August 7, 2008
After all the hoopla over flashing, I thought this post might be a little anti-climatic. Still, I wanted to share some of the points I’ve learned from my experience selling my home in Westchester.
Here’s a little background. I was lucky enough to get into the real estate market right before everything skyrocketed out of control. My three-bedroom, two-bathroom cozy little abode was purchased early in 2002. True. Real estate was on the rise, but I did manage to make a profit. I agreed to an asking price of over 1.5 times what I bought it for.
Soon after I knew the real estate market was plummeting, I put my home on the market. I decided to put my faith in Redfin in order to maximize profits. (But we’ll talk more about some actual figures next time). Keep in mind the following list is from the perspective of someone who didn’t have an agent on site to handle things like showings, etc.
1. In this market, you really have to stay on top of the changes every single week. I was pretty confident I priced my home right - you know, being a Redfin blogger for my own neighborhood and all. Well, that went out the window after two plus months on the market. I did price my home right initially. But prices were sliding steadily, homes were slow to sell, and I needed to be more flexible in price from the get-go.
2. Never do an incremental price reduction when real estate prices are falling. If you have to drop the price, drop it down to the next price point so you can catch the eye of more buyers. (i.e. drop from a $505k price tag to a $495k one, rather than $505k to $501k.) I dropped the price down twice during the sale of my home. The first time, it was a mere 2%. (Nothing happened.) Then I dropped it down another 3%. (The calls came pouring in and one of the original buyers came back with a higher offer.) The last price drop clearly was the winner.
3. Don’t bother with the lookee-loos. You know. The ones who aren’t ready to buy yet, but just want to check out your place. Buyers without an agent probably aren’t ready to buy for many, many months. You’ll know that if they have an agent, they’ve at least been prescreened so they should be able to afford your home.
4. Stay the heck out of the way. I opened my door, let the buyers and their agent in, and made myself scarce outside of the home. This way, I avoided the unwanted game of 20 questions from the buyers (can we say awkward and bad for negotiating karma?). And I avoided the wayward glance sideways of those who exited quickly because they clearly weren’t interested in buying.
Does anyone have a story to share about selling in this market? Please do.
August 6, 2008
No, not a cool August swell on the great Pacific. Unfortunately, this wave is the expected surge in home defaults, this time from people with decent credit.
This New York Times story notes that most subprime borrowers’ mortgage loans have already reset from their low teaser rates to their higher, unaffordable rates, which led to the first wave of foreclosures. Now, however, the loans of lower-risk borrowers are about to reset, which experts say will produce a second wave.
Prime and alt-A borrowers typically had a five- or seven-year grace period before payments toward principal were required. By contrast, subprime loans had a two-to-three-year introductory period. That difference partly explains the lag in delinquencies between the two types of loans, said David Watts, an analyst with CreditSights. “More delinquencies look like they are on the horizon because so few of them have reset,” Mr. Watts said about alt-A mortgages.
California is predicted to be hit particularly hard:
The wave of foreclosures is still rising in states like California, where many homeowners turned to creative mortgages during the boom. From April to June, mortgage companies filed 121,000 notices of default in California, up nearly 7 percent from the first quarter and more than twice as many as in the second quarter of 2007, according to DataQuick, a real estate data firm based in La Jolla, Calif. The firm said the median age of the loans increased to 26 months from 16 months a year earlier.
The story singles out Downey Financial, parent company of Downey Savings & Loan, as a company whose alt-A and prime loans are causing it trouble. The company reported that more than 11% of its loans were delinquent as of the end of June.
The bank’s troubles stem from its $6.2 billion portfolio of so-called option adjustable-rate mortgages, which allow borrowers to pay less than the interest owed on their mortgage in the early years. The unpaid interest is added to the principal due on the loan, so over time borrowers can owe more than the initial loan amount. Eventually, when loans grow by 10 percent or 15 percent, the borrowers are required to start paying both the interest and principal due.
Many borrowers who got these loans during the boom had good credit scores, but many of them owe more than their homes are worth. Analysts believe that many will not be able to or want to make higher payments.
“The wave on the prime side has lagged the wave on the subprime side,” said Rod Dubitsky, head of asset-backed research at Credit Suisse. “The reset of option ARM loans is a big event that will drive the timing of delinquencies.”
This predicted increase in defaults is one reason many analysts say the market has not yet hit bottom. In California, outlying areas, like the High Desert and Inland Empire, have already seen prices decline markedly; that’s probably because many of the homeowners were subprime borrowers, able to buy only with the help of extremely liberal financing and whose loans reset quite quickly. The closer-in, more desirable areas are home to people (in general) with more income and better credit. When those owners start defaulting, the market will be closer to a bottom.
Recent Redfin posts:
Is It Time to Buy?
Luxury Condo Sales in WeHo
August 4, 2008
Last Sunday marked the end of the Los Angeles Times’ Real Estate section – a victim of the cutbacks affecting The Times and many other metro dailies. The Times promised that there would still be plenty of real estate coverage in other sections, particularly its Business and Saturday Home section, where Hot Property will run.
True to its word, Sunday’s newly monikered Business, Personal Finance and Real Estate section published a story headlined “Should You Buy a Home Now?” It was the most e-mailed story on The Times’ Web site on Sunday — an indication of how many people want an answer to that question.
The story makes the point that buyers are slowly returning to outlying areas, where price drops have been most severe. The closer you get to the ocean, the more moderate the price declines have been. In the most desirable areas of L.A., affordability is still an issue.
More than half of the adults in the Los Angeles metropolitan area own their homes. But because of the price run-up that began in the late 1990s, fewer than 11% of adults in the L.A. area earn enough to buy a median-priced home of $412,000, according to a National Assn. of Home Builders index. As recently as 2001, when the median was lower, that figure was about 38%.
One measure of whether buying makes sense is calculating its rent ratio.
The ratio of home prices to annual rents in the Los Angeles area was 20 as of March 31, meaning the median home sale price was 20 times a year’s rent for a comparable property, according to Moody’s Economy.com. The 15-year average ratio in Los Angeles is 16.4.
Experts expect prices to continue to fall in SoCal.
Los Angeles economist Christopher Thornberg believes that home prices will stabilize when homes are affordable to about 25% of the adult population. For that to happen in Southern California, home prices would have to come down 20% to 35% from their current levels, Thornberg said. “There’s no way in hell the house you buy now will be more expensive next year,” he said.
For those in the market to buy, the story advises to keep in mind the following:
* Don’t count on price appreciation.
If you can’t afford a house now, don’t presume you’ll be able to tap an increase in your home equity to refinance it — that’s a mistake made by many people who are now in foreclosure.
Likewise, don’t divert retirement savings to buy more house than you can afford, expecting to make up the shortfall later through a jump in home values.
* Don’t expect a house to make you financially stable.
Experts advise home buyers to have a steady and reliable income stream; don’t buy in the belief that simply owning a home will provide financial stability.
* Don’t buy if you think you may be moving soon.
If you’re not sure how long you are going to live in a house, move slowly. If you are forced to sell after a short time, any price appreciation may be outweighed by closing costs and agent commissions — and prices could decline.
Typically, people should avoid buying a home unless they plan to live in it for at least five years, advises Richard Green, director of USC’s Lusk Center for Real Estate, but a safer target these days may be seven or eight years.
Recent Redfin posts:
Short Sale Listings Surge: Another Pasadena History Milestone
The Beginning of the End of the Downturn?
5.4 on the Richter Scale: Did You Feel It?
August 4, 2008
A blog reader wanted us to take a look at luxury-condo sales at Shoreham Villas in West Hollywood, at 8788 Shoreham Drive. Our reader says this new 15-unit complex was built on the former site of Spago, in 2006. He also says nine units were sold in 2007, but only three so far this year.
Judging by what’s happening to at least one other high-end condo complex in the area, this complex is doing well to have sold any in ‘08. Another nearby new complex, at 1331 N. Sycamore Ave., has just slashed its prices; it’s possible none of these have sold yet either, because none are listed in the comps. It looks like there are three left to sell, all at premium prices. Compared to the ones that have already sold, it seems like these could come down a little. (Note: The developers must think “79″ is a lucky number, judging from their asking prices.)
Sold:
8788 Shoreham Dr., #11
Sold for $905,000 on 6/19/08
2BR/3B/1,880 square feet
8788 Shoreham Dr., #20
Sold for $925,000 on 9/25/08
2BR/3B/1,940 square feet
8788 Shoreham Dr., #23
Sold for $1,050,000 on 2/5/08
2BR/3B/2,250 square feet
For sale:
8788 Shoreham Dr., #40
$1,179,000
2BR/2.5B/2,030 square feet
8788 Shoreham Dr., #30
$1,079,000
2BR/2.5B/2,030 square feet
8788 Shoreham Dr., #22
$879,000
2BR/2/5B/1,550 square feet
If anyone out there has any other inside info about how high-end condos in the area are doing, please let us know.
August 1, 2008
Short sales are surging on the lower-priced end of Pasadena’s real estate market. Searching Redfin for listings in 91104, I found a few decent single-family homes with over 1,000 square feet priced under $500,000. Looking at each listing, I found that most of these were short sales, or foreclosures after unsuccessful short sale attempts.
To me this looks like a record in Pasadena real estate listing history. Although I’m not attempting an analysis here, I welcome comments from anyone who is studying the matter.
If you are interested in Pasadena history beyond the recent starter home short sale surge, LA Brain Terrain is publicizing a free (reservations required) noontime series of lectures beginning today at the Pasadena Museum of History. The Museum location is the beautiful Fenyes Mansion, pictured here on Pasadena Daily Photo. LAist blog readers close to Pasadena: here is your chance to fulfill one of the blog’s recommended New Year’s Resolutions: checking out Pasadena’s many museums and cultural attractions.
As for short sale history, here are four homes just east and north of the museum, all over 1,000 square feet and all priced just under $500,000:
815 North Marengo Avenue
$480,000 (originally $580,000)
3 bed/3 bath
1,472 sq.ft.
$326 per sq.ft.
On Redfin 28 days
This home was built in 1906. The listing states that this is a short sale with trustee sale taking place August 22.
1985 Santa Rosa Avenue
$499,000
4 bed/2 bath
1,740 sq.ft.
$287 per sq.ft.
On Redfin 30 days
This is not listed as a short sale, but the last sale price was $639,000 in 2006.
885 North Euclid Avenue
$450,000 (originally $544,000)
4 bed/2.75 bath
1,294 sq.ft.
$348 per sq.ft.
On Redfin 120 days
Public records show this as a duplex (I was wondering how 4 bedrooms and 3 bathrooms could comfortably fit into 1,294 square feet). This sold in December 2006 for $645,000, and this July 14 for $385,000. Since it has been on Redfin for four months, it appeas as if the lender foreclosed and kept it on the market.
1946 North Los Robles Avenue
$450,000
2 bed/1 bath
1,346 sq.ft.
$330 per sq.ft.
On Redfin 3 days
The listing says only “short sale!!!” This last sold in May 2005 for $620,000.
August 1, 2008
That’s the opinion of at least one economist quoted in this Bloomberg News overview of California’s housing market. The gist is that there are several hopeful signs that we are nearing a bottom. mainly because bargain-hunters are snapping up foreclosures all over the state.
In Stockton, the U.S. metro area with the highest foreclosure rate, home sales more than doubled in the second quarter after prices fell by an average 37 percent, said PMZ Real Estate Corp., the area’s largest broker. Across the state, sales rose for three consecutive months starting in April after 30 straight months of declines, the California Association of Realtors said. About 40 percent of those transactions were foreclosure sales, DataQuick Information Systems reported.
“California is having a wrenching decline in wealth, but this is a cathartic event that will lay the foundation for a recovery,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, in an interview. “This signals the beginning of the end.”
Another hopeful sign: Inventory is starting to decrease, according to the California Association of Realtors.
The amount of time it would take to deplete the supply of homes decreased to 7.7 months from 10.2 months a year earlier, and the median price fell 38 percent to $368,250 last month.
Two-thirds of the homes being sold in the state are under $500,000. Many of the sales are in the areas hardest-hit by foreclosure.
Foreclosure sales accounted for 75 percent of June’s total in Merced County, home to the Merced metro area with the country’s second-highest foreclosure rate; 72 percent in Stanislaus County, home to the Modesto metro area with the third-highest foreclosure rate; and 66 percent in San Joaquin County, home to Stockton, data from DataQuick in La Jolla, California, and RealtyTrac show.
Sales of foreclosed properties equaled 63 percent of the total in Sacramento County, 62 percent in Riverside County, 58 percent in Solano County, 57 percent in San Bernardino County and 49 percent in Contra Costa County.
And the bargains will be around for awhile. Foreclosures won’t be going away anytime soon:
Discounts of as much as 50 percent will extend into 2010, helping clear a glut of foreclosures and leading to a more balanced housing market, said Ryan Ratcliff, an economist at the Anderson Forecast at the University of California in Los Angeles, and Christopher Thornberg, principal of Beacon Economics LLC in Los Angeles.
Although the bulk of foreclosure activity is taking place in outlying areas, there are scattered opportunities in the most desirable areas of L.A. A real estate investor acquaintance told me this week that he had put in a bid on a short-sale duplex near Beverly and Fairfax for $750,000 cash; it had last sold for $1.3 million three years ago.
Recent Redfin posts:
Summer slowdown: Will July end with no sales in Montrose?
Yes, People are Still Attempting Flips in This Market
July 31, 2008
On Tuesday, July 29th, a 5.4 earthquake centered in Chino Hills hit at 11:42 am. Did you feel it?
I was in my Westchester home (46 miles from Chino Hills) at the time and didn’t feel a thing. My neighbors sure did though. (Maybe I was too busy packing boxes?)
So far, I’ve been through two major earthquakes (California native - you guessed it).
In 1989, the Loma Prieta earthquake measured a magnitude of 7.1. The epicenter of the quake was in the Santa Cruz mountains, about 60 miles southeast of my San Francisco home. If you’ve never been near the epicenter of a quake of that magnitude, let me describe it to you. At the time, I still lived at my parent’s two-story wood frame constructed home. I was on the second floor. I literally saw the walls sway back and forth about a foot and a half to two feet. (Or at least it looked that way.) I thought the house was going to come down. Well, I can tell you, the house is still standing there today and seems to be structurally fine.
In 1994, I lived in a high-rise apartment building in downtown Los Angeles. My memory is fuzzy now, but I think I was on the eighth floor. That was when the Northridge earthquake occurred. It had a magnitude of 6.7 and the epicenter was about 25 miles away. I woke up in the wee hours to hear the sound of crunching metal. The power had just gone out, so all I could do was sit up in bed and hope that the objects hanging from the wall stayed there (they did) and that the building stayed intact (it did).
This topic isn’t specifically related to real estate. But everyone here lives somewhere - an apartment, a condo, a house. And someday, we’ll have another big shake, rattle, and roll. So I thought I’d compile a few resources for what to do so you’re prepared in the event of “The Big One.”
1. The Daily Breeze has a great article detailing all you need to know, including what food supplies you need, how to keep in touch with loved ones, and how to create your own emergency water supply.
2. If you’re looking for what to do before, after, and during an earthquake, FEMA has tips on checking for hazards in the home, what to do whether you’re indoors or out, and what you should do after a quake.
3. If you want a way to teach the kiddies what to do in the event of an earthquake, try the Red Cross for educational materials.
If anyone has an earthquake story to share, please do. I’m sure some of you out there have some interesting ones.
Here are some prices that are shakin’ down in the LAX area.
6660 W. 85th Pl./4bd, 1.75bth/$759,000 to $739,000
5806 W. 74th St./2bd, 2bth/$749,000 to $699,000
6431 W. 85th St./2bd, 1.75bth/$699,000 to $679,000
July 30, 2008
There are no July home sales to date in the Montrose area of north Glendale, and I found only two June sales in my search on Redfin. There were 23 sales altogether, most occurring in May, with an average sale price of $342 per sqare foot.
Here are the two June sales:
3531 Rosemary Avenue
$745,000 (sold 6/10/08)
$450 per sq.ft.
Last sold in 1998.
1721 Broadview
$540,000 (sold 6/2/08)
$387 per sq.ft.
Last sold for $551,538 in April 2008; this is likely a foreclosure sale.
South of the 210 freeway, there are 25 active listings in Montrose, but only two (listed below) are close to the price of a starter home. The third and final listing here has been on the market for almost six months.
Averages
Listing price: $669,000
Price per sq.ft.: $433
Days on market: 88
2743 Sycamore
$459,000 (originally $479,000)
2 bed/1 bath
850 sq.ft.
$540 per sq.ft.
On Redfin 12 days
No recent sale records.
3018 Manhattan Avenue
$509,900 (originally $529,000)
2 bed/1 bath
1,750 sq.ft.
$291 per sq.ft.
On Redfin 40 days
The listing states this is a “Fannie Mae owned property,” and “approved for express path financing.”
2752 Sycamore
$710,000
3 bed/1.75 bath
1,547 sq.ft.
$459 per sq.ft.
On Redfin 187 days
This last sold in 2005 for $500,000. It was extensively remodeled in 2006.
July 30, 2008
If you’re familiar with the ABC show “Extreme Makeover: Home Edition,” you know that it builds homes for families who have fallen on hard times. The Harpers of Lake City, Georgia, were one such family who wrote to the show in 2005 about their predicament: Whenever it rained, a defective septic tank would fill their home with raw sewage.
In response, the show mobilized 1,800 volunteers, who spent a week tearing down the Harpers’ old home and building a gigantic four-bedroom, three-bath house. The family was also given money to pay their real estate taxes for 25 years, plus college funds for their children.
It was like the Harpers hit the lottery. But, like many lottery winners, they weren’t prepared to handle the sudden wealth.
Next week, the Harpers’ dream home is scheduled to be auctioned off on the Clayton County courthouse steps. From The Washington Post story:
The Harpers had used their home as collateral on a $450,000 loan from JPMorgan Chase and fell in arrears, [the Atlanta Journal-Constitution] reported. He ran a home security business; she mommed at home. Happy to be on television back then, they declined to be interviewed last week, when a news crew showed up from local station WSB, wanting to know wha’ppen.
The comments this story is receiving on blogs aren’t very kind, calling the Harpers greedy and stupid, among other things. Even the town’s mayor, Willie Oswalt, chimed in: “It’s aggravating. It just makes you mad. You do that much work, and they just squander it.”
What happened to the Harpers is pretty similar to what happened to a lot of people during the housing boom: They succumbed to temptation. They saw a pile of money sitting there, and they couldn’t keep their hands off it.
Every day, we’re bombarded with images of people who live the good life, who take big risks and reap big rewards. We’re told we should designer clothes and designer cars and designer accessories. For people who struggle every day just to make ends meet, the desire for an better life must be powerful.
It’s a shame the Harpers didn’t take a more conservative approach to their new lives. I’m sure they’ll regret it forever. But they’re not the only ones who are clueless about money, and they’re not the only ones who borrowed recklessly against their home — with help from a willing lender.
Recent Redfin posts:
Free Dodger Stadium Trolley Debuts, but 50-Year Plan Ignores Transit
The Standoff
No Takers at Larchmont Lofts
July 29, 2008
You’ve got to admire whoever bought this house. He or she still believes in the power of Los Angeles real estate.
In the midst of one of the worst real estate downturns in recent memory, this buyer took one look at 429 N. Arden Blvd., in east Hollywood not far from Larchmont Village, and saw an opportunity to pocket some fast cash. 
Our buyer closed escrow on this single-family home on March 14 and immediately got to work on a total remodel. Not even three months later, it was back on the market, with four bedrooms and three bathrooms in 1,860 square feet, for $1,449,000. Earlier this month, it was reduced to $1,395,000.
Sure it has a cook’s kitchen with custom counters and Viking appliances, Toto dual-flush toilets (whatever that means) and new custom windows throughout, but will there be any takers in this market?
Turns out there are two nearby homes that have gone for well over $1 million. That was a few months ago. But, hey: Two of the places have only one bathroom. Maybe our flipper isn’t so crazy after all.
346 N. Gower St.
Sold for $1,104,000 on 1/31/08
3BR/2B/1,736 square feet
554 N. Larchmont Blvd.
Sold for $1,350,000 on 3/6/08
3BR/1B/1,436 square feet
327 N. Beachwood Dr.
Sold for $1,510,000 on 3/28/08
3BR/1B/1,691 square feet
