Loving your house again

Forget the doom and gloom about a tanking market. You made a smart investment.
By Chris Ayres 
August 17, 2008
First, let me say this: Of course I have regrets. After all, the purchase of our family home in Hollywood with an adjustable-rate mega-jumbo mortgage closed a mere 119 days before Countrywide Financial Corp. announced that — whoops! — it had, uh, run out of money. Of all the financial horror stories of last summer, this was the one that seemed to mark the official start of what is now commonly referred to as the “credit crunch” — the symptoms of which, if you’re an L.A. homeowner at least, include weeping openly in front of CNN real estate bulletins and waking up three or four times during the night to check the tumbling digits next to the satellite image of your home on Zillow.com. 
So yeah, I have regrets. Like wishing I’d borrowed more money and bought a bigger house.
For the whole article click here:

Teles Weekly Activity (8/15/08)

BACK ON THE MARKET:

1204 ROXBURY DR 2C :::   MLS # 08-283341

Area: Beverlywood Vicinity

Listing Price:  $799,000

Listing Agent: The Fiedlers – Teles Properties

PRICE REDUCTION:

2112 DUXBURY CIR :::   MLS # 08-279043

Area: Beverlywood Vicinity

New Price:  $10,000

Original Price:  $15,000

Listing Agent: JJ Wallack – Teles Properties

Teles Weekly Activity (8/8/08)

NEW LISTINGS:

2726 CASTLE HEIGHTS PLACE ::: MLS # 08-302183

Area: Beverlywood

Listed At: $4,500/mo

Listing Agent: The Fiedlers – Teles Properties.

PRICE REDUCTION:

1050 WOODLAND DR ::: MLS # 08-293545

Area: Beverly Hills

New Price: $11,900/month

Original Price: $14,900/month

Listing Agent: Ernie Carswell – Teles Properties

.

1907 CRESCENT HEIGHTS ::: MLS # 08-296399

Area: Beverlywood Vicinity

New Price: $599,000

Original Price: $624,000

Listing Agent: The Fiedlers – Teles Properties

IS THE HOUSING CRISIS REALLY A “CRISIS”?

In his commentary, Dennis Kneale of CNBC crunches the numbers.  CNBC has posted a very interesting video (it’s only two and a half minutes) in which Dennis trys to put the housing statistics in some perspective.  He makes his points well.  If you’re getting foreclosed on it won’t make you feel better.  But, if you’re looking at the market as a buyer, seller, investor, or professional agent he has a very interesting point of view.  His video is available here.   We would love your comments.

FEDERAL HOUSING BILL NOW LAW, INCLUDING FIRPTA FIX

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®

This week, President Bush signed into law the Housing and Economic Recovery Act of 2008. This sweeping legislation primarily seeks to protect homeowners from foreclosure, stop declining home prices, and stabilize the mortgage industry. Major provisions of the new law affecting the real estate practice are as follows:

- SELLER NEED NOT REVEAL SSN TO BUYER UNDER FIRPTA: Effective immediately, sellers are no longer required to provide to their buyers the Seller’s Affidavit of Nonforeign Status (C.A.R. Form AS), which includes the sellers’ social security numbers, under the Foreign Investment in Real Property Tax Act (FIRPTA). Instead, as another option, no federal withholding is required if the seller furnishes the Seller’s Affidavit with his or her social security number to escrow or other qualified substitute as defined, who in turn, furnishes a statement to the buyer stating, under penalty of perjury, that it has the Seller’s Affidavit in its possession. A “qualified substitute” is a person responsible for closing the transaction, such as an escrow company, title company or the buyer’s agent, but not the seller’s agent. The federal withholding law is now similar to California’s Franchise Tax Board (FTB) policy which allows the escrow officer to remove the seller’s tax ID number from the buyer’s copy of the California withholding tax statement, but not other copies.

- $300 BILLION IN FHA REFINANCING: Under the HOPE for Homeowners Program, 400,000 distressed homeowners can pay off their troubled mortgages and replace them with more affordable, FHA-insured loans. To qualify, a borrower’s monthly payment on existing mortgage loans must be over 31% of his or her income as of March 1, 2008 (hence demonstrating the borrower’s inability to afford the original loans). The original loans must have been originated before 2008, and secured by the borrower’s principal residence (as well as only residence). Also to qualify, the borrower must satisfy FHA underwriting requirements for the new FHA-insured refinance loan.
The FHA refinance will be a fixed rate loan up to $550,400 for at least 30 years, and will include charges for FHA insurance premiums. The maximum loan-to-value ratio of the FHA refinance is 90% of the appraised value. If the refinance proceeds are insufficient to pay off the existing liens, the refinance will not go through unless the original lenders voluntarily agree to accept a short payoff as payment in full. Rules will be established to allow, among other things, equity sharing for the original junior lienholders.
Upon obtaining the FHA refinance, the borrower must share with the FHA at least 50% of any equity realized through a subsequent sale or refinance. The FHA’s share in equity will be based on a sliding scale of 100% of any equity realized within the first year of the FHA loan, 90% the second year, and so on, but not less than 50%. The HOPE for Homeowners Program shall be in effect from October 1, 2008 to September 30, 2011.

- $7,500 TAX CREDIT FOR FIRST-TIME HOMEBUYERS: With certain exceptions, a first-time homebuyer will receive a tax credit of 10% of the purchase price up to $7,500 maximum, for the tax year in which the buyer purchases a principal residence. The tax credit, however, must be repaid like an interest-free loan in equal installments over the next 15 years or in full if the homebuyer sells the property for a gain. A buyer qualifies as a “first-time” homebuyer as long as the buyer (and spouse if any) has not owned a principal residence in the U.S. for the last three years. The tax credit phases out for a taxpayer with a modified adjusted gross income over $75,000 (or $150,000 for joint returns). This tax credit is available for qualifying homes purchased from April 9, 2008 through June 30, 2009.

- FANNIE MAE, FREDDIE MAC, AND FHA REFORM: The new law permanently sets the conforming loan limit for FHA and government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac at 115% of an area’s median home price, not to exceed $625,500. The new loan limits take effect after the current $729,750 loan limit expires on December 31, 2008.
The new law also authorizes the Treasury Department to bail out Fannie Mae and Freddie Mac if necessary by increasing their lines or credit or purchasing their stock. A new governmental agency, the Federal Housing Finance Agency, will be created to oversee GSE operations. Other FHA reform includes an increase in the minimum down payment requirement from 3% to 3.5%, and effective October 1, 2008, the elimination of seller-funded down payment assistance programs.

Some of the other provisions of the new Housing Act are, without limitation, $4 billion in assistance to stabilize neighborhoods hurt by the foreclosure crisis, $180 million for pre-foreclosure counseling, Home Equity Conversion Mortgage (HECM) reverse mortgage reform, assistance for veterans, and the creation of a nationwide loan originator licensing and registration system. The appropriate governmental agencies will establish new regulations as needed to carry out and enforce the new Housing Act.

Realegal® is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing nearly 200,000 REALTORS® statewide.

Executive offices:
525 South Virgil Ave., Los Angeles CA 90020
phone (213) 739-8200; fax (213) 480-7724

Legislative offices:
980 Ninth Street #1430, Sacramento CA 95814
phone (916) 492-5200; fax (916) 444-2033

To contact C.A.R. regarding Realegal®, click on this link:

http://www.car.org/index.php?id=MTEx

Copyright © 2008 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

Condominiums are a Micro Market

This is our first Condominium report for the Micro Markets we track on the Westside of Los Angeles. Condominiums are a Micro Market in and of themselves and are behaving differently from the single family residence market. Of the Micro Markets we track, several have a very limited condominium market while other areas like Santa Monica and Westwood have large condominium markets. This is because of each area’s zoning and building restrictions which either encourage or discourage the construction of condominium units.

The sales volume for June ‘08 improved over May ‘08, but for our month over month comparison of June ‘08 to June ‘07 and comparing YTD  ‘07 to ‘08 it was quite a different story. Sales volume in June ‘08 was up over May by 14% however, YTD, June ‘08 to June ‘07, sales volume was down 44%. June ‘08 to June ‘07 month over month sales volume was down 38%. During this same time only three markets performed better; Malibu Beach, Pacific Palisades, and Santa Monica. In reality, only Santa Monica really fared better as Malibu and Pacific Palisades had one and three sales respectively. 

Median sales prices performed differently. Seven markets actually performed better comparing the median price of properties sold from June 2007 to June 2008. They were: Beverly Hills $950,000 to $1,170,000; Brentwood  $702,000 to $739,000; Hollywood Hills East  $478,750 to    $650,000; Pacific Palisades  $706,000 to $707,000;  Silver Lake $476,000 to $595,000; Venice $1,025,000 to $1,295,000; West Hollywood $585,000 to $585,000; Westwood-Century City $689,500 to $700,000.  In eight markets’ median sales price increased in June 2008 to May 2008.

It has taken longer on average to sell a condo in 2008. The Average Days on Market to sell a condo YTD for June ‘07 was 77 days and for June ‘08 it was 102 days . Comparing month over month, June ‘07 took 64 days to sell a condo while June ‘08 has been averaging 108 days. Individual markets have different statistics. Los Feliz  averaged 198 days in ‘07 to sell a condo compared to 145 days in ‘08. Malibu Beach took 268 days in ‘08 and there was not a single sale in ‘07. In Pacific Palisades it took just 10 days in ‘07 but jumped  to 166 days in ‘08. And in Venice it took 63 days in ‘07 to 25 days in ‘08.

Active listing inventory for condominiums currently on the market year to date ‘08 is down to 710 listing from 1501 in ‘07. The number of sold listings year to date for 2008 is also down, 809 condominiums sold compared to 1511 in 2007. New listings that have come to market year to date are also down to 2240 in ‘08 from 2511 in ‘07. Expired listing increased from 153 in ‘07 to 205 in ‘08. These were listings that did not sell and the listing agreements were not renewed. More listings were withdrawn from market in 2008. These were listings that had not run the course of their listing agreement and were removed from market. 

In conclusion, the average days on market is up, median prices are stable, inventory is down 52% and sales volume is down  44%.

JUNE 2008 Micro Market Report- Condominiums

 

 

The market is much more balanced than the headlines indicate.*

Of the 257 closings this month, 46% sold within the first 30 days of  being on the market. There is no disputing the evidence that good homes at a good price are still selling very quickly.

The following micro markets were up in sales activity June 08 vs. June 07: Beverly Hills, Westwood - Century City, Brentwood, Los Feliz, and Malibu Beach. In 10 of the 19 micro markets we track, sales activity was up in June 08 vs. May 08.

The median sales price across the 19 micro markets we tracked in June 08 vs. June 07 was down 10.8%, while the YTD numbers are up 4.9%. What is also very interesting is the sales price to list price ratios. On average, listings are selling at 6% off the original asking price and 4.4% off the list price at the time of sale. The following micro markets were up in terms of median sales price for the month of June 08 vs. June 07: Bel Air, Los Feliz, and Venice.

The following micro markets have experienced a YTD increase in median sales price: Beverly Hills P.O., Bel Air - Holmby Hills, Sunset Strip - Hollywood Hills West, Cheviot Hills - Rancho Park,  Venice, Santa Monica, and Hancock Park- Wilshire.

Our Conclusions:

There is actually a healthy competition for well-priced properties. The media headlines suggest inventory is swelling and buyers should be able to purchase a property from a  distressed seller or through foreclosure. These situations in our local markets are practically non-existent. In our local markets, many sellers have the financial ability to decide whether or not to sell their home in the current market environment. The big anticipated price drop many buyers had expected has simply not occurred. For a buyer, sitting on the sidelines is not without risk. While interest rates are slowly trending upward, they continue to be the silver lining in the market. With loan programs changing every day, it is very difficult to say which programs will be available, and at what cost, going forward.

Sellers are faced with the reality that the media continues to create a perception of a buyer’s market. Sellers can take heart in the  fact that buyers want to buy and multiple offers still take place for well-priced properties. Homes priced at “market value”, not feelings or false expectations, are still selling.

In summary…. Buyers and Sellers need to pay close attention to the real numbers, not just the headlines. The media’s coverage is largely based on macro trends, not on our local micro market data. Yes, we are in a different real estate environment when compared  with the market of two or three years ago. At the same time, the  market is much more balanced than the headlines indicate.

* Our report has been amended to reflect revised statistics from the MLS listing service.

JUNE 2008 Micro Market Report

Los Angeles Limits ‘Mansionization,’ Downtown Hotel Conversions

The City Council adopts rules curbing the size of remodeled homes on the flatlands and preserving low-income housing, mostly on skid row, that advocates fear are in danger of becoming lofts.
By Jessica Garrison and Cara Mia DiMassa, Los Angeles Times Staff Writers
2:47 PM PDT, May 6, 2008
» Discuss Article (14 Comments)

The Los Angeles City Council today approved new rules to address major byproducts of the gentrification that has swept the city: Limiting the size of “mansionization” additions and making it harder for developers to convert low-income housing on skid row into luxury lofts.

The new rules radically limit the size of remodeled homes in the city’s flatlands to 3,000 square feet in most cases, curtailing what homeowners say is a plague of behemoth, ugly stucco boxes that are killing neighborhood character.

On the other end of the spectrum, council members voted to preserve more than 18,700 units in residential hotels, mostly located downtown, that advocates worry are in danger of being turned into luxury lofts or condos.

Both measures were controversial and required heavy negotiation among activists, property owners and members of the business community. But in both cases, the final unanimous votes heralded an acknowledgment by council members of the incredible pressures that gentrification has exerted on virtually every corner of the city.

“When certain neighborhoods have homes on steroids and others no longer have a place for the poor to sleep, the social fabric is torn,” said City Council President Eric Garcetti, citing the need for the ordinances.

The city has been criticized for years for not doing more to preserve the look and character of existing neighborhoods against “tear-downs,” in which property owners demolish original homes and replacement with dwelling often two or three times larger.

Activists have also been alarmed at how the revitalization of downtown L.A. has swept into skid row, leading some owners of the residential hotels that for decades were the domain of the poor to remake their property for the new downtown crowd.

Mercedes Marquez, the general manager of the city’s housing department, said the double action represented a move “to make sure that everybody has a say and stake” in the city.

The mansionization law was first proposed more than three years ago. Residents complained that the character of their neighborhoods is being destroyed by behemoth houses that dwarf the scale of other residences.

Mark Lipis of Westwood brought council members poster-size photos of his neighbor’s house, which he described as a 6,500-square-foot behemoth with a roof deck and an elevator.

The law would effect more than 304,000 lots in the flatlands of Los Angeles, most of the city’s single-family homes.

“No neighborhood is immune to the loss of character and diminishment of privacy,” said Mike Buhler, director of advocacy for the Los Angeles Conservancy. “The impact of huge new homes cannot be overstated.”

Building industry and real estate representatives, on the other hand, warned that the law would drive down property values and hurt Los Angeles’ economy. They also decried what they said was the law’s one-size-fits-all policy.

The mansionization ordinance passed 12-0. Council members Weiss, Bernard Parks and Garcetti were all absent for the vote; Garcetti, who made an appearance in support of the ordinance, was on jury duty today.

The residential hotel ordinance passed 13-0, with Parks and Garcetti absent. It replaces a temporary ordinance that the council approved in 2005, when there was a growing concern that available housing for the poor — especially in downtown Los Angeles — was rapidly dwindling amid the gentrification of historic neighborhoods. That ordinance was set to expire later in the month.

The new law protects units in the 336 single-room-occupancy and residential hotels across the city, most of which are privately owned. Owners who wish to convert their buildings may only do so if they meet a strict set of guidelines requiring them to replace the residential units within two miles of their building or pay a fee that would provide for acquisition of a new site plus 80% of the cost of constructing new units.

Seven residential hotels in the city have more than 250 units, and owners of those units would only be allowed to convert 80% of their building to market-rate units.

Activists supporting the new law said that it provides strong protections for the city’s poorest. It also includes incentives to improve the living conditions for the aging properties.

“We feel like it’s a strong victory for tenants, one of the first victories for tenants in quite a while,” said Becky Dennison of the Los Angeles Community Action Network, one of several dozen community organizations supporting the measure.

City officials said that the ordinance was one way that they could protect housing for the city’s poorest without spending city dollars in the midst of a severe revenue shortage.

“Given the crisis we have, this is one thing we can do without having to put in money we don’t actually have,” said Marquez. “This is what we can do. It will go further than we ever have before in protecting the rights of tenants, particularly the very poor.”

Veronica Perez Becker, vice president of legislative affairs for the Central City Assn., a business advocacy group, called the new ordinance a “flexible policy that takes into account the needs of the business community.”

Perez Becker said that the ordinance “allows revitalization to continue” — in part because there are provisions allowing owners to convert their buildings if they follow a strict set of rules.

The owner of the Cecil Hotel downtown did take issue with his building’s designation as a residential hotel. In recent months, the Cecil has been the target of activists who allege that the owners have conducted prejudiced and illegal housing practices.

But Michael Ross told the council that most of his hotel’s guests are tourists. “We haven’t been given due process,” he said, adding that the ordinance would “give L.A. control over our property without recourse.”

Jane Usher, head of the city’s Planning Commission, said that both ordinances were important to Los Angeles’ future. “Both represent an understanding of the needs of our residents,” she said. “The city needs to be home to people of every income, and these measures foster that.”

Jessica.Garrison@latimes.com

Cara.diMassa@latimes.com

Watching, Reading, and Listening

Watching, reading, and listening to news reports of falling prices, building inventories, and an overall sense of doom and gloom in the real estate market contrasts with our current experience in the Micro Markets we track. If you study the numbers closely you will see that little has changed in the year over year numbers for May 08 versus May 07. Yes, the number of sales has decreased by 37% however the rest of the statistics don’t reflect a big change in the market (see below). The key factor in the market right now is inventory. Inventory in the markets we survey is still low on a relative basis and this is what we believe is holding the market up compared to surrounding areas where foreclosures and short sales are much more prevalent.

Here are some highlights from our Micro Market Report:

1. The number of sales are down year over year. For the month of May that decrease was 37%. Sales volume in 11 markets we track fared better for May 2008 than April of the same year.
2. The median sales price was down year over year for the month of May by 3%. However in 10 of the 19 Micro Markets we study, the median price was actually up looking at May 08 versus May 07. The markets that were up included: Beverly Hills, Sunset Strip-Hollywood, Bel Air Holmby Hills, Brentwood, Cheviot Hills-Rancho Park, West Hollywood Vicinity, Venice, Santa Monica, Pacific Palisades, and Hancock Park - Wilshire.
3. The list price to sales price ratio declined 2.6% year over year looking at the May numbers. The ratio of sales price to list price was 97.9% in May 07 versus 95.3% in May 08.
4. 43.7% of all the listings that sold in the markets we are watching sold in less than 30 days in May of this year. This is a very important number. It clearly shows the importance of pricing when it comes to selling a home. It also shows that good homes at the right price are still selling quickly and in some cases in multiple offers. There is still demand in the market for good homes at the right price.

As a buyer in today’s market you are probably not going to get the “deal” you are hoping for based on the headlines you are reading. Prices are firmer than the media reports would lead you to believe. Buyers who anticipate further declines in the market run the risk of higher interest rates and more restrictive lending practices. No one has the ability to predict the market. Many buyers who were hoping for lower prices are now locked out of the market because they can not get the loans that were available to them a year ago or prices have not dropped as much as they had hoped. There is always a risk in waiting.

For sellers, the lesson of this market is price. Homes are still selling and selling quickly, however the market is extremely price sensitive. The only people who should be putting their homes on the market right now are those individuals who absolutely want to sell. If you need to get a certain price for your home, now is not the best time to be on the market. Please know there is no news on the horizon that points to higher prices in the short term and therefore sellers should not have any false expectations around receiving higher prices than the market will bear.

MAY 2008 Micro Market Report

Micro Markets are Choppy with Rays of Sunshine

The market is still looking to find its footing and gain traction. Consistent with the previous months of this year the Micro Markets that we are following are all experiencing different types of activity.

April’s closed sales volume is the aftermath of the slow flow of new transactions from February and March. Escrows are averaging 30 to 60 days to close.

Open House Activity is very strong as the mood and confidence of buyers improve. Positive media outlooks, including upbeat forecasts from Warren Buffet and The Wall Street Journal, about the improving sub prime markets and the housing markets are a refreshing respite from all of the negative news articles that have been published over the past many months.

Sellers are beginning to enter the market at market value and/or are reducing listing prices until market value is found.

Financing is still tough and is still the major obstacle for buyers and sellers to close a transaction. Many lenders are acting gun shy by pricing themselves out of the market or seeking appraisals below the contracted price between a buyer and seller. Local lenders, however, are taking advantage of the opportunity by providing portfolio loans to qualified borrowers, but demand is outstripping supply and the queue for approval is long.

First time buyers are back in the market. This is good news for the middle of the market as this will give those sellers the opportunity to move up to a new home. The top of the market is still very strong and oblivious to the economy or financial markets. If these buyers want a property, they buy it. We think they know something about real estate as an investment.

Improved values are driving multiple offers on existing inventories and we have participated or managed transactions with as many as 13 offers.

Inventory is still low in many markets. Sellers are waiting for the market to stabilize before placing their property on the market.

Now for some specific observations:
The sales volume in 10 out 20 markets we track had a better April than March in 2008. Santa Monica’s April sales volume doubled its March volume.

However, only 4 out of 20 markets had improved sales volume for April ‘08 compared to April ‘07.

Beverly Hills, Beverly Hills Post Office and Brentwood, which were our best performing markets for the year, took the brunt of the lower sales volume in April.
Bel Air bucked the trend and had a stronger April compared to the previous year.

Cheviot Hills / Rancho Park continues in its steady sales volume and Venice made a strong comeback by tripling sales volume compared to March ‘08 and nearly matching April ‘07.

Hancock Park continues to perform well, matching previous sales history. As traffic congestion tightens on the Westside, the Hancock Park market improves.

Median Prices improved for 13 out of 20 markets in April over March for ‘08. Only 6 markets improved for April ‘08 compared to April ‘07.

Sunset Strip improved to a median price of $1,740,000 for the month of April compared to $1,539,00 for April ‘07 and $1,475,000 for March ‘08.

Cheviot Hills / Rancho Park enjoyed a median price of $1,645,000 compared to $1,600,000 for the same month the previous year and $1,417,000 for the month of March this year.

Venice surged to $1,200,000 from $969,000.

Hollywood Hills East fared very well at $1,169,000 compared to $1,080,000 for the same month the previous year and $765,000 for March of this year.

Please use the link below to obtain the information you need for your particular market.

APRIL 2008 Micro Market Report