A Market Snapshot for California Real Estate Activity for 2010 and 2011

The market predictions for 2011 were given out just prior to the California Association of Realtors Expo October 5-8, 2010.

The California median price for a single family house bottomed out in 2009 and in August 2010 the unsold inventory index was about 6.1 months, a market "normal". Unsold inventory by price is highest at the upper end of the market, and the lower end of the market is a 4 month supply. Affordability reached 70% in 2009 and 65% in 2010, meaning two out of three household can afford to buy an entry-level home in California. 

Median price for condos was $258,000 statewide, sales of condos were up in the Spring. First time homebuyers are 44% of the market, especially for condos. However, 20% down payment was the  median down payment statewide.

There are more non-distressed sellers coming on the market this year, comprising up to 59% of the market, while short sales are 22% of the market overall. Multiple offers (about 4) existed on 51% of properties in June, 2010. Sellers net about $35,000 in cash at close of escrow in 2010. FHA loans were used by 32% of all buyers.
Short sales or distressed property conditions were the reason for 29% of all sellers putting home on the market--a record number since the survey started.
Investors comprised about over 13% of purchasers, an active part of the economic recovery, while 5.3% were second home/vacation property purchases.
44% of buyers changed their minds after opening escrow, reflecting a great deal of fear and uncertainty about the market for many buyers.
2011 should bring a slight increase in sales volumeby 2% (to 502,000 units) and a slight increase in median home price of about 2% to $312,500 for the California median price. Interest rates are expected to remain low, with as much as a .5% increase in rates.

2011 should bring a prime opportunity to buy, but the actual number of move-up buyers and sellers is also of concern due to the number of owners with continuing negative equity in their homes who may hold off selling for a long period of time.

High cost loan limits ($729,750) will continue through September 2011, very important to the Califonria housing market, because the median home price is still significantly higher than the rest of the country.
Los Angeles County median home price is about $349,000, an increase of 2.8% over 2009. This is  also a reflection of the movement in the low end of the market where properties have moved much more rapidly than the high end where some prices have softened.


Overall, home prices in the state have either stabilized or improved.

The "shadow inventory" properties held by the banks are predicted to be in a 3-5 year window for the foreclosed properties to return to the normal market, but prices are likely to hold steady because it is not in the lenders' best interests to flood the market with properties.

There is upward movement in low-end prices where there is a lot of competition between first-time buyers and investors, more than in the $1,000,000-plus market where there is much more inventory.

Long Beach is a "microcosm" of the state -- high end areas over $1,000,000 and low end areas such as North Long Beach with a high proportion of distressed properties, and will probably mirror similar Los Angeles County area performances. The recovery for the city will not be uniform, and will be a reflection of its various internal markets.

Modest price appreciation in the future is a much more realistic expectation than the 20%-plus gains during the boom years which precipitated the market downturn.

"We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures,” Leslie Appleton-Young (CAR) said.



From the California Association of Realtors annual Realtor survey and the Housing Market Forecast for 2011.

How Many Properties Under $300,000 in Long Beach?



Ocean Blvd Condo

Today, the Southern California MLS (combined with CARETS) shows 631 properties in all areas of Long Beach. This is more than June, 2009 (431) and less than December, 2008 (737).

There are 269 single family homes of which 38 are bank-owned and 136 are short sales, the majority are in North Long Beach.  There are 340 condos under $300k,  of which 48 are bank-owned and 182 are listed as short sales. There are 13 co-ops, 4 require short sale approval and 1 is lender-owned. There are only 9 OYOs, probably because many have converted to condominium status in recent years--only 1 requires short sale approval and none are listed as bank-owned.

From these 4 categories, it's clear that short sales constitute nearly 50% of the market in this price range, while bank-owned properties, while bank-owned properties are about 14% of this category in Long Beach.

If you the buyer submits an offer on a short sale, know that they require patience and the ability to wait. The seller wants to avoid a foreclosure, and can usually only do so by obtaining short sale approval from the bank, and counting on the buyer to stick around for the entire process. Buyers should understand all of the short sale addendum terms, and be clear about the waiting period you've agreed to--if there is no waiting period (number of days) inserted in the addendum, that means you're committed to waiting until either the bank says it's not approved, or the bank says it's approved--whichever is longer. In other words, agree to 90 days and if there's no approval by that time, then it's safe to cancel and move on. A 30-day escrow including bank approval would not be realistic for almost all properties.

This is the affordable range for many people, and it also attractors investors who have a lot of cash. Some properties give a 10-day period for owner-occupants to make offers, another reason why the buyer should be prepared in advance with loan approval and funds documentation to be ready to make that offer, assuming it's the property you want. Otherwise, try to find a property being sold by an equity seller.

The future will continue to feature distressed properties in one form or another: "Sales of distressed properties are set to peak in 2011 at 2.3 million transactions before falling to more normal levels at 850,000 in 2016, according to a report from John Burns Real Estate Consulting."  Does that mean prices will continue to fall? It all depends . . . on the area and local real estate. That's why you should keep up with prices in the area of your interest, and stay in touch with a good lender and a good Realtor who can keep you updated on recent sale prices, interest rates and current lending guidelines (which can change every few months or every few weeks).

Nearby cities of Cerritos, Lakewood and Signal Hill also have properties, ranging in number from 22-27 each, under $300,000--the vast majority are condominiums with a small sprinkling of houses. Norwalk, however, has 200 properties, the majority being single family homes, so this is another area of opportunity for those willing to live a little further inland.
To see all properties of interest to you, including income property, just go to my website property search at http://www.juliahuntsman.com/. 

Going Green: Recycle Your California Appliances

Is your refrigerator getting more expensive to run? I think mine is because it's now 10 years old, and my electricity usage is going up (but cleaning the coils can also lower electrical usage too). If you're going to replace them, don't dump your old appliances or have them hauled away before you check this program first. The California Energy Commission is behind the Cash4Appliances program. Click on the link for more information.

Don't dump your old appliances, instead, recycle them, and/or get a rebate through the listed partners if you bought from them. This includes Best Buy, Home Depot, Fry's, Howard's, Lowe's, and other major chains.  I unfortunately do not see Sears on this list (where I bought my refrigerator). This program applies to residential occupants, and landlords and tenants of residential properties.

This program started in April, 2010, and will continue until funds are gone. Per their website today, there is over $11,000,000 available in funds. This program includes your refrigerator, clothes washer, room air conditioner, freezers, dishwashers, certain water heaters, and certain furnaces. As of July 28, eligible energy efficient appliances and rebate amounts available are: refrigerators $200, clothes washers $100, and room air conditioners up to $50. California Cash for Appliance PLUS rebates include: dishwashers $100, freezers $50, water heaters $300-$750, and HVAC systems: $500-$1000.

Another source for recycling refrigerators is through Southern California Edison, which will remove your working refrigerator and pay $35.

FHA Loan Right After Short Sale?

Short sales are a problem for sellers who want to get into a new home right away. Besides the probable impact to your credit score and the issue or rebuilding it, there are normally the mortgage loan guidelines that require a waiting period of 2 or more years after a short sale, depending on the buyer and the loan.

But for certain buyers, there could be an option:  If you are a borrower who has not suffered delinquent loan payments, but has suffered a market devaluation of your current home, you could be eligible for an FHA loan immediately upon sale of your current home IF:

1. You aren't selling your home and buying a new one simply to take advantage of today's lower prices;
2. You purchase at a reduced price a similar or superior property within a reasonable commuting distance;
3. The short sale is for your primary residence.
4. You are current on your mortgage payments and no 30-day late payments.
5. Your home is not pre-foreclosure (with a Notice of Default recorded against it).
6. You have no late payments on installment debt prior to the short sale.

The borrower's reasons for selling would have to be approved on the new loan's underwriter, but for example, if you're moving for school reasons for your child, or job relocation reasons for yourself, perhaps this loan is for you.
Please give me a call or e-mail me to see if this would work for you!

Condo Prices in Bixby Knolls and Belmont Hts/Belmont Shore/Bluff Park

The August 2010 median sold price of a condo in 90807 (Bixby Knolls and adjacent areas) actually increased by $10,000--to $170,000--compared to August 2009. That's down, however, from the $240,000 condo median in April.  I chose this zip code because I actually underwent a first time experience ever of receiving a buyer's lender appraisal $20,000 less than the contract price. (This leads into issues about out-of-area appraisers and the AMCs, which will not be elaborated on here.) So therefore, it seemed a good idea to see what Clarus Data Metrics research revealed this month. The for-sale price in this zip code for condos shows an overall decrease in asking price by 23%, but an overall increase in selling price by 6%. December and April were two months of exceptionally high prices reaching up to the $300,000 median. The monthly number of units sold range from 4 to10 in the last 12 months, and the same range for properties in escrow each month over the last 12 months, currently up 75% from August 2009. The monthly total number of condos for sale ranges from 39 to 55 over the last 12 months.

The August 2010 median sold price of a condo in 90803 (Belmont Shore, Bluff Park, Naples, etc.) actually decreased by 4%, ranging in median price from $550,000 to about $275,000 over the last 12 months, with the current median being $326,000. The median asking price is currently $50,000 lower than August 2009. The number of sold properties for August--15 condos--is one of the two highest months for the past 12 months. The number of condos in escrow has fluctuated from 6 to 15 per month in the last year--currently the pendings are down (by 3 units) from July and down from August 2009. Currently there are 83 condos on the market in this zip code, the lowest number was 59 last January. So although supply is up, so is demand--9 sold in August 2009, 15 sold in August 2010.

Buyers and sellers should know that lending in condos means a review of owner occupancy ratio (less than 75% is a deal killer for some lenders, less than 51% is a deal killer for all lenders), the number of owners delinquent in their HOA dues (can't be more than 15%), and existing lawsuits are all items that come under review in their review of the association's documents. Other issues could be HOA reserve funds and signs of lack of common area maintenance.

FYI: "Median" is not the same as "average"--the median number divides the group into two equal halves: Half the properties sold were above $326,000 and half were under that price.

Any why are those cows there? Because they like to keep an eye on things too.

Advance Fees in California

Even though a law was passed in 2009 in California, there still seem to be advance fees being requested and sometimes paid for in exchange for certain services. Here is important language to read and understand, because there are people who are still trying to take advantage of homeowners who want a loan modification, loan modifications or attempts to avoid foreclosure that just don't work out. And the homeowner loses money.

It is illegal in California, as of October 11, 2009, for a lawyer, real estate broker, real estate salesperson, including corporations and companies, to demand or collect an upfront fee, retainer fee or other advance fee for loan modifications.  There have been, and continues to be, many people who have lost thousands of dollars through misplaced trust. And, if you have experienced this, please click on the link below to find out more about reporting to the Attorney General.

Remember, calling up your own bank is the first step to finding out about loan modifications. A property owner is able to do this on their own, although you may want the assistance of a consultant, because it can be an involved and lengthy process, depending on your bank. But there is no advance fee that can be charged, not until the close of escrow.

See the Dept of Real Estate story.

Tips for Increasing Your Home's Value

It's not unusual for a Realtor to hear a property owner say that their home is worth a certain amount because of a particular recent sale price of another house in their neighborhood. Many times the Realtor has a different opinion about the home's value than the property owner does, not because it ultimately couldn't, but because of the way it looks right now.

It's like selling a car: A prospective buyer is far more attracted to a pretty, shiny, vacummed-out, cleaned-up, polished car sitting out on the curb when they first pull up to take a look. They are far more ready to have a discussion about it, since it compares favorably or more favorably than most other cars they looked at, and a buyer is more ready at that point to believe the car has been well-maintained, which means it's worth more to them because there will be fewer repairs.  And this is the same approach owners need to take with their houses and yards. You probably wouldn't consider getting maximum value out of your car without putting some effort into its presentation--and you need to do the same with your home:

• Trim overgrown trees and bushes so that branches are at least 10 feet away from your roof -- and possibly include that same guideline for driveways, walkways, and outdoor sitting areas, or if vegetation visually obscures too much of your house so that it cannot be clearly seen from the street. Water your landscaping so that it looks green with no bare spots, and remove dead plants.
• Consider having the house power-washed--it may eliminate a paint job (unless you have the next issue). This should be done only by a professional.
• Touch up peeling paint. Not only is this an "attractiveness" issue, it signals negative messages about maintenance, and is also an FHA loan condition issue for an FHA buyer.
• Have a professional inspect your roof and replace curled or missing shingles. Remaining life-expectancy is important, especially if most of the nearby roofs are much newer looking. Stains and plant matter such as moss can be removed with a cleaning. Considering that total roof replacement could be up to $20,000, a roof in poor condition could make your house appraise lower.
• Routine maintenance and cleaning eliminates setting off alarms: repair gutters, obtain a pest/mold inspection report annually, replace missing bricks, repair exposed wood beams and window frames, remove or repair deteriorated gates and fencing.
• Colorful plantings in the are a minimal investment, but will do much to show off your yard and your home.

It's important to remember that the money invested now will help you obtain a higher price from the buyer, and will help to eliminate value issues when the buyer's appraiser comes out to see your property during escrow. Many times sellers overestimate the amount required to prepare -- this amount will also depend on how much deferred maintenance you have and your budget. Spending $2000-$5000 dollars may bring you another $10,000-$15,000 in price, or at least help your house sell faster if your market is sluggish. Attempting to sell without any preparation could affect offering price, impact negotations during escrow if the buyer discovers further issues through their physical inspection and decides to walk away, and/or impact the appraisal. 

You can find more information on the Landscaping checklist and at the HouseLogic tab at the top of this blog.

The Economic Impact from a California Home Sale

While at a meeting yesterday, I heard a statement from another attendee that somewhere between 30-50% of California's job market has been directly affected by the change in the housing market in this state--the local closings of some long-established independant businesses and the empty storefronts are a testimony to that.

When the prices of the housing market were out of reach of many buyers, I frequently heard and read statements about what a good thing it would be if housing prices dropped "back where they should be." But nothing happens in a vacuum, and when housing prices fell, so did the rest of the economy. The activity generated through the sale of one residential property conducted through a REALTOR® in California may impact up to 40 different occupations, starting with the buyer's lender and its employees and underwriters, appraisal services, escrow officer and affiliated company, title company representatives and employees, home warranty company, MLS employees, all the internet and print advertising services for marketing the property and which help to attract the buyer, accountants and attorneys connected to the transaction, home stagers whose services may be critical to helping sell the property at current market price, insurance agent, messenger companies, home construction contractors, moving truck services, property managers, car rental companies, to name some of those closer to the "ripple" effect. All of these occupations serve vital connections to a real estate transaction, and moreover, a Realtor usually has requirements to assist or coordinate with many of these participants, each of which has its own job to do. Without a home sale, many people are literally "out of the swim".

Information reported in 2009 from National Association of Realtors, Bureau of Economic Analysis and Harvard Joint Center for Housing Studies shows that when one home is sold in California, the income generated from real estate related industries $49,383.00, the additional expenditures on furniture, paint, and applicances is $5,331.00. Also, there is addtional economic multiplier impact as greater spending on charity, sports events and restaurants estimated to be $26,263.00. The new home production value, estimated at one new home constructed for 8 existing home sales,  is $68,588.  The total income derived from the sale of one California home (report used an earlier CA median price of $548,700--currently $311,950 for a single family home as of June, 2010) is $149,564. The National Association of Home Builders has estimated that nationally, approximately $8,900 is spent on home furnishings and improvements within 12 months following a home sale. In other words, what happens to the housing industry happens to a lot of people.

Houses in Long Beach for July: Prices Softer, Sales Volume Up

July in Long Beach was a pretty busy month for single family home sales but it also saw a lowering of the median price: 196 sold at an overall median of $360,000, down from $380,000 and $375,000 from the prior two months, and down 5% from July, 2009.  The July average for sold-price-to-list-price was 98%, with a low of 72%.

The peak for the last 12 months was $415,000 in November, 2009. The median list price, however, has steadily increased since December, 2009, and is up 4% from one year ago, with 1,234 single family homes currently on the market citywide. And, total number of SFRs in escrow is up 42% since one year ago and at 276 houses, is at the highest number under contract in the last 12 months. But, expired properties in all price ranges were at the highest number in the last 12 months, while the months' supply of inventory is at the lowest in the last 12 months. It has never been more important to price the house right and make the right improvements for showing.

A quick search on the MLS shows that today, there are 528 single family houses in escrow, and 434 of them are under $500,000, and 94 are listed over $500,001.  See the entire report for single family houses.

What Happens to Your Sale If You Don't Pay Your HOA Dues?

Many owners these days are having financial problems, and decide to stop making payments on both their mortgage and their homeowner association dues. They may later decide to sell as a short sale, do all their document submission to the lender, list their property, find an eligible buyer who is willing to wait, and look forward to opening escrow and getting it sold. And, common to many sellers, they stopped making payments several months prior, so now a significant dollar amount in delinquent HOA dues has built up--hundreds and even thousands of dollars are in arrears.

In California an HOA may initiate foreclosure on a property after 18 months of nonpayment (but then they take over all associated mortgage and other costs of that unit), but before that, an association after a few months of nonpayment may instruct its attorneys to file a lien. If a lien exists at the close of escrow, then it will raise the issue of getting it paid off prior to close, or delaying the close of escrow--and in a short sale, lenders may impose additional fees for not closing by the specified date. If the seller does not have the money to pay it off--this will include the dues, late fees and attorney fees--then perhaps the buyer would be willing to contribute, but if the buyer cannot or will not, then that particular escrow will not go forward. And if you have a Notice of Sale on your property already, the lender may no be willing to extend and wait for a new buyer--it just depends on the lender.

Another wrinkle for a closing is even if delinquent dues can be paid off at closing, the number of delinquent owners in the association may exceed the lender's guidelines, and now there's another reason it may not close escrow--for any owner. Non-payment of dues may force other HOA members to pay special assessments to make up for the loss of income, which may be a hardship for many owners who are struggling to stay current because of their own loss of income or job cutback issues. This may actually increase the number of delinquent owners.

Contrary to what many short sale sellers assume, lenders will not pick up all HOA costs, and many banks completely disallow any HOA costs in their approval, and that includes move-in, move-out fees, and provision of HOA documents to escrow as asked for in the contract, a total potential cost of up to $500 or more per transaction. Another potential outcome is that the owner will be pursued later by the association with a judgment filed against them. And I've also read that some bank approval terms are "requiring" buyers to pay the delinquency at closing, which is driving them away from the transaction.

So if the seller can't pay now because of all their financial problems, one option would be 1) to approach the association with a request to negotiate them down to what is possible, or 2) request a forbearance agreement and work out a payment plan over time. These are much better options for an owner who wants to do a short sale and avoid foreclosure.

The last piece of advice is that the homeowner should obtain legal advice. But unfortunately many people don't do that because that would be another bill to pay, so they look up information on the internet instead, which won't tell them about their specific situation. Find a legal clinic or some source of local legal advice which will be a resource. If you just decide to stop paying your HOA dues, it could ultimately cost you more than you think.