"The Importance of Being Earnest" About Real Estate

The Oscar Wilde play is described as "A Trivial Comedy for Serious People", but in real estate there's hardly anything trivial, if at all. Buying and selling property requires a lot of signing of forms, and it may be overwhelming at the time. But at some point in time, you may well be further considering the meaning of some particular document in retrospect--this is why your REALTOR really has to have you do what he/she needs you to do. It's all for good reason.

Here's a summary concerning what seems like a picky little thing at the time, but you know what they say, the devil is in the details. Trust me, when we ask you to review your documents, and sign certain things on a timely basis, it is what we need to do for you and what you need to do for yourself, and for all parties in your sale. In this 1992 case an agent failed to provide agency disclosure at the proper time, and if you click on the link you can read the case:

Huijers v. DeMarrais -- "It was only at the time of the signing of the purchase contract that the DeMarraises received the agency disclosure statement required to be given to them prior to signing the listing agreement. The purchase contract included a statement that Larson was acting as a dual agent for both buyer and seller."

This failure led to the lawsuit above, its decision upheld by the Court of Appeal of California. It could have been avoided. Agency disclosure has long been required prior to a buyer signing an offer to purchase, or a seller signing a listing agreement. This one-page form describes the agent's fiduciary duties to his/her client and other responsibilities, and the client's signature is acknowledgment that they "got it".

How do you know if you've received everything from your agent you're supposed to have? Click here for the sales disclosure chart.

Long Beach

Read It All Here: Gary Watts' Mid-Year 2007 Report--Foreclosures, The Media, The Subprime Market and Where It's Going

"I am holding to my original forecast for this year. I knew the 1st and maybe the 2nd quarter would be a rough one. I think the Fed will cut the interest rates later this year, and home prices will begin to firm up and even appreciate in the fall, especially as we head to 2008 and the election year!" Gary Watts.

Mid-Year Real Estate Update By Gary Watts, Orange County Economist, Real Estate Broker:

"I. Three Decades of Real Estate

A. It was 36 years ago, after graduating with a degree in Economics and advanced studies in psychology, that I landed a job (during a recession) as a salesman at a television and appliance store in a new community called El Toro, California. One Saturday morning, a real estate agent “floated” into the store. I asked him why he was so happy. He replied, “Yesterday I closed my biggest deal ever. I sold an oceanfront home in San Clemente for $28,000!

1. Loans were at 7% that year. Today they are 6.33%. I have seen 3 recessions, 3 recoveries and a year when lenders had absolutely no money to lend. I have seen an inflation rate of2l%, home loans at 18% and worked through a 15 year period of double-digit interest rates for home loans. Today, we are within 1% of a 40-year low for home loans.

2. Before beginning my career in real estate, the experts like those in Business Week in 1969 said: “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.”

3. Six years after getting into the business (1977), National Business magazine said: “The median price of a home today is approaching $50,000 ... housing experts predict price rises in the future won’t be that great”

4. I remember in the early ‘80’s a seller telling me that he had owned a lot of real estate for a long time but the glory days were over and we would never see price increases like in the past. Maybe he was reading Money Magazine in 1985 when they reported: “The golden-age of risk free run-ups in home prices is gone.”

5. My all-time favorite was when the San Francisco Examiner said in 1996: “A home is where the bad investment is.”

B. Since the Early 1990’s

1. The early ‘90’s was the only time in my 36 years that the median home price here in Orange County declined. Over those 6 years, the median home price declined 19.33% or a yearly decline of only 3.22%.

2. However, it only took the following two years to erase almost the entire loss, and before the decade ended, real estate had gone up 37 ~6% -almost twice the decline of the previous 6 years!

3. Since 2000, homes have appreciated over 100%!4. If I add up the appreciation rates for each of the 4 decades here in Orange County, the 37-year average comes to 14.9% yearly!

II. The Media

A. Today’s media plays up bad economic news now more than ever, which leads to misconceptions about economic realty.

B. And since our potential buyers and/or sellers have greater access to this mis­information, it is more important than ever for all of us (as real estate professionals) to be well informed.

C. Historically, housing downturns last only 27 months, and if you begin counting from late 2005, we are in the 20th month. Maybe, just maybe, the end is in site!

1. Since the 2005 downturn, our home prices are still on the positive side.

2. If we take just the past 12 months, our resale homes are down 0.07% from May of last year, while condos are down only 1.6%.3. The condo market has been most affected by the sub-prime issues; these effects are quickly disappearing.

III. The Sub-Prime Market

A. The worst is over, which helps explain why the sub-prime loan problems have almost left the front pages of the media. It might surprise you and your clients to know that only 1/2 of 1% of all loans in the U.S. are sub-prime!

1. These exotic loans became a major influence in the early 2000s. but anyone obtaining them up through 2004 had very few problems due to rapid equity growth. Many with no-money-down purchases soon found they had 20% (+) equity within a year or two!

2. So most of the problems were with the loans that originated in 2005 and2006. During that time, they represented approximately 23% of all loansbeing funded.

3. In Orange County, 2005 was our peak sub-prime funding year. Yet these loans represented only 20.9% of all the mortgages funded that year.

4. Today, sub-prime lenders that need to sell their loans are liquidating their paper for $.96 on the dollar.

5. For some of the banks that provided the sub-prime money:
a. Bear Sterns 1St quarter profit slipped to $361.7 million.
b. Morgan Stanley (holding $5.2 billion in sub-prime loans) had a 60% jump in earnings.
c. Goldman Saks earned $2.33 billion in the past year.

B. The media will still report about massive delinquencies and huge foreclosures in the sub-prime market but those reports will not be accurate.

IV. Delinquencies vs. Notices of Default vs. Foreclosures

A. Delinquencies cover any missed payment — even if it is just one month, it gets reported as a delinquency.

1. The delinquency rate on sub-prime loans is running 13.77%, which is up13.44% from the previous year.
2. The delinquency rate on prime loans is only 2.57%.3. Combining the two rates with the loan volume gives you a delinquency rate in the U.S. for all loans of 4.84%. The record low is 4.0%.4. California’s delinquency rate is 3.25%.

B. Notices of Default are filed when lenders’ loans have been delinquent for a specific period of time. These loans begin the foreclosure process. The four states of California, Florida, Nevada and Arizona currently have the largest amount of loans in the foreclosure process. Yet, in their 1st Quarter, 24 states saw a decline in foreclosure starts!

1. Only 3.23% of all sub-prime loans have entered the foreclosure process, with most of the defaults occurring on loans from Jan. 2005 to Feb 2006.
2. Only 1.28% of all 1st Quarter of 2007 saw 46,760 Notices of Default filed by lenders. California has 8.2 million homes and condos with 5.6 million mortgages. Therefore, in the 1st Quarter of this year, only 0.008% of all mortgages entered the foreclosure process for the quarter.
4. The all time record for filings was the 1st Quarter of 1996, with 59,987 notices filed. However, since then, California has built almost 2 million more homes, so the percentage of Notices of Default is still very low!

C. Foreclosures occur when the buyer has been unsuccessful in curing the debt and either a lender or an investor has acquired the property.
1. For sub-prime loans, 68% of the buyers are able to prevent the foreclosure by either refinancing the property or successfully selling their home.
2. For prime loans, the foreclosure rate is 0.86%. Last year, the U.S. saw a combined foreclosure rate of only 1.09%!
3. During 2006, California saw a foreclosure rate of only 1.17%!
4. Last year in Orange County, 5,680 defaults resulted in 697 foreclosures. This means only 12.2% of the defaulting homeowners actually went to foreclosure. We could also say that 87.8% were successful in either selling or refinancing their properties. This rate is below our 17-year average. Of that 12.2% of defaulting homeowners, only 38% of them experienced an actual loss at the sale!

D. A final note about foreclosures: The #1 reason they occurred was due to fraud. The # 2 reason was unethical lending, followed by #3 - loss of job, and finally #4 was medical reasons. By the way, the mortgage insurers are in a good position to cover losses at these (high) levels.

V. The Orange County Real Estate Market

A. There is no doubt that this market has its challenges, but for those of us who have been in the business for many years, this market, although weak, is so much stronger than during previous market downturns.
1. Orange County has the 2nd lowest unemployment rate in the State.
2. Labor analysts forecasted our job growth at l%, but it ended the year at 2% with a total of 29,100 new jobs created.
3. This has helped prices (for the most part) to remain neutral.
4. The wealth of this County is quite incredible and it will continue to keep the local economy growing.
5. Last year, our population increased by 21,200 people.

B. Sales:
1. Home sales are down by 24.8% and condo sales are down by 40.9%.
2. If you remove the flippers and speculators, and have fewer investors and second home purchasers, one can easily see why sales are down.
3. Year to date we are at 13, 336 total sales. If we stay at this pace, we will have sales of 32,006, which is 10% below last year’s sales.
4. Outlook: stronger sales for the later half of the year equaling or surpassing last year’s total sales.

C. Listings:
1. Last year our listing inventory grew, from the beginning of the year to the peak summer months, in excess of 100%!
2. This year, our listing inventory has grown by only 50%!
3. As of two weeks ago, there were only 209 bank owned properties in our MLS, which represents 0.013% of our inventory — not enough to put pressure on the housing market.
4. Although foreclosures may triple this year, this amount will still not be enough to hurt the housing market.

D. Forecast

I am holding to my original forecast for this year. I knew the 1st and maybe the 2nd quarter would be a rough one. I think the Fed will cut the interest rates later this year, and home prices will begin to firm up and even appreciate in the fall, especially as we head to 2008 and the election year!

Please remember that every decade someone thinks the housing market will collapse. Every decade someone wants to tell you that housing appreciation is over, but in my 36 years of meeting people, I never have met a person who regretted buying their first home!"

Long Beach

How Does Your Garden Grow? Southern California Tips

Environmental factors have always been with us--and now more than ever. Southern California is an arid area and its desert climate is often forgotten among the urbanites. More than we realize, we benefit by utilizing plants and landscaping factors original to this area. Water-saving plants not only look good and blend in, they save money by using less water which is now required to serve even more people in new and spreading developments throughout the state. Take a look at this site--it's a great resource for planning out your garden, which you can save online for a period of time, and how to pick a theme, what is plant functionality, choosing fire-resistant plants, water irrigation and maintenance, to name a few.

See what another garden looks like in Santa Barbara or how to plant a hillside, find out how to create a custom watering schedule, and see what the current watering index is for your area and time of year ("The Watering Index is a percentage based on the maximum amount of water you should apply on your landscape. Typically this is the amount you would use in July or August, when temperatures are high, rainfall is scarce and days are long. But starting in September, as days grow shorter, water stays in your soil longer and you do not need to water as much.") This is a really great site through the Metropolitant Water District, and one gardeners especially should love.

Long Beach Southern California xeroscaping

May Sales in the Long Beach Area and Statewide

The May 2007 median price for a single family home in zip code 90803 which borders the ocean and inland water areas, according to Dataquick, was $915,000, a 4.5% drop compared to May 2006. The neighborhoods in the inland and adjacent 90814, however, experienced an increase of 10.1% (median price of $765,000) compared to May 2006. Areas including Carson Park (90808) experienced the highest number of sales with a median price for a single family at $560,000, a decrease in price of 6.7% from last year.

Dataquick's report for the 6 counties in Southern California single family median price was up 4.9% compared to last year, and the same as March and April, 2007. The California Association of Realtors in its midyear report forecasts a statewide increase in the median price of a single family home to $566,500 (1.8% increase) for 2007, even though overall sales volume will fall by 14%. Currently, Los Angeles County tax data figures published by Realist are showing $565,000 median price for April of 2007, an increase from $532,000 from April 2006.

If you would like a report on recent sales in your neighborhood, please contact me by phone or e-mail, or go to www.juliahuntsman.com and complete a seller's request form or my Guestbook form and I will respond quickly.

Long Beach

Very Basic Guideline on Choosing a Home Loan

Whenever a shopper is quoted a monthly payment, he must also be shown the highest monthly payment possible on that loan, and the month it would be reached, assuming the borrower always makes the minimum payment allowed.

This is a really good home loan shopping guideline for all homebuyers, especially those who may be quoted a low start rate. There are many required disclosures, including an APR, the annual percentage rate which are your loan fees and costs which are supposed to show the true cost of your loan, but not always so! The APR is a complex calculation which may vary from loan to loan even with the same lender; ask for a good faith estimate which should look like this 2005 sample from the California Department of Real Estate. Buyers, if you're serious about shopping for a new home, you should be serious about taking the time to look into what you need in a loan and a lender!

Long Beach

April California Median Home Price Still Up

The trend continues: The California median home price is up by another 6.2% over April, 2006,, to $597,640--the sales volume is down over 27% compared to the same time last year. With more time on the market, buyers can spend a little more time looking and deciding which home they want to buy. In the meantime, loan guidelines have tightened up with most lenders and interest rates are not decreasing.

The statewide median price is not necessarily the local median price in your area, because those are impacted by the local composition of type of housing and other economic activity. But here are CAR's statistics for April on communities with the biggest increases:

"Statewide, the 10 cities and communities with the greatest median home price increases in April 2007 compared with the same period a year ago were: La Habra, 55.1 percent; Laguna Niguel, 26.2 percent; Los Gatos, 20 percent; Los Angeles, 19.8 percent; Moorpark, 18.7 percent; Dana Point, 18.2 percent; San Juan Capistrano, 17.1 percent; Redwood City, 15.3 percent; Ridgecrest, 13.9 percent; Walnut Creek, 13.6 percent."

Cooper Arms: Co-op to Condo

Originally conceived in 1922 as the most luxurious co-operative apartment building in Long Beach, it was rival to the Biltmore Hotel in Los Angeles and the Huntington and Maryland Hotels in Pasadena. The construction of the Cooper Arms reflected the building boom after World War I and the discovery of oil in the region.

The Cooper Arms was the first tasteful result of that building boom when it opened in March, 1924 as the city’s first residential high rise, catering to elegant resort living. The investors behind the building were a virtual “Who’s Who” of Long Beach. William Frist, owner and editor of the Long Beach Press, Dr. W. Harriman Jones, prominent surgeon and of course, Larkin Y. Cooper. Cooper owned a great amount of property in Long Beach, concentrating on property on Ocean Boulevard. He owned the property where the Cooper Arms was built.

The architects of the Cooper Arms were Alexander Curlett and Claude Beelman prominent architects of the day who also designed the Farmers and Merchants Bank building at Pine Avenue and 3rd Street in Long Beach and the Security Bank building at Pine Avenue and 1st Street in Long Beach. Claude Beelman later became a significant architect of buildings on the “Miracle Mile” of Wilshire Boulevard in Los Angeles. The Cooper Arms was built by the Scofield Construction Company, also the builders of the Biltmore Hotel in downtown Los Angeles. The Cooper Arms is designed in the Italian Renaissance Revival style with elegant architectural and decorative features on both the interior and exterior. The building is a twelve story, steel frame reinforced concrete structure with exterior walls of brick finished in smooth stucco. The ground floor is comprised of both public and private space. Commercial uses are adjacent to an arcade which accesses the Ocean Boulevard frontage.

The Linden Avenue entrance accesses a Spanish loggia which exits to a large garden on one side and a large public space on the opposite side, known as the “Grand Salon”, designed as a prominent gathering place for the elegant resort residents of the 1920’s. The Grand Salon has an eclectic decorative composition typical of the 1920’s era. Design elements include Egyptian-derived lotus, swags and medallions inscribed with urns and profiles. The large public space also displays a formal marble front Louis XVI fireplace.

The 12th floor solarium occupies a major portion of the top floor. It was designed to function as a ballroom, meeting room, banquet room and all-purpose informal entertainment center. The room has a domed ceiling with original lotus and bud molding. French doors open onto wrought iron balconies on the north, west and south sides of the room with commanding views of both ocean and city. The original hardwood floors, carefully installed at the time of construction of the building to absorb noise and provide correct resilience for dancing, are still in place and in good condition. Floors 2 through 12 comprise the 159 residential units, once owned as cooperative apartments, today are condominiums.

The Cooper Arms is located in the heart of downtown, and within walking distance to the beach, restaurants, theatres, exclusive night clubs, and the East Village Arts District. This building offers community laundry and historic meeting areas.

Units vary in features: some have a Murphy bed built-in the living room which often have high ceilings, walk-in closets with an eating area in the kitchen; a balcony with views of the ocean, downtown marina, and the mountains; HOA dues may be as low as $118 per month which includes water, sewer, and heat, and vary in size according to whether they are studio, 1 or 2 bedroom.
Long Beach

Buyers: There's No Time Like Right Now

Real estate supply and demand goes in cycles, it always has. Sales are down, inventory is up past the 6 month level, but what else is happening? Interest rates are creeping up, and there are no predictions for any decreases by the Federal Reserve on the horizon. Don't be one of those people who, two years after the fact, comes back and wants something from today's market that's not around any more, i.e., more inventory to choose from, lower rates, or even a lower price. Did you know that so far this year, the median home price in Los Angeles County is higher than last year? In fact, it is in the top 10 areas of median price increases in the state. If you want more information about loans or real estate, contact me by phone or e-mail. See my site at www.juliahuntsman.com for more information or a property search that is updated throughout the day.

Long Beach

Long Beach Ebell: Gone to Lofts, Every One

Long Beach Heritage Museum photo
This conversion took place with the theatre portion of the Ebell Club on 3rd Street. It's namesake in Los Angeles is regarded as very important culturally and architecturally. Fortunately, the original theatre part of the building in Long Beach is now preserved in another form, but unfortunately, its reason for being declined with the condition of the building over time. Taking the name from a gentleman in the late 1800's who wished to help women of the era maintain a center of culture important to them, these "clubs" attracted many of the wives of men of local stature and some measure of wealth as their original members, starting a tradition of contribution that carried on for many decades. In Long Beach, this is one of many loft conversions from older buildings which in the past would have disappeared. All the original converted units are now sold out and interested buyers must wait for resales. Close to downtown and on a major bus line, it's also in a residential neighborhood and about 3 blocks from the ocean. What more can you ask for in a loft?
Long Beach

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