Housing Affordability in Southern California Is Once Again Raising Its Head

March 2014 Prices for Long Beach

Sales of lower to medium-priced homes have become a challenge. 

First time buyers are feeling the effects as inventory levels remain low, and multiple offers are a continuing feature of the market in many instances.   In the last year, some zip codes in the Long Beach area saw a 20% increase in the average price of a single family home, yet sales volume is low.  Younger, first time buyers are the most impacted by the increase--financing has higher requirements to meet and many younger buyers have heavier debts. 

"Housing affordability is really taking a bite out of the market," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. "We haven't seen this issue since 2007."

Investor activity in the market has actually leveled off since 2013 as prices have risen, and combined with some buyer frustration and buyer loan qualification issues, this combined effects have actually left many homes on the market for longer, a paradoxical effect to the competition over certain homes.   The March stats for Long Beach, for example, show a 20% range increase to the average and median home prices of $450,000 to $504,000 for the last 12 months, as well as a very modest 15% increase in supply of inventory.  But that inventory is still well below the 6-month supply level, but still, it's an increase. 

So it's unknown how long this slowdown in the lower ranges may be here, but if you're a solidly pre-approved homebuyer who is financially prepared, seeing some houses sit on the market a little longer could mean the chance for you.

http://www.latimes.com/business/realestate/la-fi-home-prices-20140416,0,4794538.story#ixzz2z5asarPC

Appearances are Important, But Housebuying Involves More Than Looks

Everyone has heard of "flips". They were often foreclosed houses or condos bought, usually by an investor or some legal entity for the purpose of "fix and sell".

 

Often, they have updated or completely remodeled interiors that usually include granite countertops in the kitchen, new ceramic tile flooring in the baths plus new shower and tub tiled walls, all new sinks and toilets, stainless steel (or brushed stainless look) appliances in the kitchen, new paint, new carpet or newly refinished floors, sometimes new landscaping outside, maybe a new garage door, and if you're really lucky, a new roof.  What's not to love?   Anyone could get excited about moving into a new home that has that new look that will not need work for quite a while.

But since most buyers are obtaining financing (all cash buyers are about 30% of the market overall), the loan people have requirements.

What You Need to Find Out Before Making An Offer:

Did the seller acquire this property less than 30 days ago? If you're a "regular" buyer with standard financing, you will be locked out of making an offer on this property UNLESS is it a Fannie or Freddie property, owned by a state or government agency, an approved non-profit which handles HUD REOs or one connected to "Neighborhood Community Stabilization Program".

If the seller has owned the property up to 90 days, and the new sales price is 20% or more higher than what the seller paid for the property, then there are more issues: There must be a second appraisal (on top of the first one by the buyer's lender), not at the buyer's expense, but at someone else's, which could be another $500 to be paid up front when it's completely unknown if the two appraisals can somehow agree with each other (and many times appraiser don't agree with each other); additionally, another property inspection must be performed and paid up front by the loan officer.   THEN, copies of all work performed by the seller in renovation must be produced, which only a very caring property flipper will probably have on hand. Remember, property flips are often financed by short term loans by sellers who have never lived in the property and have no attachment to it, and whose disclosures to the buyer will probably be very minimal.  And even if you find a loan officer willing to front another $800 up front, this will not all be accomplished in a 30-day escrow. 

After 90 days? You're good to go.

Who the seller is, the length of time it's been on the market, these are very critical to know before an offer is made. And then the buyer will have to realize that should any items be called out on the home inspection by your inspector (there is no such thing as a perfect home), the seller almost always will refuse to do any additional repair because it's "already been done".  Perhaps, but anything your lender notes on the appraisal(s) will be critical before the loan can close, and if the seller refuses, you may decide to walk. 

SO, let your agent help you with finding properties that will meet your buying and lender criteria. Professional help can save you a lot of time and wrong directions.

Just Listed in The Lafayette

Lovely 10th floor studio unit in The Lafayette in downtown Long Beach. Faces south for panoramic city, neighborhood,

and ocean views. Lots of light in this spacious unit. Kitchen upgraded in 1995 with cabinetry, counters and ceramic tile flooring in kitchen/dining areas. The bathroom tile reflects the Art Deco historic style. Unit is close to the elevator. Visit the solarium on the 11th floor for more views, and the patio on the 7th floor. Extra storage units (see HOA for fee) are on availability basis. A former ballroom has become the association gym. Tax records show as one-bedroom, however, this is a studio unit with a Murphy bed in a double-door enclosed area in the living room area. Dining area offers direct views to the south. The historic Lafayette has a beautiful lobby reflecting its Art Deco past, and is located in prime urban downtown with shops, restaurants.

List price $193,000.  Lic 01188996

 

Note: Sold 4/28/2014 for $203,500. If you want a free market analysis for your property, please contact me!

 

A Few Things I Have Learned From My Clients and Selling Homes

Learning does not necessarily come in the form you think it will--sometimes you learn from mistakes, or you learn from what others tell you and what they know, or you learn from having been around that bend in the road before.  We are in the business of having to explain to our clients what they must do before, during and after transaction, and hence, we are constantly in the business of explaining and talking.  But the learning process goes in both directions.

I was so surprised when I was helping a buyer in  a purchase transaction for a WWI era Craftsman-style home to find out that those foundation blocks that look like solid concrete are in fact . . . hollow.  It turned out the particular house in question had a very poor deteriorated foundation on 3 sides.  The remaining side with hollow ornamental concrete block was providing the most support, which was not full support either. It turned out my buyer, who had prior experience with this type of foundation and didn't like them, knew and expected the concrete block to be hollow, a fact I ended up learning from this one client and which was emphasized by his physical inspector as well. Yes,  they finally bought the house anyway because in the end, he wanted an older house style.

I've learned this more than once:  Sometimes what people think they must have and they can't live without can be laid to rest if they find something that's desirable enough to make them forget their first "must have".  When working with a couple who had the expectation of buying at the standard of the brand new housing their parents could buy in the 1950s, I was beginning to wonder if I could sell them a home in a city of 50-year-old homes. After all, most houses have cracks in the driveway if it isn't brand new concrete.  I pulled up to preview a property and thought twice about going in--it had cracks in the driveway, among other things.  But I thought, what the heck, I'm here so I may as well look.  After seeing the vaulted and beamed ceiling family room, I knew I had to get them in there.  It turned out that was the feature that sold them on it, and even though the cracks in the driveway were noticed, they paled in comparison to the family room.

Sometimes the talkative partner who says they have the final word just turns out to not be the ultimate decision-maker.  If you have to talk about it too much, you're probably not it.  Like these birds milling around in the parking lot and not going anywhere, such people don't buy or sell because they don't come to an agreement.  "Meeting of the minds" is what makes everything move forward.

As Realtors helping our clients understand the market, we get used to telling them things, sometimes over and over.  And then again and again, because there's a lot to know in all that paperwork, and data about the market, and what comes from our knowledge and experience.  But, sometimes (and I learned this from a garage mechanic one time who was good at listening to me ramble on about my car's symptoms) people have their own intuition about their own deal. In the midst of a counter-offer meeting, the buyer insisted on a low price I believed the seller was unlikely to take, even though that market had more sellers than buyers. Maybe it was the glint in the his eye, but I decided to go ahead and print up the counter offer with the buyer's price.  With no further ado, the next day the seller accepted it, and escrow was opened.

So sometimes you know a lot, but you still have to keep your alert system on for incoming unrecognized sources.

Water Conservation in Southern California--It Can Save You Money!

Ironically, on the day of heavy rain last week in Long Beach, drought conditions were officially declared (again) by the City, and water restrictions were officially put into place, and/or reminded of once more. So diners must ask for water in restaurants, and water users are not to water more often than 3 days per week at specified times and for no longer than 10 minutes. Most people don't think about how much water a dripping shower wastes, or sprinklers that are constantly leaking--you can save lots of money by fixing these problems.

Here are 10 tips from the Community Associations Institute to conserve water, because about 60% of water usage is used outdoors, according to the Irvine Ranch Water District.

1. Water early in the morning or later in the evening when temperatures are cooler. Save 25 gallons per day.
2. Choose a water-efficient irrigation system, such as drip irrigation for your trees, flowers and shrubs. Save 15 gallons each time you water.
3. Maintain your irrigation system. Check your sprinkler system frequently for leaks, and adjust nozzles so only your lawn is being watered and not the house, sidewalk or street. A well-functioning irrigation system can save 500 gallons per month.
4. Water deeply, but less frequently to create healthier and stronger landscapes. Reduce water runoff onto sidewalk, streets, by watering as frequently as possible and for less time. For a free watering schedule, visit irwd.com. Save 12-15 gallons each time you water.
5. Monitor the performance of your landscape and adjust the run times up or down accordingly. If your lawn does not spring back when stepped on, it’s time to water.  Be sure to turn off your irrigation system when it rains, and depending on rainfall wait to restart. Save 1,100 gallons per irrigation cycle.
6. Consider investing in a weather-based smart controller. These devices will automatically adjust the watering schedule based on soil moisture, rain, wind and evaporation and transpiration rates. Check with your local water agency to see if there is a rebate available for the purchase of a smart controller. Save 40 gallons per day.
7. Replace your lawn with drought-resistant trees and plants. These plants are well suited for California’s mild winters and dry summers. They are low maintenance, use less water and don’t require soil preparation or fertilizing. Remember to contact your association and obtain prior architectural approval, if necessary.  Save 30-60 gallons each time you water per 1,000 sq. ft.
8. Plant the right plants for your climate. Use the Save Our Water-Wise Garden Tool to learn what plants and flowers will work best in your neighborhood. Or, download a free copy of A Homeowners Guide to a WaterSmart Landscape.
9. Put a layer of mulch around trees and plants to reduce evaporation and keep the soil cool.  Organic mulch also improves the soil and prevents weeds. Save 20-30 gallons each time you water per 1000 sq. ft.
10. Avoid using water for outdoor clean-up. Use a broom to clean driveways, sidewalks, and patios. Wash cars with a bucket, sponge, and hose with self-closing nozzle. Save 8-18 gallons per minute.

See http://www.lblawntogarden.com/ for the City of Long Beach conservation and rebate programs for residences.

For more tips and samples of drought tolerant landscapes, visit www.bewaterwise.com, http://saveourh20.org or download the toolkit.

Some Lenders Are Checking Borrowers' Social Media Accounts

Along with new lending rules for buyers and lenders that came into effect on January 1, there's more to think about, too.  According to an article in the Wall Street Journal, a buyer's Facebook and Twitter data may help a lending company determine a borrower's creditworthiness.  Ironically, these same lending companies may be backed with venture funding from Google Ventures or Accell Partners (early Facebook investor). 

Social media accounts are a way to double check a borrower's job information (see your LinkedIn account), or there's a post about how you got fired on Facebook.  And E-Bay could be a great place to check your small business reviews by others. Right now this practice of social media review is primarily used by smaller loan sources, but Fair Isaac Corp. (your FICO credit score company) is considering incorporating social media, and since it provides credit scoring for the vast majority of lender decisions, that could have a huge impact.

Lendup, a San Francisco lending source, is one company currently using a mix of credit bureau and social media information to help assess borrowers' risk and verify identities. Applicants are voluntarily sharing their Facebook, Twitter and other social sites which Lendup is using, although they don't require it.  It just helps on the road towards loan approval.  This is a company backed by Google Ventures and which expects to make 300,000 loans in 2014.

At Moven, a mobile-only bank, customers can link up their social media accounts to learn about their own financial behavior and make payments to friends. The President of Moven says social-media activity will be one factor used in lending decision on their future loans. He believes social media data says more about customers than their FICO score.

Kabbage Inc, a loan source for small businesses, requires a customer to link at least one account such as Amazon, e-Bay, or Xero for underwriting decisions.  Kabbage, Inc., is looking at how many "likes" a customer receives, and what reviews are saying about the borrower's business.

The Consumer Financial Protection Bureau and the Federal Trade Commission are taking a close look at privacy issues. If, for example, a consumer reporting company such as Experience or Equifax has inaccurate information on a borrower, the consumer may dispute that information under the Fair Credit Reporting Act. But  companies using social media in their lending decisions don't have to verify the information about you because it isn't reported to third parties, so there apparently is little or no regulation when it comes to this type of  "background check" on a borrower.

" 'There are privacy concerns. People don't understand the implications or why they may be considered undesirable' " for credit, said Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, who is calling for regulation."

See the full article at http://online.wsj.com/news/articles/SB10001424052702304773104579266423512930050?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304773104579266423512930050.html

Sellers, Get the Price You Deserve!

Seller's selling tasks

Every year  National Association of Realtors publishes its survey of home buyers and sellers, but this 2011-2012 survey (most recent) on FSBO's (for sale by owner) shows one of the largest gaps I've seen in selling price.  Traditionally, the figure was about a 5% difference in selling price (including all costs)between selling on one's own vs. being represented by a REALTOR. This, however, is showing a 20% difference in price when sellers did not use professional representation.

Not to pick on just one group, though, the graphic really highlights the issues before all sellers:

Having enough time to devote to preparing your home for sale, reviewing and negotiating all items as represented in transactional documents, understanding buyer financing issues, and being on top of the current market so that your setting the right price.

Very often, sellers focus on price to the exclusion of other terms, and may actually end up with a lower bottom line.  How is this possible? It's important to recognize negotiating issues and how much to give, or not give.

For an estimate of your home's value (condo, single family or residential units), please contact me.  If you're thinking you need to save money, you should first get an accurate estimate.  Your home could be worth more than you think (although I don't endorse overpricing), and you could actually net more than you originally thought by using a knowledgeable REALTOR.

The Overall Picture for Long Beach Area Real Estate for 2013

The market has increased in price! 2013 saw upward jumps in most areas for the average annual sales price of a single family home:

• Long Beach, increased to $489,000, +18%.
• Cerritos, $605,000, +11%.
• Lakewood, $420,000, +17%.
• Huntington Beach, $803,000, +10%.
• Signal Hill, $600,000, +13%.
• Los Alamitos, $686,000, +9%.
• Seal Beach, $947,000, +25%.
• Cypress, $532,000, +17%.
• Norwalk, $318,000, +17%
• La Palma, $576,000, +18%.
• Bellflower, $356,000, +15%.
• Garden Grove, $443,000, +17%.

Along with price increases, there are: multiple offers as new buyers compete with each other and with investors, all cash purchasers, inventory shortages, sellers reaching for too high a price in some cases, an overall upward movement in mortgage interest rates, new lending rules which may have a tightening effect for some borrowers, and more buyers in the market who are emerging from a past foreclosure or short sale and are looking to buy again. And, appraisals continue to be an issue.

Keep in mind, pricing for condos, and 2-4 unit properties would be different, and should you want to know specific pricing for your city or zip code (south Los Angeles County and north Orange County areas), please contact me. 
This data is current as of January 6, 2014, and all data comes from the MLS.

Selling a California Property and 1031 Exchanging Out-of-State

Suppose that today, January 27, 2014, you closed escrow ("sold") your California property due to be part of an exchange in the state where you currently live (not California).  Did you know that the State of California now wants its money, if any is to be made? 

So, effective January 1, 2014, California Assembly Bill 92 now adds a new annual tax reporting requirement for those taxpayers who exchange California property under federal Internal Revenue Code Section 1031 for non-California replacement property.  This means "all individuals, estates, and trusts, and all business entities regardless of their residency status or commercial domicile" must report the amount of the gain (or loss) on the property which is deferred in the 1031 exchange.  If it isn't reported, then the Franchise Tax Board will estimate and decide for you what your amount of income is from the sale of your property, and assess tax, interest, and penalties due it. 

No more taking your property and then avoiding California tax by doing an out-of-state exchange, and then a later sale. Read more here about the new law.

Can I help you decide on the market value of your property? Whether it's one unit (home, condo, townhome), duplex, triplex, 4-units or more, I can help you with an income/expense analysis, plus free information about 1031 exchanges.  Please contact me at 562-896-2609, julia@juliahuntsman.com.

Chocolate chip cookie recipe

Here's a fun way to start off your year with a quick, easy, chocolate cookie recipe, with a calendar for January 2014.

Happy New Year.