Timely Real Estate News………………………………………………….. 1 June 2011
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Was Chicken Little Right?!?
We have all seen and heard about the “plunging home prices” that we are facing. Is it true? Yes, prices of real estate — even in our wonderfully luxurious West Los Angeles real estate market — are softer than any of us would like (even for buyers), but are our prices really plunging? Not that I can see…..
However, the effect of these stories (LA Times, June 1, for example) is having on buyers and sellers today are creating a lot of fear. Buyers want to buy, but they are afraid that whatever they buy will eventually lose its value. Sellers are worried about their continuing loss of equity.
So where is the truth? In my open houses over the last few days….and with the phone conversations I have had with my buyers…..they all say the same thing… “We don’t know what to do. What if the prices go down further”? Here is what I tell them.
“Interest rates are the lowest they have been in years, and most likely will not stay at these levels, so what happens when they go up? Your expenses go up with a higher interest rate on your mortgage even though you may be paying less for the property. If you delay your purchase, you actually will be paying more with future, higher interest rates, and you will not have the advantage of having your home to enjoy. Also you have the added bonus of the tax write off.
Are you buying a home or an investment? If it is — in fact — a home that you are purchasing, then hopefully you will be staying there for a while, and the value will come back up as they always do. It might take a little longer than you would like, but again, THIS IS YOUR HOME. So please sit back and enjoy it”.
The reality is there are two markets out there today: #1 – If you have a good property that is properly priced, the buyers will be there in droves. And, #2 – if your home is on the market and priced too high, then you can expect it to sit and sit…..eventually selling for less than it possibly should have if it had been properly priced in the first place.
Of course, comps impact the values of all homes on the market and everything else around it. I can tell you story after story when this has happened.
The moral of the story is that, yes, buyers and sellers need to be extra careful these days and make sure that you clearly understand the value of the home and neighborhood. And most of all, you need to have an experienced real estate agent who truly understands the subtleties in the market. That’s what I’m here for.
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Home sales fell in April by 9.2%.
The National Association of Realtors (NAR) reported that nationally existing home sales fell 0.8% in April 2011 from March to a seasonally adjusted annual rate of 5.05 million homes projected for the year. At the current sales pace, it would take 9.2 months to sell homes on the market. A healthy existing home sales inventory is considered six months.
April home sales in Southern California fell by 9.2% from a year ago according to Data Quick, a San Diego-based real estate research firm. This figure was 25.4% below the month’s average since recording keeping began in 1988 the firm stated. The median price paid for a home in the entire region fell 1.8% from a year earlier to $280,000.
However, as I am always quick to point out, the #s for the four areas I cover — Beverly Hills, Beverly Hills Post Office, Bel-Air and Brentwood are all luxury communities, including a number of them that are gated — our real estate performance is not usually in-synch with what is happening throughout the region. Because of our attractive residential areas, superior shopping and dining, and a plethora of cultural assets, “we” tend to avoid many of the real estate pratfalls other areas endure”.
One of the notable negative statistics, however, is that according to Data Quick, 21% of the homes in the Los Angeles metropolitan area are now underwater — which is another way of saying that their mortgages are now greater than what the homes are currently worth.
Many buyers have taken the short sale route — only to be frustrated by lenders who want to stretch out the process to see if the target home will rise in value during the process. Many buyers feel that they are getting the runaround when entering the short sale tunnel. Even after months of what sometimes is described as a “tortuous process”, the lender can pull the rug out during the closing days of escrow if they think they can extract more $$ from the property. So, if you’re thinking of going the short sale route — remember that there are many hurdles to overcome — and not all will be evident from the start of the process. These are fickle times. I will be more than happy to give you counsel on any property where this might be a factor.
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There is news on the home mortgage front…….
The Mortgage Bankers Assn. said last week that applications for home loans have risen and were 7.8% higher than the previous week (May 13), and that’s good news. Fixed-rate mortgages are at their lowest point of the year according to Freddie Mac. Mortgage rates declined for the fifth straight week amid mixed economic and housing data.
The 30-year fixed-rate loans averaged 4.60%, down from 4.61% the prior week and 4.84% a year ago. The 15-year loan fell to 3.78% from 3.80% a week earlier and 4.21% a year ago.
Last year at this time, Freddie Mac noted 30-year fixed-rate mortgages averaged 4.84%. The last time the 30-year rate was lower was in the week ended December 2, 2010, when the rate was 4.46%. The rate fell as low as 4.17November 2010 before surging to 5.05% in the week ended on February 10, 2011.
Freddie Mac surveys rates lenders are offering to well-qualified borrowers who make down payments of at least 20% or have that much equity in their homes if they are financing. As rates fall, applications for home loans rise.
For those of you who are looking for five-year Treasury-indexed hybrid adjustable rate mortgages averaged 3.41%, down from 3.48% the prior week and 3.97% a year earlier. To obtain these rates, the fixed-rate mortgages require an average payment of 0.7 point while adjustable mortgages require a lower 0.5 point.
While there are signs of a slowing economy, Freddie Mac Chief Economist Frank Nothaft said that the U.S. house prices indexes may be nearing the bottom soon, pointing to slower price declines in recent months and a reduction in the serious delinquency rate.
But there were some disturbing signs as well — the number of American households behind on mortgage payments hovered at its lowest level in nearly two years during the first quarter 2011, but the number of borrowers in foreclosure stayed at near-record high levels according to the Mortgage Bankers Assn. Sales of previously owned homes declined in April, further underscoring the challenges we have in our US housing sector that has, according to the MBA, “limped along since the home-buyer tax credit ended last summer.”
The number of borrowers who are seriously delinquent — meaning they have missed three or more payments — has now declined for five straight months. “We’re not healed yet, but things are looking better than they did certainly a year ago,” said Jay Brinkman, the MBA’s chief economist.
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Bird Watching
If you have taken to bird watching in Bel Air Crest, I am afraid you and I will need to look and wait for the construction on the front entrance to begin a little longer. The chicks have not all taken flight yet and the California Department of Fish & Game has not cleared the site for the commencement of the work.
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Fun Things to Do This Summer
Given the price of gasoline, a number of us are taking “staycations” rather than going away. Here is a list of some fun things to do in Southern California
| Ahmanson Theatre – Music Center | 213 972-7401 |
| Anaheim Angels | 714 663-9000 |
| Andres Pico Adobe | 818 365-7810 |
| Aero Space Museum | 916.643.3192 |
| Art & Architecture Trolley Tour | 310 285-2438 |
| Balboa Boat Rentals | 949 673-7200 |
| Banning Residence Museum | 310 548-7777 |
| Bergamot Station | www.bergamotstation.com |
| Big Bear Mountain Ski Resort | 909 585-2519 |
| CBS Ticket & Show Info | 323 575-2624 |
| Cabrillo Marina Aquarium | 310 548-7562 |
| California Heritage Museum | 310 392-8537 |
| California Science Center | 213 744-7400 |
| Catalina Island Express | 800 995-4386 |
| Chivas – USA | 877-244-8271 |
| Children’s Museum | 818-686-9280 |
| Columbia Studios | 310-244-4000 |
| Craft & Folk Art Museum | 323-937-4230 |
| Del Rey Sport Fishing | 310-822-3625 |
| Descanco Gardens | 818-949-4200 |
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So what wonderful properties do I have in my hopper for you to know about?
I have some great new choices including a home on Promontory in Mountaingate that is listed at $2,695,000 with an amazing view of the coastline as well as a great yard, and then if you like the feeling of living in a park there is another absolutely immaculate home in the Ridge in Mountaingate with an elevator for $1,650,000. Later this week I will be listing an Urban Oasis in Brentwood, north of Sunset with a price yet to be determined. Please let me know how I can assist you with your real estate needs.
