Clearing Up the Loan Picture

Since I frequently hold open houses I regularly talk to prospective buyers. It's no secret that sales volume has dropped and that predictions abound about the coming drop in prices. I think one of the reasons for buyers holding off is because home shoppers feel like they're shopping in a store when the Big One hits, and suddenly their thrown into another aisle where all around them is shopper's chaos. Recent events in the subprime market have helped the speculation, but may this will add in some perspective about our current economy, which is, after all, still strong:

The Mortgage Bankers Association, in its testimony to Congress last fall, said that homeownership rates are at record levels, nearly 69 percent. It stands to reason that with a higher rate of ownership, there is a higher rate of foreclosure.

Delinquency rates typically peak 3 to 5 years after origination, which is in keeping with record home sales and record loans following 2001. In other words, this was to be expected.

Approximately 1 percent of all loans are in the foreclosure process, well within historical norms, according to the MBA. That’s still less than the post-recession peak of 1.5 percent just four years ago.

Three out of four loans that enter the foreclosure process will not wind up as a foreclosure sale, either because the home owner cures the delinquency, works out a payment plan with the lender, refinances, or sells the home.

Somewhere between 0.5 percent and 1 percent of all homes going into foreclosure are owned by subprime borrowers, according to estimates by Walt Molony, spokesman for the NATIONAL ASSOCIATION OF REALTORS®. On the low end, that's one home in foreclosure out of approximately 200, suggesting that high foreclosure rates are not just a subprime problem but due to a wide range of other causes.

Finally, subprime borrowers are higher risks and have always had a higher delinquency rate than prime borrowers. Yet, only six percent of home owners are nonprime borrowers with adjustable rate loans that are resetting to higher rates.

Long Beach

Housing Opportunity: Think About It

Industrial vs. commercial vs. housing use: This is one of the stories in Long Beach. As in some other cities, downtown Long Beach is building up its mixed retail/residential use most recently through loft conversions, and residential-over-retail use. But still, we have a housing shortage, not just here, but throughout the state--an estimated and predicted shortage that's been no surprise for at least a couple of decades to certain economists. It's supply vs. demand, and it's one of the reasons that the median price in Los Angeles County still increases at this point. While the inland counties such as San Bernardino and Riverside have suffered more due to foreclosures, the Long Beach area and the subprime loan fallouts is far less involved and remains overall far healthier, in spite of the increase in housing cost in this area. Downtown retail is still growing; the local office market is strong.

“We’ve obviously had a huge pull-back, but I think people feel there are opportunities on the horizon because mortgage rates are still quite attractive and there’s still a lot of inventory on the market,” Kyser says, “but at the end of the day, the irony is you still have an overall shortage of housing in Los Angeles County . . . of about 290,000 units, as well as a huge lack of affordable housing." Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation.

It's still a good time for property buyers to buy, and to take the long term view.
Long Beach

Getting Your Home Insurance Lined Up

Home insurance coverage in California is important for everyone, but this article about Allstate Insurance is why homebuyers especially need to be vigilant. Insurance coverage for homeowners is cyclical, and depends on the disaster climate in which companies underwrite. Although they say they are no longer to give coverage, or coverage is contingent on certain factors being present, insurance companies have been known to change their minds later. Nevertheless, when you're in escrow, or even when you are house shopping, start researching possible insurance companies. There was a time when coverage could easily be obtained about 10 days before escrow closed, but that hasn't been around for a long time, and it's getting stickier. Your credit may be checked, and prior claims on the property you wish to insure may impact which company will insure you. There's really no time to waste for finding coverage before you close escrow. If you're obtaining a loan, it will be required by the lender, and you should get it regardless.

Number of Sales Goes With Seasons?

Condo sales by quarter



While all we seem to be hearing about is that sales are down, historically, the time of year has something to do with it, too.

If you compare 2007's condo sales for zip code 90803 (Belmont Heights, Bluff Park, Belmont Shore areas) as shown in the local MLS, with 2006's sales at the same time last year, even more have sold with about the same number expiring. Sold condos per quarter range from 23 to 42, with the second quarter of 2006 highest in sales. Although not reflected on this chart, the median prices from local tax data for Los Angeles and Orange Counties has increased over last year's prices.

While not exactly a scientific study covering all parameters, this does show sales are continuing actively in the current market. We'll see if the second quarter of 2007 echoes last year's.
Long Beach

Counteroffers: What To Do

It's not unusual, whether you're a buyer or a seller, to start feeling that the other side is being totally unreasonable, or that the price is too low from a buyer or the seller is asking way beyond a reasonable asking price.

Sometimes, buyers may get upset and refuse to make a second counteroffer back to the seller because they feel the seller just won't listen, especially if it concerns the price. It's important to keep negotiating at that point. Getting upset will only get in the way. Each party may have what they feel are totally valid reasons for their position, and if you can find out what those are (and this is where your Realtor works for you), at least you have an understanding of the other side even if you're ultimately not going to agree with them. Once the emotional level has dropped, it's easier to make a rational decision that you won't regret later if you do end up rejecting the deal.

If you feel you're backing down on an important issue, then don't. Explain why this is important to you so that it can be communicated to the other party. Possibly the other side will walk away at that point, but that possibility also exists during the contingency periods during escrow.

It's important that you know why you think as you do--it can make the difference between selling/buying the property or not.

Long Beach

Resale Homes Are Holding in California

In spite of all the negative media coverage about the housing market, the real truth in California is that the median price is strong.

As a matter of fact, it's 3.2 percent higher for March, 2007 from March of 2006. Sellers apparently are hanging on to their asking prices and still get a reasonably close sales price. In fact, according to the California Association of Realtors, the current median price of $580,090 for a single family home is 3.9 percent higher than the February 2007 median home price. And, though certain counties may be seeing a drop in their median, Los Angeles and Orange Counties' median prices have increased in March, according to Realist, the provider of tax data for the Southern California MLS. Even the Bay Area increased, reversing its decline from last year. Dataquick's data also provides the same picture as CAR and Realist data: Sales volume has lowered while prices are holdling.

Long Beach

L.A. Area Trends

Yesterday the Dow broke 13,000 for the first time, there's no sign of rents decreasing overall, and the median home price in Los Angeles County continues to increase so far for 2007. In spite of all the talk about foreclosures and subprime loans resetting in 2007 and 2008, California may only see a fraction of their delinquencies go into foreclosure because of preventive measures and assistance taken by the respective lenders.

Only a fraction of all delinquent loans will actually go into foreclosure because of measures taken by lenders to prevent costly foreclosures. For borrowers who face temporary problems, these include delaying payments for a short period of time or scheduling a lump sum payment in the near future. For borrowers with more severe problems, alternatives include short sales or mortgage forgiveness. At present, it is anticipated that the proportion of foreclosures in California should be near the long-run average of just under one percent.

Long Beach

Greenbrook in Costa Mesa

This Costa Mesa home in the Greenbrook tract is typical of the 1950's and 1970's ranch style houses favored by those who love open floor plans. Built by Larwin, the Greenbrook homes are located in Costa Mesa, Cypress and Fountain Valley--there's even a Greenbrook by Larwin tract at Long Island, New York where California ranch homes were popular for a while. This is the era of the cathedral ceilings and open kitchens adjacent to the family room. This model features 4 bedrooms/2 baths on a single story level, ample room at approximately 2100 sq. ft. Patio and private rear yard are attractive and neatly landscaped. Family room and the formal dining area make this home an entertainer's delight as well. This home is in an interior location of this quiet tract, yet very close and convenient to South Coast Plaza shopping and the 405 Freeway. It's ideal for less time spent commuting for daily needs. For more information, contact me, or go to my website's property search to find other homes in Costa Mesa.
Julia Huntsman, Broker
01188996


Long Beach costa mesa orange-county

Foreclosure Impact

Deep Impact: Foreclosure Surge in California. A surge of foreclosures in California has some economists concerned that the fallout will be long lasting and potentially wound the whole economy. The 11,033 foreclosures in the first three months of the year represent an 800 percent increase over the same period a year earlier. "For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," says analyst Christopher Thornberg of Beacon Economics. He predicts foreclosures will top out at four or five times the current level — enough, he says, to induce a recession or at least bring the economy to the precipice.Others are less pessimistic. "The housing sector is in trouble for a considerable period," says Edward Leamer, director of the UCLA Anderson Forecast. "But the rest of the economy will muddle through." Source: Los Angeles Times, David Streitfeld (04/17/07) & REALTOR® Magazine - Daily News.

This article is like many others: It simply does not mention the big picture--for instance, what is the percentage of foreclosures of total mortgages in the state of California, or the U.S.?

"The truth is that 99% of all loans in the U.S. are not in foreclosure. The remaining 1% that were foreclosed upon had the following breakdown:

* 80% were classified by federal lenders as Professional Thieves and were turned over to the FBI.
* 20% were classified by lenders as Fraud for Property that resulted in unethical lending practices.
* Ca. Defaults: Historical 32,762 - Low: 12,145- 3Q ’04 High: 59,987 – 1Q ’96 Current: 37,273. [NOTE: February '07 data.]
* For all of ‘06, foreclosures accounted for only 1.81% of all Orange County sales, with lenders reselling those homes at an average discount of only 3.8%!" Gary Watts, http://www.impactre.com.

long beach ca mortgage california foreclosure

Home Price Up Over $500,000 Median for L.A. County

Los Angeles County's median home price (including houses and condos) is over $500,000 for March sales.

"If nothing else, the long-awaited downturn seems a little tardy — at least in most of Southern California.

"The perception out there is that we're at the edge of a volcano and about to fall in, but the numbers don't indicate that's happening," DataQuick analyst John Karevoll said." Los Angeles Times.

Mark Zandi at Economy.Com continues to believe, however, that the Southern California "housing correction" is in full swing and will last through next year.

So far, it would appear the correction is in the number of properties sold, as opposed to price, at least concerning Los Angeles County.