Fewer Homes to Buy as Sales Increase, Prices Jog Upward

Various industry sources have reported that June, 2009 showed the highest California median price this year at $274,740 (statewide median). June sales showed at 20 percent increase over the prior year. The statewide unsold inventory in June was at 4.1 months, locally the figure is even lower. Per the July 2009 report from California Association of Realtors: "The index is now 3.5 months lower than a year earlier and well below the peak of 16.6 months in early 2008. In fact, low inventories may constrain sales and contribute to upward pressure on home prices through the rest of the busy season."

The higher end properties are accounting for more sales, with properties below $500,000 accounting for about 76%, down from 85% at the beginning of the year. From March to June, the market share of distressed properties declined, contributing to the increase in median price.

Los Angeles County median sales price, July 2009, at $340,000; Orange County median at $490,000.

News about Southern California from Dataquick as of August 18th:

"In the region’s more affordable areas, many first-time buyers continued to choose government-insured FHA financing. Such loans were used to finance 37.2 percent of home purchases last month, up from 36.9 percent in June and 19.7 percent a year ago. "

"The recent drop in foreclosure resales, coupled with the rise in high-end sales, has helped stabilize some of the regional home price measures. But there’s still quite a bit of distress out there, and plenty of unknowns with regard to how lenders and borrowers will choose to proceed,” said John Walsh, DataQuick president.

And probably the most telling comment about the future:

“Even if we are at or near bottom,” he added, “history suggests we could bounce along that bottom for quite a while.”

Sales Increasing Now, What Will Next Year Bring?

There is a great deal of talk lately about the upward climb in sales, that maybe we're seeing the bottom of the market, and that prices are down from this time last year, but it's the 5th straight month of sales increases, and the best sales record in several years . . . so maybe prices are stabilizing, or even headed up a little? That's happening in some places, and yesterday's great REO panel of experienced brokers even said it's impossible to underprice a property today because it will get multiple offers and sell for more.

But take a look at the Credit Suisse chart at the right and the pink part of the graph--the reset of the "option adjustable rate" loans. Those are the loans where the "start rate" of 1% were thought by many borrowers to be their permanent loan rate, and not the introductory rate which if always paid at that payment level (and most people did that), meant the remainder of the interest of the real interest rate was added on to their principal loan amount and thus increasing it. It was one more way to end up "under water" on the home value, and end up as a loan modification customer, a short sale candidate, a bankruptcy claimant, and/or as a foreclosure recipient. And then, most importantly, notice that the reset periods do not decline until well into 2012.

Along with the recent sales increase is declining inventory: In Long Beach today there are 877 active residential listings in the MLS, and there are 753 in escrow. Also, as of 8/18/2009, there are 1910 Notices of Default filed, 1224 Trustee Sales filed, and 1426 REO properties, not on the market yet, making a total of 4,560 properties not yet on the market. (Some of the NODs may have successful loan modifications, but there is also a separate study of the percentage of loan mods that end up failing and do end up in foreclosure.) These figures are for Long Beach alone--similar profiles could be drawn for cities throughout the State of California.

Tied in with this is the talk of "shadow inventory" and the rumors that banks will flood the market with all of their pent-up inventory at once. But that is unlikely to happen in such an overt way, despite the hope of many prospective buyers who believe a $400,000 house might eventually sell for $25,000. Received yesterday in my e-mail from DSnews.com:

Perhaps it’s “government pressure to clean up balance sheets,” or the thawing out of home sales, the need for capital, or the growing pool of players in the mortgage-backed assets market. Whatever the motivation, more banks are beginning to unwind their positions in toxic residential loans.

See this story about a Milwaukee-based bank that sold 800 troubled Arizona mortgages to an undisclosed investor, thus clearing $297 million of bad loans from its balance sheets. Will this trend catch on with major banks who decide to sell off in bulk to cut their losses? There seems to be more interest now by investors willing to acquire properties associated with "toxic loans".

The current shrinking inventory may be a combination of things: the loan modifications, the foreclosure moratoriums which have been delaying filings, and the ultimate decisions by banks as to the handling of foreclosed properties, plus the "catching up" with loans in default for months and that are yet to go into foreclosure. Those involved with the REO market believe that over time, perhaps as soon as in a few short months, the inventory will once again increase greatly, continuing to affect housing market prices, and the real estate market will not fully recover from the effects of the subprime market until 2012-2014, as indicated by the chart above.

So what should equity sellers do? Take advantage of this period of time, and realize that now, when there is less competition and many cash buyers (accounting for one-third of the multiple offers on many REO properties), may be a better time to sell than a year from now, when you could end up being a short sale if your equity continues to decline with the market. In some areas short sales and bank-owned properties already dominate the inventory; in the last year certain zip codes that seemed immune, or less impacted, to these issues are now common, such as:

• In 90803, 23% of the 177 active and pending listings are distressed sales
• In 90802, 68% of the 280 active and pending listings are distressed sales

and in the future, if the local and statewide foreclosure statistics are any indication, distressed sales will impact equity sales even more severely than they are now.

If you would like to know about the current market value of your home, please contact me. To see properties on the market in your area, you may search by zip code or city, price, etc., at the MLS property search button at http://www.juliahuntsman.com/.

Have Your Documents Ready When You Call Your Lender

Are you at the critical point of "do I stay or do I go?"

In California, there are currently about one-third of all mortgages "under water", so many borrowers are contacting their lenders concerning loan modifications, or payment catch-up, their pre-foreclosure status, or a combination of all three. Borrowers are frustrated with the amount of time it takes when they contact their lender. Some banks are gradually become more efficient as they are assigning more people to their loss mitigation and loan modification efforts. Banks are still very swamped, and the average consumer is unaware of their low staffing and high demand.

To find a faster answer on which point of action you need to take, and to save yourself and your mortgage servicer precious time, when you call you should have ready:

• The most recent monthly mortgage statement


• Pay stubs or other documents showing your household's monthly pre-tax income


• Most recent tax return


• Second loan or home equity line of credit statements


• Account balances and minimum monthly payments on credit cards, car loans, student loans or other debt.


• A short, concise description of the financial hardship that is causing - or leading to - a mortgage delinquency.

See this Freddie Mac video posted on their site and on YouTube: Stop Foreclosure--Documents Your Lender Needs -- it's had over 4,000 hits in the last 30 days.

If you have decided you need to consider selling as a "short pay" (not all loan modification requests are granted by banks), please contact me for a market valuation and information on how I can help you with the process. Typically, different bank personnel involved in a short pay approval are other than those you may already have been dealing with on your loan modification effort, but your information you have gathered up to this point may save you some time.
Contact me for more information.

How To Be Beautiful with Dry Gardens in Southern California

We love lawns, we love lush green semi-tropical plants, and we love them in dry, desertous Southern California because they grow so well here in this temperate and sunny climate.

But did you know? Lawns and outdoor landscaping consume as much as 49% of our water use in the Long Beach area. If you've seen my past blogs on the subject, you know that Los Angeles and other Southern California cities, including the other desert areas, have been concerned about water use for a long time--for decades, as a matter of fact. Yet, we persist in our East Coast style of landscaping brought here by our forebears. This becomes more expensive with the passing of time--Long Beach is scheduled to raise its water rates this fall, although residents have done well so far in reducing water consumption by 10% through the current city-mandated watering schedule restricting outdoor use to 3 days per week at certain times.

Lawns in particular had a purpose in the past, and it wasn't related to beauty. Lawns derive from the green pastures once kept by owners of cows, because back when we were a more agricultural, less industrial society, financial status and its production could be measured by the amount of land people owned, their crops and their animals. Cows needed green grazing areas, so the more cows one owned, the more pasture was required, and this over time became the foundation for our attachment to lawns, long after the cows disappeared from the average homeowner's life.

Today, we need to fit in with our natural climate conditions, as well as the current water shortage upon us. Beautiful Long Beach Landscapes right into saving money while creating beautiful gardens using native plants. The photos above are "before" and "after" of one house selected by a Long Beach landscaping program. Another great source is at BeWaterWise for landscape and planting ideas.

For more information, go to http://www.juliahuntsman.com/gardening-landscaping-for-home.html