Timely Real Estate News………………………………………………June 15, 2013 ******************************************************************************************************************
Sales volume up, prices hold steady through first five months of 2013
This is our busy season — no doubt about it. Story after story in national and local media point to the intensity of the ‘selling season’ that Americans seem to enjoy each spring when families plan their moves. It’s the most popular time to sell and buy real estate. And it’s no different than in the four communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, and Brentwood. We are seeing better-than-average traffic at open houses and multiple offers on the limited inventory we have on the market. There is so much competition for homes in our four communities that buyers become so frustrated in trying to
make an offer only to find they were on the wrong end.
Sales volume through the first five months is $942+ million, up substantially when compared to May 2012, which recorded $696 million by the end of the month. That is a huge jump in total volume (35% jump) over the previous year, but it is not inconsistent with what we have seen before. Remember, we live in a very dynamic real estate market — home prices can range from under $1 million to over $85 million in the same community. And while we have had a great May selling period, May 2012 was even better (after a slow 2012 start). Home sales volume in Beverly Hills, for example, was $111 million in 2012 and $87 million in 2013; BHPO had $44 million last year vs. $36 million in 2013; Bel-Air really had a much better May 2012, with over $72 million in sales vs. only $28 million for this year; and finally, Brentwood, had a banner month, hitting $85+ million in sales vs. $45 million in 2012. All of this points to a strengthening in the market, and while real estate volumes are indicators of our market’s strength, we continue to see variances in appreciating home values.
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Median Sales Prices again show the market’s volatility….but not to worry
Real estate prices are sometimes compared to the weather — just wait five minutes and they’ll change. In every SchifferLine, it seems like I’m repeating myself — the more things change, the more they stay the same. Median sales prices — which reflect the ‘middle price’ of the total number of home sales in a given month (half the homes are above that #; half below it), gives you a 
more balanced view of home prices in general. Computing the normal average (total volume divided by total units sold) really can be skewed when you have a very large # of homes that are in the luxury category that can be sold each month — over $10 million for example, which is what happens in our market. Most all real estate data trackers use median average to gauge the market.
For example, only Brentwood had a healthy increase in median sales price for May 2013 when compared to May 2012 — a 47% jump at $2,710,000. Bel-Air was down 22% to $1,885,000; BHPO was down only 4% to $2,268,000 million and Beverly Hills was off by 20% for May 2013 vs. May 2012 at $4,912,000. We are making progress, even if your area is experiencing a temporary lower fluctuation in median sales prices — wait a few minutes….it will change.
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Fun Summer Concert Information
Disney Hall — Annual International Laureates Music Festival
Enjoy this magical California venue! Seating is available on a first-come basis. Bring a meal to enjoy.
Plentiful seating provided on a first-come basis with open grass area for picnic blankets, tables and chairs.
The acclaimed I Palpiti Orchestral Ensemble of International Laureates from 20 countries is featured in solo, chamber, and orchestra concerts with a Grand Finale at the Disney Hall. Two weeks in July or August, various times — www.ipalpiti.org
Marina del Rey
Burton Chace Park, Marina del Rey
Begins July 11 and ends August 31 — features alternating Classical and Pop concerts each Saturday. Some of the featured acts this summer include a Night at the Opera, Billy Ocean, Russian Biryukov on Cello, Taylor Dayne, Rufus Choi, piano, Poncho Sanchez and Rose Royce.
Call (310) 305-9595 to verify Summer Concert Dates, Performers and Times
Los Angeles County Museum of Art (LACMA)
Sundays Live at LACMA
Free live music at LACMA features unique solo and group performances from around the world.
Sundays 6:00 p.m. at LACMA
LACMA is located at 5905 Wilshire Blvd, Los Angeles, CA 90036.
Pershing Square
Downtown Stage — Free Summer Concert Series. Saturdays, 8-11PM
Free concert series from July 6 through Aug. 31
Pershing Square is where well-known recording artists and local indie groups share the same stage for six weeks of free musical entertainment. Showcasing regional, national and international musicians, the concert series in downtown LA is a four-day weekly event that begins on Thursday. Recording artists that have headlined shows at this popular summer night hangout include the all-female 1980′s band The Bangles, English New Wave band The Fixx and the alternative rock band 10,000 Maniacs. The series of evening shows also provides an engaging platform for emerging DJs and garage bands. Pershing Square Downtown Stage has become a superb entertainment site due to its high-tech light and sound systems and celebrity guests.
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There’s a lot of news out there….what’s real, what’s not?
I publish the SchifferLine twice each month — Each issue, we review the ‘hottest and latest’ news to determine what gets in, what doesn’t, and this month, the newswires have been humming with statistical analysis about home prices, foreclosures, the economy, and trends….is the bubble about to burst….or is there even a bubble? For example, this week, the Los Angeles Times reported “Southland home prices soar 24.7% in May from a year earlier.” When we look at median sales prices (which is the common measurement), you can see that yes, Brentwood had a great month compared to May 2012….but the other communities (Beverly Hills, Beverly Hills Post Office, and Bel-Air) were down between 4% and 22%. See what I mean? Regional stories like the one based on Data Quick, a respected real estate watcher, are fine for what they are: a regional perspective.
You have to put all of this in perspective because when we see those large #s in the Los Angeles Times, you are apt to apply the 24.7% increase to your own property. Perhaps this might be true, but not likely. Remember, this is a Southern California story, 
and when you understand that very distressed inland areas were devastated with the recession and they are now making a comeback, these median price increases are more formulated to include a heavy dose of areas that are coming back from the brink. Data Quick President John Walsh was ‘quick’ to add that “we’re deep into uncharted territory. He cites “razor-thin inventory, pent-up demand, low interest rates, and all cash purchases by investors and wealthy individuals.”
The major lift in the real estate story is that the “number of sales (23,034) hit the highest level for a May in seven
years, which reflects what has been happening in our four communities. But the price increases have raised concerns, too, of another ‘housing bubble.’ Prices remain far from the peak of 2007, and experts say the market is likely to cool off as inventory expands. As prices rise, more homeowners and builders will list homes for sale….and that may be OK now, according to USC’s Lusk Center for Real Estate’s Richard Green, “but a year from now and with another year like we have now, that will not be OK!” He points to trouble when we have more housing on the market: (more inventory)
and prices rise…..”But rising mortgage interest rates and the lack of a strong wage growth should put the brakes on price hikes. Ultimately,” he said, “people simply don’t have the income.”
That’s is something we should all remember — extremely low inventory and mortgage rates have ignited the bidding wars according to Data Quick, and it’s a bright spot now….but be aware of applying regional performance to your neighborhood.
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UCLA’s Anderson School Forecast puts some ‘reality’ into future
If the Anderson School Forecast was a reality TV show, you wouldn’t have been particularly pleased with their latest dose of ‘reality’ regarding the economy. You might want to change channels.
According to the Anderson Forecast, the country’s tepid growth in its gross domestic product isn’t creating enough good jobs to build a strong middle class according to their latest report. “Growth in the GDP has been positive, but not exceptional,” the economists wrote, “but not rapidly enough to create good jobs for all.” This latest report, which analyzed long-term trends of past recoveries, found that the long-anticipated “Great Recovery” has not yet materialized, and what we’re seeing now “is not a recovery,” they commented, “it’s not even normal growth. It’s bad.”
The challenge is that the long-term implications in the face of technological advancements that continue displacing workers, and the country’s education system isn’t adequately developing a workforce for the future according to Edward Leamer, director of the UCLA Anderson Forecast. “More robust growth will be necessary to bring this recovery in line with previous ones.” And he made a straight-forward pitch to our education system: “Regrettably we reward teachers if their students can regurgitate the information on standardized tests,” he wrote. Future workers will need creative and analytical thinking skills for 21st century jobs, he said.
The sustained housing recovery is expected to boost GDP over the next couple of years and further bring down the unemployment rate, and that the U.S jobless rate will fall to 6.9% by the end of 2014 and edge down to 6.4% by the end of 2015.
Is there any good news? Yes! California’s job growth has been spread across several industries, including leisure and hospitality and white-collar jobs in the professional and business services sector. But construction, which has long been a drag on the state’s recovery, is propelling economists’ optimism about future growth — albeit with some caveats. Though the number of housing starts has doubled since the recession, tight credit conditions for new-home buyers have made it tougher to secure mortgages. Young adults are facing staggering student loan debt that will force them to put off buying homes until later in life, said senior UCLA economist David Shulman.
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Wall Street buyers are moving in……your new neighbor
According to a recent article in the New York Times, they say Wall Street caused the real estate meltdown and that now Wall Street is moving into to take advantage of the low prices on real estate throughout the US. Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Someare already wondering if prices will slump anew if the big money stops flowing. “The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in
prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”
Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest. Blackstone, which helped define a period of Wall Street hyper-wealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.
We are seeing this impact all the time in our market — not to the extent that other areas have because our inventory of bank-owned homes is relatively low, and higher-priced homes are not easy targets for “buy low, sell high”. Still, I am still seeing bank-owned home sales and short sales each month. As a general rule I have tended to stay away from short sales, because the process involves long, complicated negotiations with lenders and the seller/buyer, but have had a few short sale transactions.
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As Home Sales Heat Up, Buyers Are Competing With All Cash Buyers
More than two-thirds of the homes sold today are purchased by buyers who use traditional mortgage-backed loans, but there are a growing number of all-cash buyers who have invaded the market, causing some disruption in the market place. Buyers tend to be intimidated by cash buyers, but they shouldn’t be because at the end of the day, more transactions are still done the traditional way with buyers getting loans. An all cash buyer has a few advantages over traditional transactions in that they do not have appraisal contingencies and generally once they have provided their proof of funds to the seller, and cleared their physical inspection contingencies, the seller knows they have a solid sale vs. waiting for the buyer to have the appraisal and get their loan approval, so the sale is solid sooner, but at the end of the day the money to the seller is the same. In the past, all cash buyers expected to get a bigger discount on the purchase price because of their cash, but that really isn’t the case anymore.
What we are seeing in the bursting of the last decade’s housing bubble appears like ancient history — where first-time home buyers are competing with investors to get into single-family homes with prices approaching $1 million. After saving money for years — waiting for the residential real estate market to hit bottom — buyers all over the country appeared eager to get back in, lured by low interest rates and the prospect of a good deal. This is certainly true with most buyers who rely on mortgage-backed loans to purchase their homes. But with the number of homes for sale at historically low levels, large investors began purchasing thousands of properties which has radically changed the real estate landscape, forcing prices up across all price levels.
However, there are still plenty of skeptics wondering just how long the sharp price increases can last. “People are realizing we’ve probably hit bottom, but the kinds of spikes we’re seeing in places like California seems like history is repeating itself,” said Daren Blomquist of RealtyTrac, which monitors residential sales, in a recent story that appeared in the New York Times. “That’s not sustainable for the long term, at least not for the regular home buyer, so I think there are some warning flags there.”
Now, agents say their biggest challenge is potential sellers who are wary of putting their home on the market because they fear they cannot find a place to buy. Competition for homes is becoming more intense — as seen in California where multiple offers has become the rule. And the current market is turning buyers to desperation, particularly because the turnaround has come so quickly. “We were not prepared to go to war over buying a home,” one frustrated buyer stated, “but if we want to get the home we want, we have no choice. “According to Blomquist, “…a year ago, people didn’t want a deal, they wanted a steal,” he said. “Sellers were listing homes for less than what they originally paid for them and offering all these concessions. Now, the only concessions are coming from the buyers.”
I see this every day in our market. There is, indeed, intensity in the marketplace between the sellers and buyers, but not that alarm bells are going off. Do all-cash buyers have an advantage? Yes, in some cases where sellers are eager to close escrow quickly and move on. But since two-thirds of the sales are coming via the traditional mortgage-backed loans, we haven’t seen the all-cash advantage discourage home ales to traditional buyers.
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Mom’s 91st Birthday Celebration in Montreal
A few weeks ago, my whole (small) family met in Montreal to celebrate my Mom’s 91st birthday! We came from far & wide, Vancouver BC, Smithers BC, Denver and Los Angeles to meet where my nephew Connor goes to school (Concordia) to party and play. It was wonderful! Montreal is a great city, very European and it gave me a great opportunity to practice my French. We stayed at the Ritz Carlton which just reopened after a 4 ½ year remodel and it was lovely. I hope to get back there again before Connor graduates in the next year or so.
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Preventing blocked drains the earth friendly way
An ounce of prevention is worth a pound of cure, or in this case – an ounce of enzyme is worth a pound of caustic soda; or a hundred bucks spent on a plumber.
Pouring Drano or a similar product down the sink isn’t exactly the best choice to clean out your drains. For starters, it’s a hazard having it on the premises and it’s a very dangerous product to have anywhere near children. Secondly, caustic soda, while breaking down rapidly in the environment; also breaks down just about anything it touches. There are certainly more earth friendly options.
One alternative is to pour a scoop of baking soda mixed with half a cup of vinegar down the drain, and follow it quickly with boiling water.
The other alternative, is an enzyme/bacteria based preparation.
These are sold under various names and can be purchased in most hardware stores. Although they appear to be a little expensive, it’s the solution that keeps on working; only requiring an infrequent top up dose. What they do is to help establish colonies of *useful* bacteria in your drains and systems. The great thing about these preparations is that they are totally non-toxic to humans and the environment and they are very easy to use – no complicated mixtures, just pour and you’re done!
Tip: when using these types of preparations, it’s best to add them just as everyone in your family is heading to bed – if large amounts of water follow the preparation, it can wash away the bacteria before they’ve had time to get a foothold in your drains.The next time you notice your drains smelling or perhaps water not getting away as quickly as it should, reach for bacteria instead of caustic soda. Bacteria, while sometimes our enemy, are quite often our friends!
Something else I’ve found very useful is a sink drain strainer – these trap food and debris before it winds up in your plumbing.
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It’s mid-year already!!! Where did the time go? I am still very busy. I have a listing on one of the last of the Mohicans (a lot in Bel Air Crest). It is a little over 15,000 square feet, and according to the building one could build a 9,000 square foot house on it. We are asking $2,850,000. At the other end of the spectrum, I have a listing on a lovely single condo in Brentwood for $310,000…. Great for a first time buyer. It is a security building, pool, etc. Please let me know how I might assist you with your real estate needs.
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