Month: February 2010

The nonprofit news group ProPublica reported yesterday that 97,000 homeowners have been stuck in trial loan modifications for more than six months under the government’s anti-foreclosure program, which was supposed to generate permanent modifications after three months.

60,000 of those 97,000 borrowers have their mortgages with JPMorgan Chase & Co. . .WOW. . .can you say extend and pretend. . .

With vacancy rates continuing to rise in Santa Moncia, rents in the 90402 and 90403 zip codes are down about 9-13% since 2008. According to Westside Rentals, around 280 1 bedroom apartments are for rent in these high priced zip codes.

After a slow three month period, local landlords have seen activity has pick-up dramatically the last few weeks and rental rates are expected to stabilize at the current rates through the spring and summer months.

California’s hotel market was late showing up to the foreclosure party but their arrival was inevitable. The median price per room is down 30% from 2008 and 38% from 2007. Most hotels presently on the market are still priced too high to sell and Atlas Hospitality Group another 10-20% drop in 2010.

Lenders in 2009 continued to delay processing the foreclosure of distressed hotels, opting instead to extend the forbear in order to defer the reporting of their losses. Although REO hotels made up 73% of the 2009 sales transactions, the majority of distressed hotels have still not been sold.

Foreclosures will dominate the market in 2010 and that is welcome news to developers who turn a profit by converting struggling hotels into condos and/or timeshares. Conversion happens to prime coastal hotels during every recession.

Sources: California Hotel Sales Survey Year-End 2009 and First Tuesday Journal

Here’s an overall snapshot of Westside neighborhoods based on Single Family Residences and their performance over the last 2 years ranked from highest in decline to lowest decline based on price per square foot. These type of losses help explain why many buyers are out testing the market right now despite the fact that some of the losses are only 1/3 of the average for LA County…Is it too early to buy in some of these neighborhoods? The current activity of buyers would lead us to believe it is not…if only we had a crystal ball.

1) Malibu 90265 ($734/sqft) -29.7% (2008-2009)

2) Marina del Rey 90292 ($506/sqft) -28.9%

3) Pacific Palisades 90272 ($728/sqft) -22.5%

4) Venice 90291 ($712/sqft) -22.4%

5) Beverlywood 90034 ($456/sqft) -21.5%

6) Culver City 90230 ($467/sqft) -20.6%

7) Santa Monica 90405 ($676/sqft) -19.9%

8) Santa Monica 90403 ($811/sqft) -19.4% (2008-2009)

9) Santa Monica 90402 ($876/sqft) -19.3%

10) Westwood 90024 ($616/sqft) -18.8%

11) Brentwood 90049 ($654/sqft) -17.8%

12) Beverly Hills 90211 ($621/sqft) -17.6%

13) Rancho Park 90064 ($547/sqft) -17.2%

14) Mar Vista 90066 ($531/sqft) -16.2%

15) Bel Air 90077 ($572/sqft) -15.5% (2008-2009)

16) West LA 90025 ($599/sqft) -14.8%

Comparatively, the entire County of Los Angeles corrected over 41.3% in Price Per Square Foot since 2007. . .

*Sources: DataQuik, MLS, Westside RE Meltdown

Below you will find a line to a good article that appeared in the LA Times this past weekend about the high end home market. The reality has definitely hit seller’s and buyer’s are noticing. Agents are the busiest they have been with buyers in over three years in all price ranges.

Despite the challenges of getting jumbo financing, activity continues to get stronger with a flurry of cash buyers and foreign investors. High-end homes (over 2.5 million) properly priced 15-25% (depending on area) off the highs of 2006 are getting strong offers. However, expect prices to stay flat and trend further down (at a slower rate than 07-08) in this segment of the market for another 3-5 years.

Link: LA Times Article: High End Home Sellers Lower Their Sights

With inventory trending up but days-on-market trending down, conditions do not seem to have strong up or down pull in the 90402 zip. Despite the fact that there is a relatively high amount of available inventory, the Buyer’s market is still seeing prices move higher. Given inventory levels, these price conditions are fragile.

Rent comparison has long been hailed as a fundamental factor in setting the value of real estate. When it is cheaper or slightly more to purchase a home rather than rent, a purchase of real estate makes sense for a buyer. In recent reports, Deutsche has been using this indicator to try and gauge the future of housing prices.

For example, Deutsche Bank reported that Americans paid about 13% more to own a home in 1999 than to rent a comparable home. Compare that number with Americans paying 66% more to own than to rent during the 2000’s which brought the ensuing Great Recession.

Unfortunately the market stabilization would make one think it is a great time to buy but the this indicator does not reflect lender and government intervention. However, it is a great tool along with price per square foot to properly price a home. If a mortgage payment is 25-30% more than what the rent would be, does it make sense to buy?