monthly income, though there is flexibility to go higher if other elements of your application are viewed as strong. In May, Freddie Mac and Fannie Mae had a housing expense ratio of 22%. Federal Housing Administration-approved borrowers had average housing expense ratios of 28%.

The second DTI component — the so-called back-end ratio — measures your income against all your recurring monthly debts. These include housing expenses, credit cards, student loans, personal loan payments and others. Under federal "qualified mortgage" standards that took effect in January, your back-end ratio maximum generally is 43%, though again there is wiggle room case by case.

Most lenders making loans eligible for sale to Fannie or Freddie prefer not to see you anywhere close to 43%. In May, according to Ellie Mae, the average approved home purchase applicant had a back-end ratio of 34%. Even at FHA, which tends to be more lenient on credit matters than Fannie or Freddie, the average back-end ratio for buyers was 41%. The average for denied applications was 47%.

A good place to learn more about DTIs and to compute your own is Fannie Mae's consumer-friendly "know your options" site (www.knowyouroptions.com), which includes calculators and other helpful tools.

Also, most lenders want to see FICO scores well above 700 — Fannie and Freddie averages were in the 755 range in May; FHA average approved scores were a more generous 684.

Bottom line here: If you want to be successful in your mortgage application, be aware of these key turnoff points for lenders and take steps to avoid the tripwires.

(source: Washington Post Writers Group)

Tight Inventory + Silicon Beach = Multiple Offer Hysteria

The strong seller's market of 2013 is bleeding into the 1st quarter of this year and showing no signs of slowing down, especially with homes priced under $3 million dollars.

With tight inventory, interest rates staying fairly low and an influx of young wealth moving to the Westside (Silicon Beach), the process of buying a home in the area requires quite a bit of patience and understanding it will take a premium number above the comparables to attain a desirable property.  It is important that  buyers work with local agents that have a good reputation to give them a better shot at acquiring a property.

I have been fortunate enough to close quite a few deals on the behalf of buyers involved in multiple offers the past six months. The feedback from the listing agent's was the professionalism of our offer package and knowing our team was a good group to work with helped position our client's favorably with the seller.  Price is ultimately the major factor but when the seller has the ability to choose between three or four great offers, the small details make the difference between getting the property of your dreams or not even getting countered.

Here is a look at some individual sales on the Westside illustrating the current market dynamics-

12613 Woodbine- Mar Vista- This major remodel+addition of about 500 sq. ft. immediately went into escrow about $75K over asking at $1.575k. The initial offer was so strong the builder did not want to mess around and accepted without countering other parties.  The house is 3 bed/3 bath, 1,750 sq. ft. on a 5,676 sq. ft. lot. The house was completely redone in a superior manner compared to recent flips/remodels recently on the market.  The builder did a good job with the attention to detail and will be rewarded handsomely for it. The house will end up selling at $900.00 a sq. ft which is a record for the area.  The builder bought the home in March of last year for $835,500.  Even with as much as $250K into it, the return on investment is substantial.

3216 Federal- Mar Vista- This classic 3+3 at 2,083 sq. ft on close to an 8K lot hit the market in early

February and was under-priced by the listing agent at $1.075M.  They received 25 offers and it reportedly is in escrow for $325K over asking at around $1.4M.  The house does require some remodeling of the kitchen area and updating of the bathrooms but it does allow for a young family to move in and fix it up over time.




 2045 11th Street- Santa Monica- We represented the seller in this transaction and received six offers and 

ultimately sold to an all-cash buyer for $1.352M, $53K above the asking price.  All of the potential buyers were well qualified and made it very difficult on the seller on which offer to choose after one round of counters.  The 2 bed/2 bath, 1,536 sq. ft. home on a 5,800 sq. ft. lot has strong emotional appeal with a recently redone kitchen opening to a great room that is flooded with a ton of natural light.  The outdoor deck with spa and the overall private feel of the property contributed to such a high interest level.  We had over 200 parties attend the Sunday open and Tuesday broker caravan.

1936 Thayer- Westwood- This 2+2, 1,618 sq. ft. home on a 7,184 sq. ft. lot was listed for $1.295M earlier this week and is reportedly in escrow for above $1.370M.  They received 15 offers.  This house will need to be remodeled but had a good lay-out and a library that could be converted to a third bedroom.  The location is in a great pocket of homes just south of Santa Monica and west of Beverly Glen.