Best Places To Live

Every year editorial staffers get together various criteria to decide on the 10 best places to live in the country. Your criteria may not be the same, however, Money Magazine's annual article is a good way to find an overview of statistics and information, and make some comparisons.

Cerritos, for instance, has one of the top-rated high schools in the country whose students' scores far exceed the national average and outperform schools in the top 10 cities, it provides many amenities for its residents, but is not one of the top 10. For one thing, the median housing price is much higher there than the 10 selected cities. And, typical of Southern California, the air quality is lower compared to New Hampshire or Florida locations. However, Claremont is Number 5 on the 10 Best Places ot Live list, so air quality is not the only issue. And Lake Mary, Florida, (Number 4) has twice the diabetes rate than Cerritos.

But other things that change are insurance premium costs, property tax rates, crime rates, and average income. In a city such as Long Beach, the average income shows much lower than Cerritos because Long Beach is a very widely diversified city with extremes in income and demographics.

But even with all the California-bashing going on now, it has the most cities in the 1op 100 of any other state--9 in all, 5 are in Southern California: Claremont 35,900; Clayton 11,400; Coronado 25,900; El Dorado Hills 22,200; Grand Terrace 13,200; Granite Bay 24,800; La Mirada 48,600; La Palma 16,100; Moorpark 33,700.

Long Beach Housing and Traffic

City government sometimes gets lost in the shuffle of the more immediate concerns of day-to-day life, foreclosures, media coverage of housing, more foreclosures and homeland security. But it shouldn't be, because your local areas are often under one sort of study or another over a period of years.

The traffic congestion in the area of 2nd St and Pacific Coast Highway yesterday afternoon was huge coming through Belmont Shore, over the bridge towards the 405 Freeway after the conclusion of weekend recreational events along the shoreline. What perhaps a lot of people don't know is that this intersection has been the subject of a study called the South East Area Development Improvement Plan since the 1970s, a study that has been in the process of renewal and updating, and broadcast at local community meetings. The latest studies include wetlands restoration, bike paths, changes in local shopping areas, and the addition of new housing. Lennar Homes, for instance, has had a proposal for housing development in the location of the Seaport Marina Hotel for some time. Take a look at this informative slide show by the City's SEADIP Advisory Committee for ideas that may impact your living, driving, biking or shopping in that area.

Long Beach

Field Trip to Other Blogs

Here's a little review today on blogs involved in small business situations or are self-employed:

Don Simkovich in Altadena does interviews or takes tips from people knowledgeable in business, money and real estate with the goal of leaving the reader with one important tip or idea they can "take away" and apply to their situation or help them evaluate their needs. "For example," Don says, "I've got an upcoming interview I'll be doing with a coffee company, they grind their own coffee, and I'll be asking them how they chose their business, what they've learned and what's one tip they'd like to offer to someone starting their own business." Maybe you too can get an idea here!

For a break from the serious issues into the world of lighthearted shopping for stuff you might actually need take a look at Cool Steals and Deals for anything from a computer to linens. This site is run by a lady who recently and unexpectedly lost her spouse, so it would be great to support her and her site, because her site is definitely "cool".



Long Beach

Does Your Avocado Oven Scream "Fixer"?

According to this article it does. But I think it all depends on who you are (and the condition of the oven). If you're a retro person, the 1950's, 1960's, and 1970's may look like fun to you, or you may not care what year it was all made as long as it runs.

But to take into consideration all the things that go into pricing your property, "No Magic Formula" makes its point very well. Just as one oven doesn't predict a price, neither do other factors without considering the overall picture of size, number of bedrooms and bathrooms, amenities, condition, the current market trends, and location, location, location. Price may change 10% or more depending on whether or not the owner has an ocean or water view, or if the property borders a commercial area. It also depends on perceptions about an area or property, or whether or not the upgrades match area expectations. If every other house has an upgraded kitchen and bathroom, and yours does not, that will probably affect the selling price of your home unless you have other compensating factors that would be desirable to your buyer. That means you're waiting for just the right buyer and your house would probably sell faster if you had the upgrades that most of the other homes have in your area.

For buyers who worry about paying more than a home is worth (and there is no real estate cycle where this is not a fear), I could not agree more with the concluding quote of this article:

"Buy a home because you like it, you want to live there, and you're OK if the market goes up, and you're OK if the market goes down."

Mid-Year California Forecast in a Nutshell

A lot of people are searching for clues for market direction. The broad picture continues: Sales are fewer, selling prices remain fairly strong. Areas and counties vary somewhat depending on their local economy. For more information from this mid-year forecast by the California Association of Realtors, please contact me.

Contact me if you would like a current market analysis of your property in Los Angeles or Orange County, or free listings from the MLS.

Deciding on the Right Home Improvements

How do you know the right home improvements to make? It's not a one-size-fits-all. Knowing the architectural style of your home, the economic level of your neighborhood, and the usual percentage of return are things to keep in mind.

What do buyers expect to see when they walk in the door of a Mission revival or a Craftsman bungalow, or a 1950's tract home? Buyers sometimes miss your perspective and decide instead they might have to spend more money to rip it out. Are you installing a new floor to please yourself because you'll probably be there for the next five years, or are you contemplating selling in the near future? If the latter is the case, you'll probably want to make an improvement for curb appeal, not for the most expensive appearance. Staging your home for sale could put your home sale on a faster track for an offer, and might help to compensate for the neighborhood factors or other property features if a buyer can see himself living in it as a result. One of the best improvements: an outdoor patio or deck, new kitchen upgrades. One of the worst improvements: very customized spaces such as a wine cellar, sauna--or expensive technology installations such as a CAT5 cable that are outdated by the time the house sells.

Long Beach

Mello-Roos and Property Taxes

I frequently am asked about Mello-Roos Districts by those who aren't sure what they are or where they are located.

These districts were formed after the enactment of Proposition 13 in 1978 which was voted in to restrict public agencies' ability to increase property taxes based on assessed value. The 1982 Community Facilities Act was passed which gave government an alternative method to finance improvements and services.

While any county, city, school district, special district or joint power authority has the power to institute a Mello-Roos district, these districts, which are created to fund infrastructure such as streets, sewers, police protection, fire protection and similar services, are usually part of a new development which does not already have these services. They are more often found in areas such as Orange County or Riverside County where there are more post-1978 developments. The tax is not based directly on property value, but on other characteristics such as square footage and lot size of the property. It must be voted on by two-thirds majority vote by those residents living within the proposed boundaries. Large tax amounts may be funded through bonds issued by the District. There may be an ongoing maintenance fee even after the bonds are paid off.

The Community Facilities District does have the separate power to foreclose, making it all the more important to pay your taxes on time. Notice of the tax amount, if it is in your area, is found in the Notice of Special Tax which the seller must make a good faith attempt to provide to the buyer during escrow.

Long Beach

A Note for the 4th of July

It's only fitting to check in at the site for Monticello, home of Thomas Jefferson, not only because he was a President, but also his final day is recorded on a July 4 (but back in the 1800s).

Tomorrow, 76 people from 36 counties will become United States citizens in a ceremony at Monticello. These ceremonies for Monticello started in 1963, are presided over by a local judge and are accompanied by patriotic music by the Charlottesville Municipal Band.

If they haven't bought their new U.S. home yet, we hope they will soon. Many Americans don't realize that the United States is one of the very few countries where a buyer can obtain a 30-year mortgage without discrimination towards age, marital status, race, or gender discrimination, with zero down if need be. The variety of loan options available in this country does not exist in many countries where 20% down is still the standard.

Long Beach

"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