Real Time Market Activity For Santa Monica 90402
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.
By John SkinnerRent Trends As A Housing Price Indicator Back In Vogue…
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?
Recordings of Notice of Defaults Rose 9.5% in January
Recordings of notice of defaults (NOD’s) on trust deed loans in January 2010 rose 9.5% on a daily avearge basis from December 2009, according to Foreclosure Radar.
The increase in the number of NOD’s recorded in January 2010 is up more than 16% from January 2009. However, real estate owned (REO) properties are down more than 33% January over January, indicating banks are taking longer to complete the foreclosure process. REO’s once placed on the market, continue to sell rapidly.
The good news is that brokers with REO properties to sell are seeing them go quickly. The buyers are ready to pounce after the dip of the past two years, especially under a million dollars whree affordability is the best it has been in California in 12 years.
Unfortunately, such listings are scarce despite the number of defaults. Lenders continue to play the delay game to benefit their bottom line as they do not report the market value of their loan portfolio of toxic mortgages until the REO is resold. Unless this changes, look for more of the same kinds of numbers next month.
Never Pay Advanced Fees For A Loan Modification
With 25% of Californian’s underwater – around 2,500,000 people- all needing loan modifications, nefarious loan modification facilitators have taken advantage of this increased demand by collecting advanced fees from the homeowner and then (for the most part – it does work out rarely) accomplish little to nothing in negotiations for a loan modification with the lender. In fact, the services performed by the facilitator can easily be obtained by the homeowner directly through the lender or non-profit housing counseling agency.
The California Department of Real Estate revoked a record breaking 672 licenses in relation to loan modification scams, up 50% from 2008. Additionally, 105 licensees have surrendered their licenses to the state are facing disciplinary action for accepting advanced fees.
Effective October 11, 2009, California Business and Profession code 10147.6 prohibits advance fees to be paid for any loan modification or loan forebearance service on a one-to-four unit residential loan even if the licensee received a “no objection” letter from the DRE previously granting them authority.
A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available at www.hud.gov.
*Source: “DRE Licenses Revoked in 2009 hit a reacord” by Connor P. Wallmark
Sales of Million Dollar Plus Homes 1/3 of What They Were in 2005
*Only 18,261 homes sold for over $1 million dollars in 2009, a mere fraction of the 54,773 which were sold during the speculative boom in 2005.
*Approximately 1,900 homes in California that were sold for over $1 million prior to 2009 were sold in 2009 for six digits.
*Cash is king…Of the homes purchased for over $5 million, 66% were paid for in cash, as were 29% of homes purchased for over $1 million.
High-tier properties are first in a recession to slow down in sales volume, but always the last to enter the foreclosure fray- but they will have to hit at some point especially properties that were financed after 2001.
Real Time Market Data For Santa Monica
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Each week we will be updating you with Altos Research for Santa Monica, Brentwood, Pacific Palisades and Mar Vista. We hope to be adding Manhattan Beach and Culver City in the near future. The Altos research provides an overview of current real estate market conditions for Single Family Homes, trends in pricing and current levels of supply and demand. The data is gathered on Monday of every week and released to us on Wednesday. Please feel free to call our office whenever you would like more detailed information.
Tumbling Down on Corsica Drive
Last year I wrote quite a bit about prices dropping in the Palisades Riviera. Although we have seen some slight stabilization lately, 1136 Corsica Drive shows how far the market for high-end new construction dropped. This 6,800 square foot Mediterranean villa detailed with fine qualities and design, featuring a gourmet kitchen, vaulted ceilings, his and hers baths, and lush landscaping complete with pool, spa and barbeque debuted on the market in January of 2008 for $9,275,000.
After being leased in October 2008 for $35,000 it is now listed for sale at $6,495,000. This is a classic example of what happens when a seller doesn’t understand market reality and tries to catch a “falling knife” as opposed to adjusting to the market quickly. The current price properly reflects the market in that area and it should garner serious interest. Please feel free to call my office at 310-255-3447 if you would like further information or want to schedule a tour.
Does Recent Market Activity Align With Reality?
Historically, December and January are slow months in residential real estate but the historical norm didn’t apply to anxious Westside/South Bay buyers wanting to take advantage of record low interest rates, FHA financing, tax incentives and sellers finally giving into a 20-25% price correction from market heights.
The market is the hottest it has been in over 3.5 years with the term “multiple offers” becoming a normal phrase out of a listing agents mouth while buyers are flowing into open houses priced under 2 million dollars like the economic collapse at the end of 2008 never happened.
Homes and condos priced below $850,000 are seeing a ton of traffic. This past weekend, condos in my office that have been on the market for over 30 days priced between $400,000 and $800,000 had 40 to 60 perspective buyers checking them out. Last year at this time, condos not considered new listings would be lucky to draw the attention of 5 to 10 people for an open house.
Even the high end ($2,000,000+) house hunters are getting serious. Thanks to a proliferation of all cash buyers (mostly international) combined with a weak dollar properties in areas like Malibu and Beverly Hills are finally moving at a faster pace.
The top producing agent in Malibu closed out December with $26.5 million in sales, one of his best months of the year. Cash-rich buyers looking to capitalize on lower prices have rushed into the market in recent weeks and the sales pace has continued through January.
For the first time in 2 1/2 years, the median price has posted a year-over-year gain in 2 1/2 years according to MDA DataQuick. This activity has lead to the median home price in Southern California to rise 4% higher than it was in December 2008.
Will this surge last?
The major question on many people’s minds is whether this is going to last. In my opinion, it will only last as long as government incentives are in place and the dollar continues to weaken. Unfortunately, that is not a good mix for the economy in the long run and reality will have to set in at some point. The government incentives and record low interest rates created an artificial bottom that will eventually have to be broken before true progress can be made.
A strong discount in the market has already occurred and I am not saying it is a bad time to buy. However, buyers need to make sure they are looking at least 5 years down the road and not getting too caught up in the incentive hype which is driving much of the market (under a million dollars). Some experts worry that once certain government policies and programs wind down the housing market could falter.
Some buyers are so concerned with getting the tax credit and taking advantage of interest rates that they want to put in offers on properties that do not really fit what they want.
Home purchasers have to realize that finding the right home for your needs is far more important than an $8,000 tax credit. Furthermore, once the tax credit is gone a very good chance exists that the purchaser will get that credit back in a reduced purchased price on the property that truly fits their needs.
Christopher Thornberg, principal of Beacon Economics, states “The bounce in the housing market is due to government policy, not due to fundamentals,” he said. They only delay the solution — they only delay the healing process.”
When you combine these programs expiring with banks taking up to 18 months for foreclosures to get through the system along with shadow inventory (i.e- Bank owned properties or seriously delinquent properties not listed on the market), the housing market is not where it needs to be yet to make a realistic recovery.
On a macro level, 64,000 listings are currently available on the MLS for Southern California compared to 160,000 in 2007. Without looking at the details, one would think this means total stability in the market. However, a closer look at the shadow inventory shows us a scary back-log with 160,000 properties not part of the current inventory. Not all of these properties will hit the market due to loan modifications but even if just 60% of them become available it will drastically change the landscape of the market. This inventory has to work through the system before we start to see a stable recovery.
The fundamentals of buying a home, especially in an uncertain market must be followed. A home is purchased to live in and not as a tool to get rich quick or a status symbol. A home buyer should be purchasing because the home fits their needs for at least the next 4 to 6 years, the monthly payments are aligned with their income, they can take advantage of the tax benefits of owning a home and they will be happy if they make a 2-3% annualized return when they sell.
In the long run owning real estate in South Bay/Westside areas is one of the best leveraged investments one can make if the proper fundamentals are used.
Mortgage Rate Update
The typical interest rate for a 30-year fixed-rate mortgage was virtually unchanged this week, hovering just under 5%, Freddie Mac said on Thursday.
The rate edged down from 4.99% to 4.98%, according to the weekly Freddie Mac survey, which assumed that borrowers had a down payment of at least 20% and paid 0.6 points in upfront lender fees and points. Buyers often pay higher points to obtain a lower rate.
The average rate on a 15-year fixed mortgage was 4.39%, down from 4.40% last week.
Shaodw Inventory Doesn’t Just Pertain To The Residential Market
The shadows that will eventually hit the residential market are starting to show in the commercial market as well. Overall office vacancy in the fourth quarter of 2009 in Los Angeles, Orange, San Bernardino and Riverside counties was 18.5%, a substantial jump from 14.4% a year earlier, according to commercial real estate brokerage Cushman & Wakefield.
Right now, many firms have shrunk but are still renting the same amount of space they had in better economic times.
“All the vacant space out there still doesn’t reflect all the jobs that were lost,” said Whitley Collins, regional managing director of real estate brokerage Jones Lang LaSalle.
Shadow space, as leased but unused space is often called, is impossible to measure accurately, but there is surely enough of it to slow the commercial real estate comeback. Office leasing growth usually lags behind economic recovery by six to nine months, Collins said. A local office market recovery might be as much as 18 months behind the economy now because of shadow space.
