SchifferLine 15 April 2013

Timely Real Estate News………………………………………………15 April 2013
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Even Einstein couldn’t figure out the income tax. So why should you?
The only thing for certain about the day after Tax Day — April 15 — is that your CPA will not answer their phone or emails.  Most likely, they will be headed for a beach in Hawaii or Mexico. It was Albert Einstein who probably said it best: “The hardest thing in the world to understand is the income tax!” And Patrick Henry would be astounded at our income tax code today because if he thought that “taxation without representation” was bad then, he should see how bad it is with representation!….a quote from The Farmer’s Almanac.

So, where did income taxes come from? We probably have to thank the British for that, plus a few other “Johnny-come-latelies”: The United States did not have an income tax until just after the Civil War started. Someone had to pay for one of America’s costliest wars in terms of lives lost and resources expended, so in 1862, the very first income tax was assessed to raise funds for the “Yankee” side of the Civil War conflict — with a rate of three percent. You can blame Abraham Lincoln and the US Congress that created the office of the Commissioner of the Internal Revenue and enacted a “temporary” income tax to pay war expenses. I thought since April 15 our tax-payer deadline has come & gone, it would be fun to share some interesting tidbits with you.

The first goal was to get some “emergency” money into the government — and of course, we copied the existing British system of income taxation which started at 3% on incomes between $600 and $5,000….7.5% on income between $5,000 and $10,000 and 1% on income of $10,000 and above. Since then we’ve been through several versions of the Internal Revenue Service, but we ‘bit the bullet’ in 1913 with the enactment of the 16th Amendment  that simply states: “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among several State, and without regard to any census or enumeration.”

I have always been a fan of Charles Schultz, here is my ‘contribution’ to Tax Day’13, April 15!

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Real estate volumes hold steady as Westside stays ahead of previous year.
There were no blockbusters sales behind our sales volumes for March 2013 in the four communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, and Brentwood. Sales for 2013 stayed ahead of sales volume for year-to-date period ending March 31, 2013, according to the Multiple Listing Service’s March report. Their reported total sales was $415.8 million, however, this represents an anomaly that occurs every month with the home sales that  are processed through the multiple listing service.  Lately there have been some sales that are called “private” sales in that they are not put into the multiple listing service system so when I give you the stats, I generally am only using the MLS stats.  As a Coldwell Banker Previews Director (agents specializing in high end properties), I have access to the  sales stats including any and all private sales (after escrow closes and are public record), and here is an example:

There were four sales in Beverly Hills since January 1, 2013, that were unreported on the MLS which totaled $35.1 million. When added to the MLS-reported sales #, the total sales volume YTD is $446.9 million, not $415 million. Therefore, the “real” increase for this year over 2012 same period is 10.6% not 2.8%. I don’t have the same stats for the other three areas I report on.

We receive these statistics from various agents from the different areas and as such none of the agents prepare or reflect the same information in the same way. Suffice it to say, I am attempting to take their respective reports that market conditions in the various areas and arrange the information in the same manner so that it is accurate and similar and give us the same perspective of what is happening, and will report back to you via The SchifferLine as soon as I can put it together. If you’re confused, please give me a call and I will be happy to discuss specifics for your neighborhood. At a recent Previews Directors meeting hearing the reports from the various area specialists, it was apparent that the communities east of the Sunset Plaza were still experiencing a strong market, but it was not quite as strong as the communities west extending to Malibu.

Sales reflect strong market growth
In analyzing the sales in Beverly Hills, Beverly Hills Post Office, Bel Air, and Brentwood, what typified the sales patterns was a consistent number of homes between $1.8 million and $7 million. What is happening, however, is that sales are becoming stronger in terms of measuring the average listing price to the average sales price. For example, in Beverly Hills, of the 12 homes selling during last month, the selling price was 100.6% of the listing price, meaning that homes were actually exceeding their listing price, as was the case in Brentwood also. Bel-Air and Beverly Hills Post Office “asking-vs.-selling” price was at 99.5%, meaning that prices are really holding firm. This is great news — and we are seeing this in our open houses and in the multiple offers most agents are receiving on their listings. In West Los Angeles, we are seeing this across the board.. As you know, I am a mentor (currently have 9 in my flock).  One of my mentees got her first listing in the Palms/Mar Vista area a few weeks ago.  It was a sweet little house that was in rough shape.  We listed it at $689,500, and received 14 offers, 11 of which were all cash.  The house closed escrow in 3 weeks from start to finish with a sales price of $790.00 and is being torn down.  We expect the new owner to be putting the house back on the market in about 6 – 9 months around $1.8 (there are houses on the street that will support that price!).

Median sales prices….well, I have to be candid about median sales prices, again: We are seeing the normal fluctuations every month in our home prices — some communities are up, some down, and every month we go through this. As I have said so many times, we look at “year-to-date” #s to determine the health of real estate prices in our neighborhood. Beverly Hills continues to be such a strong leader in these four communities I report on — they’re up 11% for the year, through March 31. Brentwood is up 6%, but Bel-Air is down 27% through the first three months of this year. Beverly Hills Post Office is only down 3% for the year. But remember, last year (2012), Bel-Air had some huge sales over $20 million which really skews the median price range (remember, the median average is picking the home sales price where half the homes are below that # and half are above that #).

Comparing March to February….when I review these statistics provided by the MLS every month, I am very cautious to draw any long-term conclusions because of the volatility of the market and our economy. As we pointed out last month, the UCLA Anderson Forecast for 2013 was somewhat optimistic that we would not be losing ground on the economic front — but because of our high unemployment, California would continue to hold steady, especially as we work out of the foreclosure sector, where inventory is slowly being reduced.  Last month (March), we saw that median sales prices were 13% higher in Beverly Hills when compared to March 2012….Beverly Hills Post Office was 21% higher over the same period….Bel-Air was down a modest 4%, while Brentwood was up 27%. Beverly Hills enjoyed a 69% jump in median sales prices when comparing March 2013 to February 2013….BHPO was up 25% over the previous month….but Bel-Air was down 50% for March 2013 compared to February 2013, and Brentwood was down 3%. What this means is simply this: Hold onto your hat….one month does not make a year make.

The trends in these four communities reveal home prices are firming up and inching upward, except in Beverly Hills where home prices have moved faster up the ladder than in other parts of the US. I call this the BH Factor — a community that has a strong, global brand that attracts obsessive buyers who want the BH address, BH schools, and BH on their envelopes and business cards. This global brand only helps its neighbors who have strong, national brands (for sure), but who are not as well known on the global stage as BH. We have seen so many buyers frustrated with the lack of quality inventory in Beverly Hills, they naturally spill over to Bel-Air, Brentwood and BHPO, and the beach communities of Santa Monica, Pacific Palisades and Malibu. We all benefit from this very rich pie!

Another interesting aspect of  today’s’ market is the fact that sellers are asking for and buyers are writing offers without a contingency for the house to appraise as part of the loan process.  Last week, I was involved in multiple offers for a condo in Santa Monica for a client. During the course of the week, we ended up writing and losing on all four condos because there was a condition for the buyer to waive their appraisal contingency and my buyer client was not comfortable in doing so.  This was reinforced by a recent article in the Los Angeles Times.  

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College loan debt threatens economic recovery.

The staggering amount of outstanding student debt — nearly $1 trillion owed – is beginning to impede the U.S. economy as a whole according to a new report from the New York Federal Reserve. Basically, what is happening is that because of the high cost of a college education today combined with stricter credit ratings, the housing market is being robbed of its richest crop of new buyers: young college graduates.

With the number of borrowers approaching 40 million nationally, including more than 40 percent of 25-year-olds, the average balance on their loans has risen to $25,000. About 6.7 million of all student borrowers, or 17 percent, are delinquent on their payments three months or more.

“Delinquent student loans borrowers have a very difficult time accessing credit and the share of those borrowers is greater today than in the past,” said Donghoon Lee, a senior economist for the New York Fed and one of the authors of the report. The worst news, however, is that these over-leveraged and defaulting young borrowers no longer qualify for other kinds of loans either, particularly home loans. In 2005 according the Fed report, nearly nine percent of the 25- to 30-year olds with student debt were granted a mortgage. But now, that percentage is down to just above four percent in 2013.
 
The most precipitous drop was among those who owe $100,000 or more. New mortgages among these more deeply indebted borrowers have declined 10 percentage points, from above 16 percent in 2005 to a little more than 6 percent today. We’re seeing how difficult it is for the average home borrower to qualify for a mortgage today, but imagine if you are carrying over $100,000 student loan debt and trying to purchase your first home — the debt staggers the mortgage loan process. And what is ironic is that the students with the highest loan amounts are the ones most likely to buy a bigger home because they are the professionals and have the expense of going to graduate school.

So, how are we going to get out of this mess? The report points out that the ‘best fix’ for everyone would be a faster growing economy, which would provide jobs and higher incomes to those who have borrowed. Until then, the average college student is in a “Catch-22” — if you don’t prioritize your student loan debt, you won’t be able to get credit in the future. And if you do pay it, you won’t be able to afford anything else!

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The Adams Family– an all-too-typical story about student loan debt….

Between the recently graduated college students, the Adams’ student loan debt is over $100,000 — and as a consequence, they’re paying $1,100 a month to service the debt, and that, coupled with the fact that Mr. Adams is working on a “contract job”, was enough to disqualify them from getting a mortgage.

This story is becoming more common as student loan balances have tripled between 2004 and 2012. And as a result, we are seeing a decrease in first-time buyers.

Take the case of Sophia C “Without the student loan debt, a year and a half earlier would have been the time I could have afforded to buy a house, and probably something a little bit bigger,” C” said. She is facing $60,000 in student loans from graduate and undergraduate school and is paying $320 a month on a 30-year loan. Only after living at home for two years was she able to apply for a mortgage and put a down payment on a home. Her escrow is scheduled to close at the end of April, and she considers herself lucky to be able to get a loan at all.
 
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Brush Clearance Time Of The Year!

A lot of us live in a Very High Fire Hazard Severity Zone as rated by the Los Angeles Fire Dept and we have witnessed the last few years with the frightening fires we have experienced.  This year, with the record low amount of rain we have had, we are potentially venerable to a bad “fire season”.  Living where we do, we have to make sure that the brush around our homes is cleared.  The LAFP Brush Clearance cycle begins on 1 May 2013.  They ask us to do a survey of our respective properties and they too will be coming out to do their own inspections. If they find that we have not complied with their clearance requirements, they will be levying fines. Here are their requirements:
1.All native brush, weeds, grass, trees, landscape, ornamental and hazardous vegetation with 200 feet of all structures, whether those structures are on our property or an adjoining one,

shall be maintained in accordance with these requirements. 2.  Maintain all weeds and other vegetation free from dead material located within 20 feet of any combustible fence of an edge of that portion of any highway, street, alley, or paved driveway used for vehicular travel.  3.  Trees shall be trimmed so that the foliage is no closer than 10 feet from a chimney outlet.  4.  Remove any accumulation of leaves, needles, twigs, and all other combustible material from the roof of any structure on your property.  5.  Trees that are taller than 18 feet shall have lower branches trimmed so that no foliage is within 6 feet off the ground.  Trees and shrubs less than 18 feet shall have branches trimmed so that foliage is removed from the lower third of the tree or shrub.  6.  Maintain five feet of vertical clearance between roof surfaces and foliage of overhanging trees.  7. All dead plant material to be removed from property.  8. Maintain hazardous vegetation beyond 100 ft., but within 200 ft. of all structures as follows: remove dead material, except vegetation that is cut to 3 inches. Prune foliage from lower 1/3 of trees and shrubs up to a max of 6 ft. 9. Remove and safely dispose of all cut or bagged vegetation.

 

BRUSH CLEARANCE
SAFETY TIPS FOR HOMEOWNERS

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 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.
•    Thank you for clearing your hazardous vegetation and making your community a safer place.

For additional information, please contact the Brush Clearance Unit at (818) 374-1111, or visit their website at www.lafd.org/brush

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So how is my business doing?  Needless to say, I have been very busy, not only working with many buyers looking for inventory is growing but not fast enough! Everyone is looking for the same thing. I have a wish list of buyers for Bel Air Crest & Mountaingate ranging in price from $1.300, 000 to $10,000,000 and leases from 3 to 6 bedrooms in prices up to $16,000 a month.  So please give me a call if you are considering selling or leasing your home.  I also have a few listings coming up including another one on the Wilshire Corridor. Please let me assist you with all of your real estate needs!