Timely Real Estate News……………………………. 15 March 2011
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The ‘jig’ is up…..it’s time to be Irish again on March 17
On March 17, we’re all Irish — who doesn’t want a little more ‘Irish Luck’ in their lives? There is something magical about this holiday — it’s the one time of year where we have the Irish’s traditional corn beef and cabbage (don’t forget the potatoes) and pint of Guinness beer. The Irish have never needed an excuse to have their pint of beer, but as we pointed out last St. Patrick’s Day, the tradition of corn beef and cabbage is more American than a passion of Ireland.
While we are familiar with the famous “Riverdance”, which is notable for its rapid-leg movements, body and arms being kept largely stationary, the dancing traditions of Ireland probably grew in close association with traditional Irish music. Although its origins are unclear, Irish dancing was later influenced by dance forms from the Continent, especially the Quadrille. Travelling dancing masters taught all over Ireland, as late as the early 1900s.The history of the dances of Ireland is quite old and tied into the folk dance probably dating back as long ago as the 1400 or 1500’s!
One last Irish historical fact: St. Patrick’s Day is a religious holiday in Ireland and is named after Saint Patrick (AD 387-481). It originated as a Catholic holiday but today is more of a secular celebration of Irish culture. Wearing of the green started out originally as “blue” but has gradually shifted to green to reflect the ‘green shamrock’ — a token of good luck. And if you’re not wearing green on St. Patrick’s Day — you may be pinched — another sign of good luck.
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Japan and its tragedies and the impact on the world economy
First, let us start by sending our thoughts and prayers to the families affected by last week’s earthquake and tsunami in Japan. The earthquake was a magnitude of 9.0 – the strongest in Japan’s history. The earthquake in Japan and its damage created some counterintuitive market reactions.
Secondly, one would think that U.S. treasuries and mortgage bonds would trade much higher, as often is the case when devastating natural events drive money into “safe haven” trades, according to John Ciolino, Coldwell Banker’s mortgage consultant. But that wasn’t the case John indicated.
Why? The answer – he says — is that buying of treasuries and mortgage bonds as a safe haven trade was offset by the Japanese selling some of their own massive holdings of treasuries and mortgage bonds in order to repatriate money back to their country during the time of emergency. Considering Japan is the second largest holder of U.S. debt at $877 billion — selling just a tiny position of their holdings — has an impact on bond prices. John indicated that oil fell last week, despite the news. Why? Shouldn’t unrest in Saudi Arabia – the world’s largest oil producer, push prices higher? Yes, he stated, “but that news was offset by the earthquake in Japan. That’s because Japan is a huge importer of oil… and the market senses that the earthquake and subsequent tsunami may create an economic slowdown and diminish the demand for oil.”
The Japanese government has since shored up its economy with a major influx of money to hopefully offset a huge impact their horrible will have on economies around the world. Obviously this is going to be a “wait and see situation.”
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What is happening? Well, it is going according to ‘plan’
When I first looked at the statistics for the four communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, and Brentwood — I was a bit taken aback. Sales volume was down 29% (egads, I thought)….all four of my communities were down in median sales price compared to the previous month….and median sales prices were down for the year. What was going on?
One has to look at statistics a year ago to find that we are basically on track with the same pricing trends as 2010. At this point in 2010, we were down 30% in sales volume -this time (February 2010), we’re down 29% from last year in volume. And all four communities were also behind where they were in 2009.)
My mother always said that I was a ‘late bloomer’. Well, not exactly, but it does seem that when you look at the February statistics provided by the MLS, you can see that individual communities reflect anomalies that don’t normally occur. For example, Beverly Hills was down 79% in median sales price compared to February 2010. That’s a huge anomaly — and it’s because we had sales of $7 million, $8.8 million, $10 million, $12 million, $16 million – all in February 2010, which accounts for this huge difference. Bel-Air, which is down 54% compared to February 2010, also had three sales last year of $4.5 million, $5.2 million, and 5.4 million, which really bumps up the negative comparison with a limp 2011. Beverly Hills Post Office was down %19 compared to February 2010 and Brentwood was down 23%.
When you compare January 2011 to February 2011, it’s a bit more normal for a down period — Beverly Hills was down 32%; Beverly Hills Post Office was down 15%; Bel-Air down 23%; and Brentwood down 30%.
Again, I try to keep a focus on trends — such as year-to-year median sales price — and while we are down in volume (again), these YTD #s reflect a more encouraging trend: Beverly Hills YTD is down 33%, BHPO down 17%; Bel-Air is off by 3%; and Brentwood is down 16%, which is better than what this area did in 2010, which, overall, are a bit better than 2010. Is this good or better news?
There’s an old adage that seems to apply here: “It’s too early to tell.” 2011 is barely underway and one indicator is DOM — Days on Market. The average for all four areas is just 88 days, which is just under three months. In this market, is this good or bad? Several years ago, average DOM was over 120 days….so we’re heading in the right direction.
Homes not priced right sit….and sit….and sit
Remember, DOM reflects many issues — mostly price. Is your home priced right? The farther away your price is from true market value, the longer your house sits….and sits. The longer it sits, the faster the value declines. Another key factor is the comparing Original Listing Price (OLP) to Selling Price (SP). For example, when you look at these #s, you will find that Beverly Hills selling price (SP) to original listing price is 84%; Beverly Hills Post Office is 81%; Bel-Air is 88%; and Brentwood tops out the group with 90%. Basically, these means that when you compare what a house came on the market for and what it sold for, Brentwood homes did better than Beverly Hills Post Office.
There are notable examples of seller ‘excess’ – wanting more but – in the end, getting less. A home in Beverly Hills Post Office was first listed at $7.4 million and after sitting for 479 days, it finally sold for $4.5 million. Another home in Beverly Hills came on the market at $3.75 million and sold for $2.78 million 229 days later! Obviously, these homes were not properly priced and owners paid the price. But the right pricing can turn the other way, too. For example, a Brentwood seller put their home on the market for $3.3 million, had multiple offers, and sold almost immediately for $3.5 million. A home in Bel Air was only on the market for 8 days, getting $325,000 more than the asking price of $3.075 million. Again, priced right with multiple offers.
How can you avoid risky price strategies? Again, I’m going to tell you that unless you have a thoroughly experienced real estate agent who knows your neighborhood, you are risking value time and equity by not getting objective, accurate advice. I cannot tell you have many times I have seen homes come on the market where the owner is absolutely rigid (and unrealistic) about the true market value of their home. I have seen homes drop from $14 million to under $10 million….and in this buyer’s market, that is not unusual. Buyers know they have the upper hand today — and the ONLY way you can protect yourself is to be objective and realistic about the challenges of putting your home on the market. Knowledge and experience is everything. I’m here to help.
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An institution — Bel Air Bar & Grill — is leaving us….but only temporarily
It is famous as the Bel Air watering hole….but for at least 12 months, this local institution will be closing it doors (and tearing them down, too) staring mid-April. The owners are going to redesign and rebuild this “hood” hangout, with plans to reopen in April 2012. We’ll miss this local favorite. If you’re in the mood for pizza, across the street on Sepulveda, Manny’s Pizzeria just opened in the small strip center across the street. I have not been there, but from those who have, I understand the pizzas and salads are great.
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Nuclear power and the environment
Given what is happening in Japan today, and with both Chernobyl and Three Mile Island in the past, I thought this article would be particularly timely. I’m not totally against nuclear energy, I just prefer the closest nuclear reactor being 93 million miles away (the sun). Regardless, nuclear energy does have some very attractive attributes in a world becoming increasingly conscious of peak oil and climate change and I understandable that many people feel it’s a solution.
How does nuclear power work? Essentially, nuclear power seems quite simple. Nuclear fission heats water to generate steam, the steam turns turbines connected to a generator which in turn produces electrical power. It’s basically the same process as coal fired generation; just using what can be a very, very unstable fuel. Nuclear fission is the splitting of atoms, a process in which a great deal of energy in the form of heat is produced. Where things get complex are the controls and resources needed to keep the fission reaction safe.
Advantages of nuclear energy The actual generation of electricity using nuclear energy involves little in the way of carbon emissions. A single nuclear power plant can generate a huge amount of electricity. Running costs are low. Nuclear reactors have a long life span. Fuel appears to be abundant; however this is a hotly debated subject and one in which I don’t intend to enter.
Disadvantages of nuclear power
Mining Uranium mining destroys landscapes and uranium and other radioactive substances are released in the process. The mining and extraction process requires large volumes of water and various acids and alkalis. Contaminated water can leak from tailings dams into groundwater.
Greenhouse gas emissions Electricity generation using nuclear fuel is emissions free – but that’s just the generation. All the processes leading up to that point involve carbon emissions; but how those stack up compared to coal I’m not sure.
Accidents In a word – Chernobyl .. but now there’s also Japan. While the Chernobyl accident occurred decades ago, its legacy continues and may even worsen if the old plant isn’t properly dealt with. Even today, an exclusion zone of approximately 20 miles exists around the Chernobyl reactor and estimates are the region will not be safe for agricultural purposes for 200 years. The effects of Chernobyl are still measurable in countries as far away as the UK.
As for the current Japan nuclear emergency at two nuclear reactors at Fukushima power plant, north of Tokyo – that situation is still evolving.
A nuclear meltdown can be caused by a number of issues, such as a failure in a plant’s cooling system, but my understanding is basically the fuel rods overheat to the point they melt. Beyond that meltdown, the worst case
scenario is where the containment structures then also fail – they may rupture due to a build-up of steam pressure inside. At that point, dangerous levels of radioactivity can be released and as in the case of Chernobyl, affect a very wide area.
Aside from the general immediate health and environmental effects should the Japan situation deteriorate into a Chernobyl-scale incident; imagine having to tie up so much land in an exclusion zone in a country with so little land available – and perhaps for centuries
Water consumption Nuclear power plants are thirsty operations. According to the Union of Concerned Scientists, for every three units of thermal energy generated by the reactor core, two units of waste heat go into the environment. Cooling systems for plants require huge volumes of water and a nuclear power station will use more water than a similar sized coal fired power station. Water intake and discharge has a negative effect on aquatic ecosystems – through the processing of the water itself which kills organisms and the raising of waterway temperatures during discharge. In a world where fresh water supplies are becoming increasingly unreliable in many places; there’s also no guarantee a plant that is built today will have the water it needs in a decade from now without causing even more related environmental problems.
Waste The issue of radioactive waste is an important one as what we do with it is a legacy that will affect future generations for thousands of years. The more nuclear power plants we have, the more waste is generated and it only takes a single incident to affect a wide area – and for a very long time. The waste can also be used by hostile parties to create “dirty bombs”. Aside from the human costs of such devices being used, the environmental impact needs to be considered.
Time for construction A solar power plant can be planned and constructed in a matter of months; a rooftop solar power system in a matter of weeks. A nuclear power plant can take decades – it’s not a short term solution for our energy needs by any means.
Misuse Nuclear energy based power generation is thought to be a front in some countries for nuclear weapons programs. You cannot build a nuclear missile from solar panels, nor with the equipment used to make them. A nuclear energy free future removes some opportunities for covert weapons development.
Availability of uranium While some say we have an “endless” supply of uranium, the same sort of spiel was once said about oil. Perhaps uranium is a plentiful resource, but how much of it is relatively easy to get to? Low-grade uranium ore contains as little as 0.01% uranium oxides and it takes a lot of uranium oxide to make nuclear fuel.
There are advantages and disadvantages for all power sources. Here’s hoping the people of Japan are not again subjected to the nightmare of a widespread radiation incident on top of everything else they have to contend with at the moment.
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My properties for sale… We just reduced the price on my fabulous listing at 20726 Pacific Coast Highway in Malibu to $8,099,000. With spring around the corner, beach living is a wonderful alternative for those “staycations.
Back in town, I just listed a wonderful one ad den at The Terrace in Mountaingate, a newer 4/3.5 Canyon home for $1,725,000 in Bel Air Crest and have my great 3/2.5 plus den for $1, 360, 00 also in Bel Air Crest and for those of you who long to build your own dream home a lot in Bel Air Crest for $3,250,000. Please call me at 310 432-1384 or check out my web site, caroleschiffer.com for more information. Looking forward to hearing from you.
