Distressed Listings in Long Beach, Cerritos and Huntington Beach

Some buyers are thinking that foreclosure and/or short sale properties (they owe more than they will net from the sale) are in every neighborhood where the buyer would most like to live. Not true, and it's been the source of misunderstanding, and sometimes frustration, for people who might otherwise make a move right now. A short sale is not necessarily the way to go: There are "normal" listings of non-distressed properties priced just as advantageously; plus, a short sale is in the hands of the bank, not the seller, and the bank. Fathom7's 3/31/08 entry on the Redfin site says, "Add to this the matter of the short sale taking a long (sometimes interminable time to complete) and these properties become amazingly undesirable. What I don't understand is that rather than take a rational offer for the home, the bank and the still-present-owners appear to prefer foreclosure over accepting a short offer on the short sale. somebody is getting something but nothing gets accomplished for the buyer," (It's true, some banks are not clearly understanding that foreclosure is usually a more expensive process than accepting a buyer's offer and taking a loss), and,
"Here's one example of what I have been dealing with: I have had interest in a particular house – the asking was outside of what I wanted to spend for that house (too many compromises for the premium price). Then , the price took a drop. No sooner had I discovered this when I learned that it too is a short sale. The “listed” price is also short of what is owed and thus is not the real price the bank is going to take. This one too is likely on it's way to foreclosure."

First of all, the short sale status should always be disclosed up front in the MLS so that it's not a surprise to the buyer (however, the price reduction could have been the beginning of the short sale), and second, Fathom7's observation that it's on its way to foreclosure is probably very accurate, because if there's a non-distressed property at or near the same list price, it's going to be an easier pick; third, there are plenty of distressed properties in some areas, but maybe not in the ones you want.

Distressed properties may be ranging from 1.5% of the market up to a 33% or more, in different areas.

Market samples:

Zip code 90803 (Bluff Park, Belmont Shore, Belmont Heights, Naples) - Single family: 5 properties listed as short pay and/or pre-foreclosure, out of 109 single family listings, or 5.5% of the MLS listings are distressed. Condos: 6 properties listed as short pay/NOD (notice of default), out of a total of 55 listings, or about 11% are distressed condos.

Zip code 90802 (downtown Long Beach, Alamitos Beach) - Single family: 8 properties listed in short pay and/or NOD, out of 19 houses, or 42% are distressed. Condos: 36 short pay properties, an additional 6 also as pre-foreclosure, are listed out of 278 condos, or about 15% are distressed properties. (This zip code has a higher percentage of multi-unit housing compared to other areas in Long Beach.)

Zip code 90807 (California Heights, Bixby Knolls and adjacent areas) - Single family: 26 short pay/NOD properties out of 115 houses, or approximately 23% of houses are distressed listings. Condos - About 14 short pay/NODs out of 42 listings, or 33% are distressed condos.

Zip code 90814 - (Bluff Heights, part of Belmont Heights, Carroll Park, Rose Park South) - Single family: About 7 out of 45 MLS listings are short pay/NOD listings, or 16%. Condos - 1 short pay/NOD listing out of 39, or less than 1.5% is a distressed property.

Long Beach - There are a total 1158 single family listings (including the above zip codes) for the entire city in the MLS, 291 are listed as short pays, or 25% are distressed listings.

Huntington Beach - For the entire city, 462 single family homes are listed, 67 are short pays, about 15% of the total market -- this is spread across 4 zip code areas, where some zips may have a higher percentage. Condos - 256 listings, 27 listed as short pays, about 11% of all condo listings.

Cerritos - 90703 zip code - Single family: 112 listings of which 25 are short pay, or 22% are distressed listings; 26 condo listings, 5 are short pays, about 19% are distressed listings.

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Long Beach/Los Angeles Metropolitan Area Homeowner Vacancy Rate

Some markets, such as Florida, have been hit harder than others in the current market. Each quarter the U.S. Census Bureau publishes renter and homeowner vacancy rates; the 2007 4th quarter rate for homeowner vacancy of 2.8% is the highest since it began collecting this information in the 1960's (see comment at end). But the 4th quarter is also typically the slowest time for the housing market in general--fewer home sales, fewer people moving due to the holidays, or taking a listed home off the market temporarily for the holiday period.

Not all markets are the same: the Long Beach-Los Angeles-Santa Ana corridor rate was 1.6%, much lower than Detroit, Cleveland, Atlanta, Orlando, or Indianapolis, for example, yet we rarely hear about those markets in the news media, but rather how difficult the California market is due to the number of foreclosures, which are not the only reason a home may be vacant. A home may also be vacant due being not yet sold and the owner has moved on, or a home being converted to a rental, or has second-home or seasonal use, which is a growing factor among the baby-boomer generation. The West as a region showed a higher number of seasonal vacancies in the 2007 4th quarter than in 2006, while the overall year-round vacancy rate in the West remained the same for both periods. See the Census Bureau chart. The WSJ Online comment that vacancy rates are "matching" the highest level since the Census Bureau started collecting this information is misleading--since the Census Bureau in its own comment says that areas are redefined every 10 years, and states which sets of years are not comparable to each other, i.e., 2005 and later data is not comparable to data prior to 1986 (see bottom of chart page).

Also from: The Wall Street Journal Online, March 21, 2008

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East Long Beach Still Sells

Zip code 90815 (excluding Park Estates and Bixby Hill areas) closed 37 transactions since January 1 to today's date in prices ranged from $355,000 to $715,000 for a single family home (data from the Southern California MLS)--one property reflected as a short sale (this data is only recently being reflected in the MLS). The same period last year closed 51 sales ranging from $476,000 to $930,000.


Currently, in these same 90815 areas of east Long Beach, Los Altos, Stratford Square, Lakewood Plaza, the Ranchos, La Marina, and Artcraft Manor, there are 83 active listings ranging in price from $380,000 to $1,095,000.


About 18 of these are impacted by short pay situations (meaning the seller is requesting the lender to accept a loan loss), however this area is far less impacted on the whole than other areas which may be as high as one-third of the active listings will require lender approval of the seller's short pay request.


It's opportunity time if you're ready to make a move! For a buyer- or seller-directed property search, please go to http://www.longbeachrealestate.listingbook.com/, or go to http://www.juliahuntsman.com/ to search properties on the market by zip code, or price!



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Staging to Sell

If you're thinking about the things you need to do to prepare your home for sale, here is a video on the essentials. This video demonstrates how to create space through eliminating collectibles, or moving your furniture around.



http://www.expertrealestatetips.net/

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California FHA Loan Limits Now Up to $729,750!

A new and long-awaited temporary loan amount increase from $362,790 to the conventional loan maximum of $729,750 passed yesterday (until end of 2008)!

Per the Los Angeles Time: "The California counties at the new maximum level for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura. "

This could make FHA loans available to 30,000 additional Californians. FHA loans are characterized by low down payments of 3% and not as driven by FICO scores as conventional loans are.

Additional loan limits in Orange and Los Angeles Counties are:

1 unit 729,750
2 units 934,200
3 units 1,129,250
4 units 1,403,400

If you are considering purchasing a new house, condo or units for yourself, please contact me for a lender referral. Not all lenders specialize in FHA loans, so it's important to find someone who is experienced in these government loans. Call me at 562-896-2609, or you can go online in the meantime and search properties at http://www.juliahuntsman.com/ or try a new type of property search at http://www.longbeachrealestate.listingbook.com/ .

Tightening the Lending Standards--Is Your FICO Below 680?

Here's more on the trend that's been going on since late last summer: tightening lending standards, and Wells Fargo Bank is just one example as it tightens its lending standards in 200 markets across the country. If you want to buy, you must get your loan lined up before making an offer. This has always been considered the normal procedure for buyers. Now it's an absolutely essential must for any borrower. Conventional loan guidelines have changed drastically since 2007 to the point higher down payments may be required and stated income loans are now off-limits in some markets.

A Wells Fargo internal memo identified 30 markets in California alone as "at risk". Fannie Mae and Freddie Mac (government-chartered mortgage financers) have surcharges for borrowers with credit scores below 680, a previously acceptable FICO score, and are requiring 5 percent down payment in markets identified as "declining". PMI (private mortgage insurance required on many loans less than 20% down) will be harder to obtain on loans with less than 3% down payment, and MGIC Investment Corp., a leading provider of private mortgage insurance, is discontinuing coverage of loans with down payments of less than 5% in 30 markets, which includes the entire state of California. So the message is: Don't count on that 100% financing or stated income loan in some instances, they're harder to find.

If finding a home is important, taking the time to invest in education about financing one is equally important.

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Mortgage Debt Relief Bill in California: Not Quite as Forgiving

Like the housing market, debt relief is a little more expensive in California.

On the state level, Senate Bill (SB) 1055, authored by Sen. Michael J. Machado, passed the Senate Revenue and Taxation Committee on an 8-0 vote. The measure would help California taxpayers whose lenders have forgiven a portion of their mortgage debt, by allowing them to exclude the forgiven debt from their incomes for state income tax purposes. Under existing state tax law, forgiven debt on mortgages is taxable to the borrower as ordinary income for the year in which the debt is forgiven. Per the Franchise Tax Board:

"If it passes, SB 1055 will conform to specified provisions of the federal Mortgage Forgiveness Debt Relief Act of 2007 – with a notable difference. For California taxpayers, the period of excludable discharges would be from January 1, 2007, to December 31, 2008. The federal period of excludable discharges is from January 1, 2007, to December 31, 2009."

When Are Short Sales A Good Buy?

There are more listings these days taken under "short sale" conditions, and naturally, buyers are looking for a good buy. For the agent, the Southern California MLS now accommodates property searches based on this category as well as for bank-owned properties, but what will be involved for the buyer? For example, in Cerritos, there are about 27 short sale listings out of 80 4-bedroom houses on the market. In the Wrigley and general California Heights areas in Long Beach, out of a search of 34 houses under $500,000, about 12 are noted to be short sales. In Huntington Beach, 35 out of 115 houses listed under $750,000 are showing as short sales in the MLS.

First of all, initial disclosure of the short sale by the seller and listing agent is absolutely critical, and should be placed in the MLS listing. A "short sale" is where the owner owes more than the current market value of the property, and where the lender forgives a portion of the loan to match up with the market. The transaction and sale is legally between the buyer and seller, but the fact is the bank will have the ultimate voice in approving the amount of sale. If you're a buyer in a hurry, you may have to be very patient because it's not likely that even if the seller agrees upon a 30-day escrow period, that the bank will be getting around to it that fast. The closing period will likely be closer to 60 days. Much depends on the personnel in its loss mitigation department.

Contractually, make sure you as a California buyer of a 1-4 unit property have completed the Short Sale Addendum as part of your purchase contract and which discloses the contingency of the seller's receipt of a short sale approval by the lender(s) (remember, there may be a second loan by a separate lender which will also have to be negotiated). And, the lender reserves the right to accept other offers, so if the price is not right for them, your offer might sit on a desk while the lender waits for a better offer. Since you don't want to wait forever for lender approval, you will want to insert a realistic date into your contract for the lender's response which enables you to contractually cancel and move on. If the property is an exceptional price for the area, be aware that you may be competing with other offers, even though the market is otherwise slow.

On the postive side, banks are less interested in going through the more costly foreclosure process, and they really would rather approve a seller's short sale, and if the short sale package is presented (some listing agents are not presenting one until they get an offer from a buyer) and dealt with on a timely basis, then the buyer may have some luck. The key is to finding a house you really want, and having the ability and the time to wait out the process.

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Recent California Sales and Prices

The red bars in the chart at the right show the drop in California median sales price of single family houses since last summer. Is this all due to the foreclosures and delinquencies, as is heard so much of in the general media?

Since 1974, the average foreclosure rate per year is .81% (including the highest rates back in 1996 and 1997 of around 2%), and at the end of 2007 was 1.7%. The mortgage delinquency rate was at 4.4% at the end of 2007 (long term average is 3.9% and up as high as 6% in the mid-1980's). This means that out of all the loans made, 1-2% of those loans are having problems.

The loan resets many of this group are facing will continue for some time to come, and certain areas highly impacted by foreclosures will be more affected by lower prices. But in any market, there are always buyers and sellers, however currently, sales are below the 350,000-400,000 the expected "baseline" activity per the state's inventory of home and population demographics, and seems to coincide with the tightening in the credit industry since last summer, so that many people who could buy are delaying.


The statewide median price for detached housing dropped from the mid $580's in August to about $525,000 in October, to $475,460 at the end of December, 2007. However, the Los Angeles County median price for houses in December was $487,000.

Buyers and sellers will need to know their local area prices--sellers should be realistic about their asking price, and buyers should not be expecting cutthroat bargains just because sales are slower. In some areas, sellers are taking their homes off the market and leasing them if they feel they cannot get their price, and therefore there can actually be a shrinking inventory in some neighborhoods. One neighborhood I have been tracking in Costa Mesa (Orange County) featuring Greenbrook homes has actually shrunk from 10-12 houses listed on the market last Spring 2007, to now showing 3 listed as "active" and 1 that went into escrow on Feb. 12, as of Feb. 16, 2008.






Charts and price data per California Association of Realtors


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Why Buy a Home in Today's Market? It's Getting More Affordable

The $168 billion package signed off on by President Bush earlier this week increased the maximum conforming loan limit up to as much as $729,750, or 125% of the median price. Conforming loan limits are generally set on a statewide level (as opposed to FHA limits which are more local)--HUD has 30 days to determine those loan limits, but this morning the feedback is that for Los Angeles and Orange Counties, the maximum limit may be set! The information should be available by next week. (3/3/08 NOTE: limits may now be set on a county basis, and Los Angeles and Orange Counties may receive the highest loan limit.)

Buyers, it pays to pay attention right now and make plans for yourself. With new rates coming into effect in the very near future, you want to be prepared to take advantage of those lower, former "jumbo" rates which will reduce the monthly payment.

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So, with a little help from C.A.R., "Why Buy a Home in Today’s Market?"

1. Interest rates on long-term, fixed, and adjustable mortgages are at historically low levels. The rate on a 30-year, fixed mortgage is hovering just below 6 percent, while, by comparison, interest rates were hitting 8 percent and higher during the last market downturn in the late 1990s, and were between 10 and 12 percent at the height of the last housing boom in the 1980s. Lower interest rates make it easier to qualify for a loan, and your monthly payments are more affordable.

2. No one can put a price on the intrinsic value of homeownership. Home prices also reflect financial worth and, the good news is, across California the median sales price for a single-family home has been consistently rising for several decades. The projected median home price for a single-family home in California in 2008, for example, is $553,000. By comparison, the median price in 2000 was $241,350; $193,770 in 1990, and $99,550 in 1980. (source: C.A.R.) Also, "The percentage of households that could afford to buy an entry-level home in California stood at 33 percent in the fourth quarter of 2007, compared with 25 percent for the same period a year ago", according to a report released 2/19/2008 by C.A.R..

3. The length of time a home remains on the market before it is sold has increased from roughly two weeks in 2004 to between eight and nine weeks in 2007. With more homes on the market for longer periods of time, you have more choices when it comes to selecting a home today.

4. The multiple-offer frenzy that dominated the latest housing boom has subsided, and there is less pressure on today’s home buyers to outbid one another. REALTORS® in California reported that in 2007 only 28 percent of homes sold had multiple offers, compared with 57 percent in 2004. (source: C.A.R.)

5. The credit industry crisis that has made securing a home loan difficult for many has led to heightened scrutiny of mortgage lenders. As a result, state and federal agencies have created protections for home buyers that were not in place a year ago.

Buying a home in today’s market may be challenging, particularly for those with credit problems or little saved to put toward a down payment. But there are many factors impacting the current housing market that make buying a home today a viable option.

the above article courtesy of California Association of Realtors.

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