Skinny On Real Estate
Commercial Real Estate Update. . .
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.”
By John SkinnerMost home buyers expect to put 10% or less down
Isn’t this the same mentality that helped create all of the current housing troubles?
Zillow’s Amy Bohutinsky said of the nearly one-fifth of buyers who plan to put no money down, “Given the fact that home values are still declining in most markets, this surprises us.”
(Source: LA Times)
L.A. County’s May default rate almost double of last year
The percentage of Los Angeles County mortgages delinquent by 90 days or more in May was nearly double the rate last year, First American CoreLogic reported this week.
May’s 9.5% delinquency rate for L.A. County was up from 5% of mortgages late by 90 days or more in May 2008. First American bases its foreclosure analyses on public records.
(Source: LA Times)
West Manhattan Beach Analysis
The median price for Single Family Residence’s “SFRs” west of Sepulveda was down 22.4% ($1.980m to $1.535m), comparing the first half of 2007 with the first half of 2009.
There are two major factors with the median price drop. Obviously, due to the economy and less demand, the same properties are trading for less money. For example, a standard Tree Section new construction home built on speck might have gotten $2.1m-$2.4m in 2007, will now go for between $1.6m to $1.8m.
The other and more significant change, which is the case in all coastal communities, is the amount of sales in specific price ranges.
In 2009, the bulk of sales are at the lower end for the area West of Sepulveda (under $1m), pulling the median price down while sales at the higher end ($2m-$3m) are stagnant with the super high end (above $3m) staying fairly steady over the past 3 years.
About half of the Jan.-June sales in both 2007 and 2008 occurred below $2m. In 2009, fully 75% of sales were in that range. That’s a significant, 50% increase!
Another number that really stands out is the share of sales priced below $1m. Accounting for only 2-5% of all sales in 2007-08, low-end sales hit 21% of all sales in 2009.
The biggest drop in sales happened between $2.5m-$3.0m, which have accounted for 1% this year, in 2007 and 2008 it was at 12% and 15%. If you look at the range of sales between $2.0m-$3.0m, it shrank from 30% in 2007-08 to around 13% this year.
Here are the numbers of sales in the 2 categories with the greatest change:
Sales Priced At $1m or Below
2007: 6
2008: 2
2009: 16
Sales Priced Above $2.51m, up to $3.0m
2007: 15
2008: 13
2009: 1
Please note, this is from MLS data and excludes off-market sales.
The sales pace for the area is off 41% from the first half of 2007 (129 closed sales vs. 76). The scary thing is the first half of 2007 from an historical perspective was one of the worst performing periods compared to the prior 20 years.
Due to lower interest rates, higher inventory and the over 20% price adjustment in the market, I predict sales volume in West Manhattan Beach to pick up throughout the rest of 2009 and into 2010 while the median sales price continues to decrease at a slower, steadier pace.
(*Sources: The MLS, Manhattan Beach Confidential)
Background on some sales in Santa Monica
A quick review of some of the sales and pending sales in Santa Monica:
1352 Hill Street: Went into escrow on May 12th, just 11 days after it was listed with a list price of 1.595. It is a remodeled home that is 3 bed/2 bath, 1,940 sq. ft. on a 7,140 lot.
133 17th Street: A new construction home foused on being environmentally friendly that finally went into escrow on June 8th with a 3.695 list price. It will be intresting to see what the sale price ends up being. This 5 bed/6 bath, 4,700 sq. ft home on an 8,900 lot originally listed for 4.8 in November of last year.
2127 Marine Street: Went into escrow on May 23rd, within eight days of being listed for $1.699. This 3 bed/2.5 bath, 2,400 sq. ft. home on a 7,000 lot is remodeled and in great condition.
919 Centinela: This contemporary home that was updated in 2004 went into escrow just 12 days after being listed at 1.999. 4 bed/3/5 bath, 4,024 sq. ft, 9,000 lot but the back-yard is not usable.
1736 Oak Street: Sold for $885,000 on June 12th. Originally listed for 1.060 in February. *Remodel/tear-down candidate
1024 23rd Street: (New construction)Sold for 2.425 on May 22nd.
659 East Channel: Sold for 3.683 on June 9th. Originally listed for 4.495 on March 24th. No price reduction. 3 bed/3 bath, 3,000 sq. ft. on 3/4 acre lot (not all useable). Awkward floorplan.
Please contact me if you would like more detailed information. HAVE A HAPPY AND SAFE 4TH OF JULY WEEKEND!!
Westside sales statistics for June
This information was gathered from the Multiple Listing Service “MLS” as of July 2, 2009.
Palisades Riviera Update
Over the past eight months I have been closely monitoring the lack of sales activity in the Palisades Riviera. I am happy to report that over the past two months activity has finally picked up with 5 homes currently in escrow and 1 recorded sale. Quick review:
609 Amalfi: In Escrow as of 6/28/09 at a list price of 7.6. Originally listed at 9.5 and had been on the market for 250 days. Description: 8,065 sq. ft./18,325 Lot/6 bed/7 bath/Built in 2000.
1117 Napoli: In Escrow since 6/26/09 at a list price of 2.895. Originally listed at 3.7 and had been on the market for 136 days. Description: Tear-down or re-build. 3,945 sq. ft/13,119
965 Napoli: In Escrow since 6/22/09 at original list price of 6.495. Was on the market for 94 days. Description: 5,716 sq. ft./13,200 Lot/5 bed/5.5 bath/*New Construction (2009). Built simultaneously with 981 Napoli (see below) by developer.
1511 Amalfi: In Escrow since 5/6/09 at original list price of 2.995. Only on market for 26 days. Description: 3,300 sq. ft./21,175 Lot/4 bed/3.5 bath/*remodel candidate
972 Corsica: In Escrow since 5/21/09 at original list price of 2.995. Only on market for 15 days. Description: 12,998 Lot/4 bed/3.5 bath *remodel candidate
981 Napoli: SOLD for 6.744 on 5/22/09. Originally listed for 8.60 and on the market for 180 days. Description: 6,725 sq. ft./12,913 Lot/5 bed/6.5 bath/*New Construction (2008)
The Riviera has dropped about 20% in price over the past year and list prices are finally starting to reflect that correction which is leading to quicker sales.
Please contact me if you would like any additional information.
Deviation of new and existing home sales
This graph provided by the calculated risk blog is a great visual representation of the gap between new and existing home sales since 1975. This is clearly the largest disconnect we have seen:
Review of the last So Cal Housing Bust: 14 years until full recovery
Los Angeles-Glendale-Long Beach: Peak: 2nd quarter 1989 Bottom: 2nd quarter 1997 Depreciation: 36.7% Full Recovery: 2nd quarter 2003
Background:
The California economy expanded rapidly in the 1980s. Gross state product grew at an annual rate of 5.1% from 1983 to 1989, well above the national growth rate of 3.6%. The state’s economic growth was accompanied by substantial population growth, which led to a construction boom and large increases in real-estate prices.
By 1989, a substantial decline in national defense spending seriously hurt California’s booming defense industry. In addition, the national recession of 1990-91 reduced the demand for goods and services produced in California. Unemployment increased, and the California real-estate market subsequently collapsed.
California’s downturn in the early 1990s had a speedy recovery of less than five years to its previous peak.
In the early 2000s, California experienced a particularly large home price boom fueled by a marked increase in the availability of mortgage credit. Home prices in California peaked in the first quarter of 2006. The ensuing subprime-mortgage crisis has hit California particularly hard. As of the first quarter of 2009, home prices have fallen almost 44%, adjusted for inflation, far more than the 32% drop from 1989 to 1997.
The Federal Housing Finance Agency last week released a study of real-estate downturns since 1975, tracking home prices from the quarter in which the declines began to the quarter in which inflation-adjusted prices returned to their previous highs.
Prices typically fell for three years and nine months, the agency said, but the average recovery took nearly twice that long: six years and eight months.
With such a quick and steep drop in the median Southern California home price since 2006, will a recovery be quicker than seven years?
Commercial Real Estate: Top analyst says office market is getting worse
A grim forecast for the U.S. office market was offered by a top analyst at Deutsche Bank, who predicted that urban business districts won’t recover until 2017.
“The froth is still working itself out,” Richard Parkus, the bank’s head of commercial securities research, said at a New York event hosted and reported by Reuters news service. “We are currently in something which is comparable to what we saw in the 1990s and potentially worse.”
Recovery is not imminent. The commercial market is getting worse, not better, he said. Demand for office space is falling, so rents and the income landlords receive from rents are also falling. That means many borrowers are now struggling to make mortgage payments on their properties
Real estate values could fall as much as 50% from their 2007 peak, Parkus said. “We are not only not approaching stability, we are at a period of maximum deterioration,” he said.
Source: Reuters News Service
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skinny on real estate
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