Timely Real Estate News………………………………………………….1 June 2014
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Home prices easing off to the relief of analysts…..that’s good news
Headlines stream across the page….”Home prices on the rise”….”Sales volume increases…” You can’t pick up the Los 
Angeles Times from day to day without seeing headlines that focus on rising home prices, low inventory, and sales volume. But as I have been saying recently in the SchifferLine about these issues, we are getting confirmation that the new data released last week indicate that a slowing trend in home prices has arrived and yes, that is good news.
The recent report from Standard & Poor’s/Case-Shiller national home price index last week (28 May 2014) noted the steep climb in home prices is actually slowing down and “is going to have a positive effect on the market”. Home prices’ annual growth had actually eased in March to 10.3 percent from a previous year’s increase of 11.4 percent. And analysts said that the softening of price gains — rather than a worrisome trend — may be welcomed news: Double-digit increases cannot go on forever and many economists are using words like “sustainable” and “stable” to describe the slowdown. Essentially, what they’re saying is: This slow down means the real estate market is becoming “healthier.”
Of course, homeowners are liking the run-up in home prices — especially their own. “We are still beneath the price levels of 2007. Equity has been lost, and although we’re regaining it back slowly, we have to take a look at the broader market,” according to Carole Schiffer.
Los Angeles market recovering?
What is the real definition of “recovering”? In real estate terms, it is a “transitional” term that simply means “we’re not there, yet!” We’re heading back to previous levels on price levels, but we are significantly behind on inventory levels. Nationally, we have recovered approximately 37% of our previous equity position of 2007.
Foreclosures make up a much smaller percentage of the sales today (which is good news)…and the higher prices have caused investors to back off, leaving the bigger question of whether housing is affordable. I have been writing about how first-time, qualified buyers are prevented in looking at homes in some Westside neighborhoods, and certainly, in the five communities I review (Beverly Hills, Beverly Hills Post Office, Bel-Air, Brentwood, and Westwood/Century City), prices have been rising to new levels since 2007. We’re not back by any means to those 2007 levels, but our median sales prices remain some of the highest on the Westside.
While first-time buyers make up less than 30 percent of the market, they are seeking refuge in nearby lower-priced communities such as Culver City, Palms, and Mar Vista where homes are selling in more affordable price ranges. And, in a recent Los Angeles Times story, young adult families are now moving into homes farther east of West Los Angeles such as Leimert Park, Crenshaw and West Adams. And you can bet that in five, 10 years from now, these lower-priced neighborhoods will see home prices rise way beyond their current market values.
The “new normal” — homeowners regaining equity
As the Case-Shiller report pointed out, analysts are also citing that at the height of the bubble in 2007, these prices should not be considered the “benchmark”. Compared to March 2004 — a decade ago — home prices in 14 of the 20 cities cited in the Case-Shiller report were higher. That trend was good news for 4 million families who regained some equity in their 
homes last year. But there are still 6.5 million homeowners today who are “under water” (owing more on their home than what it is worth), many of whom who bought or refinanced at the height of the market. Hopefully the recent run up in price conditions will not last and our “new normal” will see moderate home price increases (not double digit), inventories increase, and sales volume will reach sustainable levels. We still are governed by the simple law of “supply and demand” — and what we see today are buyers who are still aggressive for the limited supply.
In the end, many analysts are united in their opinion that all of the housing woes go beyond home prices, inventory and sales volumes — It gets down to this: People buy homes when they have good jobs and rising incomes. Our sluggish economy and Los Angeles’s somewhat stagnant employment picture remains a challenge we are going to be faced with for some time in the future.
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Yellen has few options to stimulate the housing market
Federal Reserve Chair Janet Yellen and her colleagues are frustrated with the fact that they can’t really do much about the housing recovery. In a comprehensive review of the Fed’s options on bloomberg.com, the housing recovering goes beyond the availability of cheaper money and leveling of housing prices. In a report issued 29 May 2014, the National Association of Realtors reported that pending home sales climbed just 0.4 percent after a 3.4 percent increase in March (which was the first gain in nin
e months according to the NAR).
Housing demand has cooled according to the NAR report as higher prices and borrowing costs put ownership out of reach for some prospective buyers. There is the issue of low inventories that continue to plague much of the country which means that even with cash or pre-approved loans in hand, it doesn’t guarantee that a family can get the home they want.
Yellen and her colleagues agree that the housing industry — as a whole — is surprisingly weak and even though the GDP decreased to minus 1% because of the harsh winter quarter, most economists believe that it will soon be back to the 3% annual growth rate level.
Stingy lenders, wary borrowers, and reluctant homeowners all add to challenges in the housing market according to Yellen and her advisors. And as a senior economist Ellen Zentner at Morgan Stanley (New York) stated that mortgage financing continues to be extremely tight and the Fed simply can’t manipulate that. “It’s out of their hands,” the economist said.
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Let me share a story I had with a title rep the other day who was calling me on his phone while he was in line at the LA County Recorder’s office to get a deed recorded so it could close escrow that same day for any special reason. I asked him if he was doing this so that the deed could be recorded and the escrow closed that day. He replied….”No, that wasn’t the case. The lender had delayed funding the loan for 10 days.” “Why did the lender delay funding?” I asked. He responded that in his opinion, “…lenders were delaying funding to look for any loopholes that would enable them to not fund this loan’.” 
He went on to say that lenders who have been stung in the past by bad loans are still experiencing a great deal of dis-comforture in making loans.” To me, as a real estate agent, it presents an interesting perspective because, when I have had a transaction that involved the buyer obtaining a loan, and they were using a lender that was doing what we call “table funding”, which means that they fund the loan right after they get the signed and approved loan documents from escrow, table funding enables deeds to be recorded and transactions to be closed quicker.
My title rep went on to say that this “behavior” of dragging out funding of loans was, in his opinion, not limited to any one or two lenders — but to all lenders across the board.
All of this makes for an extraordinarily stressful situation for all involved.
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Brush Clearance — a “Must Do” during fire season
We’re already in the “fire season” and we are projected to have the fire season last all year according to the Los Angeles Fire Department. So please take the recommendations from the LAFD seriously.
We have had large fires in Southern California this year, and we are fortunate to have the expert leadership, experience, and responsiveness of the LAPD serving our neighborhoods. Because we live in the mountains and canyons of West Los Angeles, we are particularly prone to dangerous fire outbreaks that have had dire consequences in the past. Please read and implement these LAPD recommendations: Remember that when clearing your brush, safety is very important. In recent years many brush fires have started by homeowners attempting to clear their brush. Many times, the sparks produced from metal blades on motorized equipment has started fires.
The following are simple guidelines for homeowners to follow to clear their brush
safely:
• Always have a water source readily available. A water extinguisher, garden hose or a few buckets of water.
• Avoid clearing brush during the peak temperatures of the day, between 11:00 am and 3:00 pm and on days when a Red Flag Alert* has been declared by the Fire Department
• Only use properly maintained motorized equipment and have a spark arrester when required.
• Do not refuel motorized equipment while motor is running. Use approved fuel-dispensing containers only.
• Always make sure the hot exhaust on any motorized equipment is clear of any vegetation. (grasses, weeds, shrubs)
• Do not use metal blades on weed whackers/whips. Use nylon line or plastic blades instead.
• Always wear safety glasses and gloves. Hard hats and dust masks are recommended.
• Identify property lines by going to http://zimas.cl.la.ca.us for assistance
• Cut all grass and weeds down to three-inches or less for a minimum of 200 ft. from all structures.
• Trees 18 feet and higher — trim lower branches six feet from the ground
• Shrubs need to be trimmed up 1/3 height
• Remove all dead or dying trees and remove dead branches
• Trim tree branches 10 feet away from chimneys
• Remove dead leaves and pine needles from roof tops
• Clear a minimum of 10 feet of roadway or combustible fence of grass and weeds
Please refer to the LAFD mailer sent to each home. Fire season is here. Be Prepared
For additional information, please contact the Brush Clearance Unit at (818) 374-1111, or visit our website at www.lafd.org/brush
* Red Flag weather days refer to certain weather conditions that can cause a wild-land fire to start and to spread rapidly. These conditions generally exist when the winds exceed 25 mph and relative humidity is below 15%
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The End is in Sight
Carmeggedon I and II have passed and the majority of the work on the 405 has been completed. Some work remains to be done. They are still working on the on and off ramps, Sepulveda itself, and replacing/repairing the landscape. The projected completion date is in August or September. Let’s all hope they make their targeted date!
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Rocking and Rolling on the Westside.
Given our recent spate of earthquakes, I hope you have taken the opportunity to be “earth quake prepared”. If you need any additional information for resources, please let me know.. I would be more than happy to assist you! It is important that we all are ready for “The Big One”!
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On a personal note
From time to time, I get comments from SchifferLine readers who either want just real estate and financial news or they would like a more “personal touch”. To be honest with you, the past couple of years in the Westside real estate business, it’s been a roller coaster of good times and not-so-good times — for all. We are seeing increasing prices and low inventories — something that continues to dominate the news and yes, even in The SchifferLine. So, today, I want to get off that broken record and talk “personal”.
I am so lucky and privileged to have my 92-year-old mother, Kelly, in all of our lives. My family has always viewed Mom as something very special — spry, alert, sharp as a tack to this day, and energetic about her commitments to family and community. Mom turned 92 on May 23 this year and we have split her celebration into two parts — the Southern California version, where Mom was treated to a surprise dinner and mini-birthday party at our Coronado home at her favorite restaurant, Primavera, over Memorial Day weekend….and the Canadian version in West Vancouver, which will hopefully happen in mid-June, where she will be celebrated again with my sister’s family. She is such an inspiration to our family, but as one of the tireless community leaders in the arts for our great city for the past 60 years, Mom continues to be engaged on every level. It’s her energy and zest for life that keeps all young! Keep it going Mom!
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A
s for my real estate world, I continue to be very busy in representing buyers, sellers, lessors and lessees. I currently have a lovely home available for lease in Mountaingate for $12,500 a month. With 4 bedrooms, 4.5 bathrooms, a den and family room, and golf course view, it has been updated and remodeled. I also have some homes in both Bel Air Crest and Mountaingate coming on the market in the next few weeks, so please contact me at 310 442-1384 or carole @caroleschiffer. com for more information.
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