Author: John Skinner

The home mortgage market, propped up by more than $1 trillion in government money, is flashing a strong “buy” sign to house hunters.

Extending a summer-long slide, the average interest rate on new 30-year fixed-rate loans nationwide has broken through the 5% barrier to 4.97%, nearing the lowest level in decades, the Mortgage Bankers Assn. reported this week.

And mortgage finance giant Freddie Mac, which separately tracks rates, reported Thursday that the average fixed rate on a 15-year home loan had dropped to 4.46%, the lowest level on record.Borrowers are taking notice. Loan applications jumped 13% last week and are up 50% from late June, the bankers group said. (Source: LA Times)

Please see full article: Borrowers Rush in as Mortgage Rates Slip below 5%

**Not a bad time to buy if you can take advantage of this historic situation (low interest rates and declining home prices) and plan on owning the property for at least 5 years. Please call 310-486-5962 or e-mail me john@skinnerestates.com if you would like to discuss your situation.

The Westside/South Bay residential real estate market finally showed some life after being dormant for close to 18 months. Buyer’s started to come off the sidelines this summer as the panic over the overall economy eased and seller’s finally started to except a price decline of 20-30%.

The market below $1 million has stabilized and even shown some signs of slight appreciation but the market above $1 million (especially above $3 million) still has hurdles to navigate despite some faint signs of life this summer.

The Westside/South Bay Market Below $1 Million

If a Westside/South Bay seller of a non-tear down type property properly figured the correct price decline in a listing price, they didn’t have a problem selling this summer. Record low interest rates for conforming loans up to $710,000, an $8,000 first time homebuyer tax credit (if they qualified), a foreclosure moratorium and FHA loans (also up to $710,000) that only require the buyer to put as little as 3 to 5% down helped fuel a stabilization and even a small uptick in the median price.

In fact, quite a few multiple offer situations popped up in areas like Mar Vista, Culver City, Westchester and South Torrance where homes selling for around $1 million two years ago were being listed for $750K-800K.

Typically, the spring and summer selling season is the busiest time of the year so I don’t think people should think we are on track for a full recovery. Despite all of the incentives, sales activity is still off normal levels. For example, In August of 2005 (near the height of sales activity) 65 homes sold in the 90230 zip code of Culver City. Fast forward to August of 2008, only 25 sold and this year we have seen a jump to 38 sales. However, this number is still off the average sales number for the 90230 zip code and the activity seems very strong because we are coming off one of the slowest periods of sales growth Westside/South Bay real estate history.

The Westside/South Bay Market Above $1 Million

The high end home market is still declining in both volume and price but not nearly at the level it was in the 1st and 2nd quarter of the year. Despite a recent uptick in activity and a flock of foreign investors purchasing property sales activity is still miserable.

This segment of the market still deals with issues the conforming market does not. Very few banks are lending jumbo money and if they are a borrower’s credit has to be excellent along with requiring them to put more than 25% down in most cases. The lending standards are so tight that more than 50% of the higher end deals are all cash.

In the 90402 zip code of Santa Monica where most homes sell for over $2.5 million dollars, only 4 homes sold in August compared to 13 sales in August of 2008 and 26 sales in 2005. The lot value (tear-down) for an 8,900 square foot home north of Montana has gone from about $2.45 million in 2007 to around $1.8 million today. A 7,500 square foot lot which was going for around 2.25 million is trending towards $1.6 million.

The high end Westside market is tough to categorize since it operates on more of a micro level based on superior location and schools. For example, some parts of Bel-Air and Brentwood have dropped 40% in price while other parts are only down 20-25%.

Overall, the market is definitely healthier than the 1st and 2nd quarter but I don’t think we are at the bottom yet in terms of the South Bay/Westside. The drastic price drop we saw at the beginning of the year has definitely subsided and those days should be over. However, affluent areas are typically the last to recover and the California economy still needs to clear some hurdles before true price stabilization can begin.

After taking a break to recharge the batteries and fortunately being very busy with clients and transactions, The Skinny on Real Estate is back and will provide you with statistics and important pertinent information regardng Westside Real Estate. . .

*The best house I have seen the past two weeks on the Broker Caravan was 16104 Northfield Street in the Palisades with a list price of $2.875 million. The 2005 construction home has great curb appeal, a very functional floor plan and does an excellent job of capturing natural light. One of the only negative things about the home is the lack of back-yard space which could turn off a family with young children. I still expect this home to sell fairly fast above 2.75 million. The home is over 4,000 sq. ft. and boasts 5 bedrooms.

Runner-up: 1208 Pacific Street in South Santa Monica. The 3 bed/2 bath 1,660 sq. ft. home on a 7,200 lot commanded multiple offers and went into escrow within 6 days of being on the market. The list price was $1,429,000

*The mood of most sales agents has improved dramatically with sales activity picking up tremendously over the past two months. In February you would have thought the grim reaper was taking hold of most real estate offices but things have definitely changed with the arrival of the spring/summer selling season and more realistic seller’s. Quality homes that only require a conventional or FHA loan (homes under a million dollars) have been seeing multiple offers. I expect activity to stay strong through the rest of the summer selling season before fading again as October approaches.

Pre-foreclosure data seems to suggest the Westside is going to get hit with a wave of foreclosures in 2010. Currently in Mar Vista, 97 homes are categorized as distressed and only 3 of them are currently on the MLS. If all of those homes came on the market, inventory would double for the area. However, the bank’s know this and they are doing everything they can to work with borrowers.

I already know of 2 examples in Santa Monica where the banks have agreed to lowering interest rates on mortgages to 3% for the next 3 to 5 years and then fixing them around the 5% mark. In one case the person’s monthly mortgage payment was cut in half!

Inevitably, the foreclosures will continue to increase on Westside especially with the foreclosure moratorium period now passed. However, I don’t believe we will see the tidal wave of foreclosures that some housing bloggers are predicting. The banks will do what they can to avoid that.

U.S. apartment vacancies near historic high: Highest in 20 years

The vacancy rate for U.S. apartments reached its highest level in more than 20 years. The national vacancy rate rose to 7.5 percent. The record high was 7.8 percent in 1986.

Effective rent was down 1.9 percent from the prior year and 0.9 percent from the first quarter to $975, Reis said.

Article: Vacancies near historic high

US office market continues to spiral down

The U.S. office market vacancy rate reached 15.9 percent in the second quarter, the highest in four years and rent fell by the largest amount in more than seven years as demand from companies and other office renters remained weak, real estate research firm Reis said Inc.

The Reis forecast is for the U.S. office vacancy rate to top out at 18.2 percent in 2010 and for rent to continue to fall through 2011.

Article: US office market continues to spiral down

Strip Mall Vacancy Rate Hits 10%, Highest Since 1992

Reis reports the strip mall vacancy rate hit 10% in Q2 2009, the highest vacancy rate since 1992. Effective rent declined 3.2 percent year-over-year to $17.01 per square foot.

About 7.9 million square feet of space was returned to the market during the quarter. The amount was second only to the 8.1 million square feet in the first quarter. In U.S. regional malls, vacancy rate rose to 8.4 percent, the highest vacancy level since Reis began tracking regional malls in 2000.

“Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest.”

Article: U.S. mall vacancy rate soars, rent dives