Timely Real Estate News………………………………………………….1 May 2014
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Cinco de Mayo celebrations abound — Monday, May 5 
You can bet that celebrations will begin long before Monday, May 5, the official date for Cinco de Mayo, as Angelenos begin their four-day version of Cinco de Mayo — which celebrates this traditional Mexican holiday commemorating the victory over the French in the Battle of Puebla (not Mexico independence which is celebrated on the 16th of September). I wish you a safe holiday. Please drink and drive responsibly.
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As there is in life, there is always some Yin-Yang.
The same is the case with the stories I am sharing with you today. Some of the stories will appear to conflict with each other, but in looking at the issues, I hope you see the same thread I see in linking all of this information together. There is always some good news, especially regarding the increase in “pending home sales” across the board, not only in Southern California, the first upward tick since summer 2013. That’s good news. Each story features only a “slice” of our real estate pie, but they add up to a steady return of our market, albeit not as fast as we might like.
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Pending home sales post first gain in nine months….NAR
After months of stagnant activity, the National Association of Realtors announced that the national pending home sales rose in March 2014 for the first time in nine months. In their “Pending Home Sales Index” (PHSI) — which is a forward-looking indicator based on contract signings, rose 3.4 percent to 97.4 from an upwardly revised 94.2 in February, but it is still down 7.9 percent below March 2013, when the Index was at 105.7.
Lawrence Yun — NAR’s chief economist — said a gain was inevitable. 
“After a dismal winter, more buyers got an opportunity to look at homes this past month and are beginning to make contract offers,” he said. This pent-up demand resulted in increased sales activity and is expected to steadily pick up as we move into warmer weather and as more inventory reaches the market. Yun also pointed to the ongoing improvement in job creation in the economy after a very tough winter.
The Pending Home Sales Index in the West increased 5.7 percent in March to 91.0, but is still 11.1 percent below March, 2013. The results were mixed throughout the other three regions in the country. .Although home sales are expected to trend up over the course of the year according to the NAR, this year began on a very weak note and total sales are unlikely to make the 2013 sales level by the end of the year. “We don’t see these bad-winter effects in Southern California,” Carole Schiffer said, “and we are — to some degree — buffered by the negative impact on regional economies east of us. But the effects on our national economy eventually do reach out west, and to an extent that we are still suffering from inventory shortages, but we are seeing total sales increases and higher prices.”
Existing-home sales are expected to total just over 4.9 million this year in the US, below the nearly 5.1 million in 2013. However, NAR stated that with ongoing inventory shortages in much of the country, the national median existing-home price is expected to grow between 6 and 7 percent this year.
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The venerable Robinsons-May site on Wilshire may soon sprout condos….
It’s been one of the country’s most desirable, most valuable commercial real estate sites — the 62-year-old Robinsons-May store, located at 9900 Wilshire in Beverly Hills, was closed in 2006 and has gone through a series of owners, all envisioning developing the property into condominiums which would garner some of the highest prices in the world.
Originally desi
gned by the renowned William Pereira-led architectural and engineering team, the “neighborhood store” for Beverly Hills was opened to great fanfare in 1952….it featured four levels connected by “vertical transportation” – two escalators and two elevators. But after more than 50 years in operation, the store chain couldn’t sustain itself — a genre replaced by Rodeo Drive boutiques and luxury stores such as Neiman-Marcus.
Under current owners, Joint Treasure, a Hong Kong private equity firm which bought the property for $148 million in 2010, the property is up for sale again, and local real estate developers familiar with the property believe the selling price will be more than $300 million. The property is adjacent to the Beverly Hilton Hotel, and its owner announced that they will start work on a Waldorf Astoria hotel that will rise next to the Hilton.
The significance of adding over 200 luxury condos to this site cannot be overstated. According to the selling agent, there is an under-supply of higher-priced condos that could attract wealthy buyers from all over the world willing to pay a large price for this valuable real estate. The property comes with a design by Richard Meier (who designed the Getty Center) that includes 235 condos, underground parking for 875 cars, and nearly 21,000 square feet of retail and restaurants. It is also projected that should the approval be granted for the project, it will have a positive impact on the values of all residential properties in Beverly Hills and the surrounding areas.
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California foreclosures are near an 8-year low
That’s great news. For too long were we saddled with large inventories of short sales and foreclosures on homes that went back to their lenders, pulling down home prices, and more importantly, eliminating thousands of dollars in home values and equity. While we still have a foreclosure inventory similar to the levels of 2006, they will continue to be around as long as homeowners can’t make their payments, and the national economic condition continues to be a factor. In the face of unemployment, lack of business growth, and an anti-business climate, last month the UCLA Anderson Forecast cast doubt on Los Angeles’s and Southern California’s ability to maintain a strong economy. Just this week, it was announced that LA County (Torrance) is losing Toyota’s US headquarters to Texas (that’s 5,000 jobs going elsewhere) and there are indications of other business leaving our beautiful state as well.
According to Data Quick, the San Diego-based real estate research firm, for the third consecutive quarter, California foreclosure starts remained little changed — the result of steady economic growth and higher home values. Foreclosure processors are still mostly plowing through a pool of toxic subprime mortgages originated back in mid-to-late 2006, a real estate information service reported.
Lenders and their servicers recorded 19,215 Notices of Default (NODs) on California house and condo owners during the first quarter of this year. That was up 6.0 percent from 18,120 NODs in the prior quarter, which had the lowest NOD tally since fourth-quarter 2005, and was up 3.5 percent from 18,568 NODs in first-quarter last year.
The trough for DataQuick’s NOD statistics, which began in 1992, was 12,417 in third-quarter 2004, while the peak was 135,431 in first-quarter 2009. Each NOD represents a “foreclosure start” because the filing of the Notice of Default begins the formal foreclosure process.
“It may well be that the foreclosure starts in recent quarters don’t reflect the ebb and flow of financial distress as much as they reflect a steady state of workload capacity on the part of the servicers. They may well be just working their way through a backlog, stacks of paper piled high on desks,” said John Karevoll, Data Quick analyst.
Thanks to the economic rebound and higher home prices, the number of homeowners defaulting on their mortgage should continue to trend lower. For a variety of reasons, however, No D filings could edge higher month-to-month and quarter-to-quarter. For example, some larger lenders and servicers could quicken the pace at which they’re processing existing backlogs of distressed properties. And there could be a spike in “re-defaults” among borrowers who avoided foreclosure with a loan modification.
Most of the loans going into default are still from the 2005-2007 period according to Data Quick. The median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than four years, indicating that weak underwriting standards peaked then.
Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 7.7 percent of all California resale activity last quarter. That was up from a revised 6.8 percent the prior quarter and down from 17.1 percent a year ago. Foreclosure resales peaked at 57.8 percent in first-quarter 2009. Among the state’s larger counties last quarter, foreclosure resales varied from 2.1 percent in San Mateo County to 17.5 percent in Madera County.
The role of short sales – transactions where the sale price fell short of what was owed on the property – is also fading. Last quarter short sales made up an estimated 8.7 percent of the state’s resale market, down from an estimated 10.6 percent the prior quarter and 21.0 percent a year earlier.
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Southland home sales stuck at 6-year low; Median sales prices at 6-year high
The “hits” just keep on coming….low inventory translates to low number of transactions and with supply low, demand is high, which translates to higher prices. That has been “our story” for the past year (or more), and while Southern California home sales quickened last month compared with February, as they normally do, home sales remained far below average and at the lowest level for a March in six years.
A real estate information service reported the median sale price rose to a more-than-six-year high, driven up by demand that continues to exceed supply in many areas, as well as a shift toward a greater share of sales in middle and high-end markets. A total of 17,638 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. According to San Diego-based Data Quick
that was up 25.7 perce
nt from 14,027 sales in February, and down 14.3 percent from 20,581 sales in March last year. We are seeing the same signs in the five communities I report on – Beverly Hills, Beverly Hills Post Office, Bel-Air, Brentwood, and Westwood/Century City. Compared to last year, we have had dramatic increases in total sales volume through the first quarter 2014, and we are seeing rising median sales prices. Of course, while we had a large individual sale in Bel-Air ($102 million) which can affect total sales volumes for sure, the median sales price increases reflect an across-the-board strength in home values.
For seasonal reasons sales shot up between February and March, with that gain averaging 36.3 percent since 1988, when Data Quick’s statistics begin. Southland sales have fallen on a year-over-year basis for six consecutive months, and last month was the second in a row in which sales were at the lowest level for that particular month in six years. Sales during the month of March have ranged from a low of 12,808 in 2008 to a high of 37,030 in 2004. Last month’s sales were 26.9 percent below the average number of sales – 24,115 – for March since 1988. Sales haven’t been above
average for any month in more than seven years.
“Southland home buying got off to a very slow start this year, with last month’s sales coming in at the second-lowest level for a March in nearly two decades. We see multiple reasons for this: The inventory of homes for sale remains thin in many markets. Investor purchases have fallen. The jump in home prices and mortgage rates over the past year has priced some people out of the market, while other would-be buyers struggle with credit hurdles. Also, some potential move-up buyers are holding back while they weigh whether to abandon a phenomenally low interest rate on their current mortgage in order to buy a different home,” said DataQuick analyst Andrew LePage.
Affordability of housing causing a state crisis for many
While it may not be “your” problem, but the challenge of financing affordable housing which until 2012 was an integral program for most cities who built housing for under-served, low-income families, is now being debated in the California legislature — where does the money come from? 
Local development agencies once generated roughly $1 billion annually for below-market housing across California, but for 400 agencies in many cities up/down the state, those funds disappeared in 2012 as the State of California faced a fiscal crisis. Many housing and community redevelopment projects were cancelled midstream. And there is no reasonable solution in sight.
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According to the UCLA Anderson Forecast, high rents and a lack of rental housing in urban areas have forced many families to move outside the core, which increases the cost of transportation to/from work. And with gas prices continuing to remain high in Los Angeles, the burden of just housing and transportation costs have crippled our own economy.
It is a problem that continues to be attacked on many fronts and most likely will continue to be so for a while as there are many political aspects to the solution.
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What is happening in my real estate world? After personally having a somewhat slower first quarter ( I also needed the rest!) , I have become extremely busy and am caught up like most agents in the lack of inventory to place some of my wonderful client in. I have been sending letters out to specific areas, telling owners about some of these clients in the hopes of finding some sellers who have been considering selling their homes, and fortunately, I have turned up a few for us to consider. However, if you are considering selling or leasing, please do let me know as my wish list is growing every day.
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