Sales Activity Comparisons for Long Beach and Cerritos

The number of houses selling over $1,000,000 in the 90803 zip code now equal about half of total sales of single family homes during July and August. While there are those who say that this fact skews the overall median price, it's still a fact that there is a market in this price range where it did not exist a few short years ago. In August, the AVERAGE sales price of 17 closed escrows, per the MLS, was $1,283,876 at an average of 64 days on market with the selling price about 91% of the original list price. In July, 25 properties closed escrow after an average of 68 days on the market at an average selling price of $1,408,653, at 92% of the original list price. The lower end of sales in this area was around $600,000, and up.

If these prices shock you, just look at the blue-footed doobie for a minute.

The story for July and August of 2006 for 90803 was almost the same for average price and number of sales (18 for both months), but the average time on market was MUCH longer: 124 days on market in July and 97 days on market for the average sale of $1,175,000 in August.

The story in Cerritos is similar: August of 2006 saw 53 days on the market, July was 42 days on market. August of 2007 was 26 days on the market (half the time to sell from one year ago) and July of 2007 the average sale time was 29 days on the market.

For both years the sale to list price percentage is higher than Long Beach--in July of 2006 it was 97% of the original list price and in July of 2007 it was 95% of the original list price. The average sale price has declined in those two months to $715,789 for August and $747,754 for July of 2007.

If you still want to be in Long Beach near the beach, the house at the right is on the market for $689,900 in Belmont Heights. For more information, call me or go to www.juliahuntsman.com and find 261 Grand on the property search engine.

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Old Saying in Real Estate: "First You Have to Sell It to the Buyer and Then ...

... you have to sell it to the appraiser." In a rising market appraisals are usually not a cause of concern, but the market of the last two years is seeing a return of cautionary words about knowing the appraisal process. This is where sellers are smart to choose agents who provide them with realistic comparables when listing their property, and this is where it's smart for buyers to work with agents who are familiar with their prospective new home.

Sellers who bought recently may not be happy with the actual rate of return on their new purchase, particularly if they've refinanced lately, or took out a home equity line, or had a 100% mortgage to begin with. Sorry, but your equity won't be so great, if any. Furthermore, in the words of a local loan representative who sent me an e-mail on appraisals today:

"The appraisal process often confuses consumers and loan officers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them or sales staff because there has been so much time and effort invested in the file. It is important to know that the appraiser is completely independent from borrowers, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value. The most important feature of a home is location, location, location."

It's not uncommon for sellers to think their lovely home is worth more because of $50,000 invested in certain upgrades, but that depends on the age of the home. Per our friend from Wachovia, "the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal" because much of the total remodel cost usually involves demolition and upgrading of the basics such as plumbing and wiring. Upgrades in a very new home would get a higher return on the investment because they are an addition to the cost of building the new home. The value of those upgrades will depend on the local value of other recent sales with similar upgrades.

If you have an all cash buyer and no lender appraisal is required, you may or may not deal with an appraiser because the buyer may still want a 3rd party opinion.

A most difficult thing in a transaction where the buyer is obtaining a loan is to have the appraisal reviewed prior to closing--last minute questions can delay the closing. The best of all possible worlds is for sellers to realistically price their properties for their area.

(And why is there this picture with the dog? Because I couldn't find a photo of an appraiser.)

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Local Water Use Restrictions

The City of Long Beach has declared a water shortage and issued revisions to the municipal code concerning water use which ought to be of interest to all Southern California cities.

Record low rainfall and an 8-year drought in the Colorado River watershed, used by much of Southern California, along with other impacts such as a federal court Endangered Species Act ruling on August 31st, necessitated new rules for the City of Long Beach:

Washing driveways, sidewalks, parking areas, patios or other outdoor cemented or paved areas with a garden hose, unless it is attached to pressurized water broom;

Irrigating any landscape with potable water between 7:00 a.m. and 6:00 pm;

Irrigating any landscape more than three days per week.

The City imports almost half of its water and states a water supply shortage is imminent without immediate conservation, and is mandating the use of water pressure devices on all hoses. Just click on the link above for complete information.

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New Property Search by Map

Find the latest technology now offered through
our Southern California MLS service. Easy to map, easy to search by zip code, map area, and city. Different ordering sequences allow searching by days on market, square footage, bedrooms, baths, plus more selections.

Go to www.juliahuntsman.com and click on "Pinpoint Map Property Search" where you will find a screen like the one at the right.

Take advantage of other links there, too!

For free e-mail property updates directly from our MLS, just fill out your information on my Guestbook form, and I will set one up that goes directly to your e-mail address. This saves time and allows for very focused searches.

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Know Your Rights if You Are in Pre-Foreclosure

It's an unfortunate fact that certain loan borrowers have been unable to make their payments. On this blog there are many searches about information on foreclosure and pre-foreclosure.

If you're in this situation, please see my earlier post What Happens If You Are In Foreclosure?.

It's important for you to know that certain California statutes regulate the sale of homes on which a Notice of Default has been filed, that if you list your home with a California agent you should make sure your agent is aware of using the Home Equity Sales Contract form when a buyer presents an offer. This form specifically addresses particular issues as required by the California Civil Code Sections 1695-1695.17 which are designed to protect the seller from fraud and deception by unscrupulous buyers. Among other things, a sales contract under these circumstances would include the following language to prevent you from signing over the rights to your home under undue pressure:

"NOTICE REQUIRED BY CALIFORNIA LAW Until your right to cancel this contract has ended, _______ or anyone working for _______ (Name) (Name) CANNOT ask you to sign or have you sign any deed or any other document."

Read the Code sections linked above (they're not that difficult to go through) because they carefully spell out what the equity purchaser (your buyer) must do if you already have a Notice of Default filed on your property. An equity purchaser convicted of fraud under these laws is subject to damages and other penalties including jail time, and the seller has certain rights to bring action. If you are in doubt about someone you are dealing with, or have questions before you list your home, please take the time to get a second opinion from a qualified REALTOR, or seek advice from an attorney who specializes in real estate law and foreclosures.

October 12, 2007 addition from October CLTA News concerning rescission of a sale of a pre-foreclosure property:

"REMINDER --- DISTRESS SALES ARE HIGHLY REGULATED

"Homeowners facing foreclosure and buyers wanting a deal would seem a perfect match. But these matches face obstacles that both buyers and sellers may not fully understand. This is because the California Legislature stepped in a few years ago to crack down on fraud and created a whole new set of laws dealing with the sale of property in foreclosure. The law provides far-reaching protection to homeowners facing foreclosure. Once a notice of default is filed the law applies and sellers have specific legal protections, including the right to cancel a contract to sell up to five business days after signing a contract to sell the property. Not only can a seller cancel the contract before the sale but under certain circumstances the owner may rescind the sale within two years if a court finds the sale unconscionable. In addition, a court may award the seller damages and the purchaser could be criminally prosecuted.

"A representative of the seller is also treated harshly if they do not comply with the law. These representatives must have a valid real estate sales license and a bond. [MY NOTE: USING THE REALTOR'S HOME EQUITY CONTRACT FORM CORRECTLY ADDRESSES THE BOND ISSUE.] Both the purchaser and seller must be given a statement by the representative that they have the license and bond. Failure to comply means the seller may choose to treat the sales contract as void and can seek damages. There is some relief from all of these pitfalls. If a purchaser is going to use the property as their personal residence or the purchaser is the spouse or blood relative of the homeowner then the law does not apply. The bottom line in all of this is that both buyers and sellers and their agents should be aware of the law. With all of the attention devoted to sub-prime mortgages and foreclosures it is likely that the failure to strictly comply with the law will lead to serious title problems."

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Southern California's Hot Weather Breeds Mosquitoes

Last year's news on the West Nile virus is really still with us, so much so that the Department of Public Health for the State of California recently published a bulletin about standing water and green pools. It's mainly directed towards real estate managers and other property managers who might be concerned with vacant properties and unattended pools, but standing water could be a problem in a lot of locations, such as a chronic low point at a street intersection which catches the neighbor's lawn runoff.

"Standing water" in this bulletin is what has been in a pool for more than 7 days, it supposedly takes 7-10 days for "green pool" mosquito eggs to hatch.

It's easy enough to check for tubs or pots or other small containers around your property and overturn them if they are collecting water. Better yet, put them out of reach of falling water. Potted plants that are overwatered are also an ideal site for mosquito breeding--especially in very hot weather.

If a green pool, or stagnant fountain is around you, you can help by calling the number in this bulletin: "You can find your local agency on the California WNV website (www.westnile.ca.gov) on the right side under 'locate your local mosquito and vector control agency' or by calling 1-877-968-2473 (1-877-WNV-BIRD)."

Long Beach

Can You Buy on $100,000 Income? Yes!

"The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,380 for the second quarter of 2007." (California Association of Realtors, August 29, 2007.)

With downward changes in the market in some areas, the buyer affordability levels become a little more positive. The percentage of households that can afford to buy in today's market has increased one percent from the 2nd quarter last year to 24%. The index goes up a little more for those who can find that 100% loan that matches their buying profile, or for those who have a larger down payment than 5%.

In today's search in the MLS for just 3 zip codes in downtown, Belmont Heights/Shore, Bixby Knolls/California Heights areas of Long Beach (90802, 90803, 90807), a total of 203 condos and houses over 2 bedrooms came up under the asking price $504,080. On your monthly payment, add in HOA dues which are usually $200 at least for condominiums. For single buyers looking for lower prices in the $300,000 range, this figure does not include one-bedroom condominiums.

I am meeting quite a few people paying $2500-$2800 a month in rent. These are the people balking at paying perhaps a higher mortgage + taxes + insurance payment, but they're receiving no tax deduction benefit and no home equity. Tax deductions include mortgage interest, property taxes, plus other deductions (consult your accountant), according to your current tax margin which for a lot of people is about 35%. What a renter has, in a gradually shrinking rental housing inventory, is a 30 or 60-day notice to find a new home, and no long-term benefits.

Here you have at least 203 opportunities to buy in these 3 zip codes alone--why not search out all of your opportunities while you can look without pressure? It's much easier than the other scenario of limited time and uncertain choices.

CAR: July's California Median Home Price at $586,030

While the sales volume continues to decline, the median price in this state remains strong. July's median price for single family homes (excluding condominiums) is even a little higher than this time last year, according to the California Association of Realtors.

Partially responsible for this decrease in sales are the tighter lending guidelines--for buyers looking for 100% loans, they are much tougher to find. For all buyers, higher FICO scores are demanded, and some loan programs have disappeared all together. These changes affect the entry level buyers the most, as even a 95% loan-to-value program may be difficult to find.

110 out of 371 communities/cities in this state showed an increase in their median price compared to one year ago. Click on the title link of this article and see the 10 highest priced communities in the state, and the 10 with the greatest increase.

Condos have increased overall to a median price of $434,640, a 2.4% over one year ago.

Real estate is local, so median prices don't reflect changes up or down in other communities on a month-to-month basis.

Important to keep in mind: “It is important to note that decline in sales is not driven by weakening economic conditions ... Rather, the statewide and national economies continue to move forward, with no recession on the horizon at this point in time."

Vacation or Second Homes

Sometimes, actually a lot of times, people think they don’t have the ability or resources to accomplish a certain goal, and then it truly becomes unattainable. A timely quote for this might be, “People don't plan to fail; they fail to plan.” (This was most recently said by a REALTOR in New Jersey, but don’t think he was the first.)

First, you have to ask yourself what you really want—possibly this will lead to workshops on goal-setting, or minor, then major, soul searching, then therapy. We’ll leave that up to you, but we do recognize that for most people making transitions can take time. Fast forward and move onto your second home strategy.

A down market of new and existing home sales spells opportunity, and the IRS allows for certain benefits, if you plan well. Do you plan to make it your future retirement home? Then area will be especially critical. Have you factored in your upkeep and expenses for maintaining a second home vs. an annual summer rental? Are you living in the desert and wishing for ocean breezes—if you’re calling on a coastal listing and it’s 108 degrees where you live now, you might be calling out of desperation (see “Fools Rush In” at the link) rather than a good long-term plan.

Have you talked with your tax accountant or attorney first to be aware of how you can gain or lose with the IRS—how many days you may or may not rent out the second home, how to avoid the Alternative Minimum Tax or minimize it, or how your Subchapter S corporation through your business can benefit you. Have you thought about your 1031 exchange and capital gains factors if you decide to turn this into an investment property, or vice-versa? If you have an vacation investment property you may be able to exchange it or convert it later to personal use:

“A section 1031 exchange lets you sell one investment property and defer the capital gains if you put the proceeds into another. You'll have to rent out that new property, too, to qualify for the tax deferral. But after renting the property out for a year, you can convert it back to personal use. There's still no tax until you sell.” (Jeffrey Schnepper is a New Jersey lawyer and CPA, personal finance columnist and the author of several books on tax strategies.)

You could be considering a family home, a smaller cabin, a condo or townhome or a duplex or a triplex near the beach where you could be gaining income on the other units. The initial planning stages may put you through some work, but it’s better than buying a property and later losing money on it because you bought it in that dream like state while you were on vacation already.

Not All Pricing Trends Are Down ...

. . . in fact, some are up. Writer Kenneth Harney, based in Washington D.C., reported August 12 about median price increases in Chevy Chase-Bethesda areas, by zip code.

In today's Los Angeles Times, a convenient interactive zip code finder is an interesting feature for finding median prices comparing July 2007 to July 2006. For instance, 90803, a Long Beach area of affluence, ocean views, and mixed single family residences, residential units, and condos, adjacent to the shoreline and a few blocks in, shows a median price increase from under $1,000,000 last year to over $1,000,000 this year, and an increase in the number of sales as well. Go to nearby zip code 90815, an area of mostly single family homes near a shopping center, schools and local libraries, and see the price and number of sales change upward only slightly since last year. On the other hand, Cerritos zip code 90703 has seen an 11% decrease in number of sales with a 3% median price decrease from $690,000 to $668,000 this year.
North Long Beach area 90805 has an 11% decrease in price and an almost 40% decrease in number of sales. This would be more the land of opportunity for the right buyer in the $400,000 price range for a house.

You may find, however, that data is different depending on which source you use: See the zip code chart published in Sunday editions of the Los Angeles Times.

While certain areas are more connected to subprime loans than others, an area of affluence is still not totally immune, since some borrowers stretched themselves to the limit to get into their new home of choice.

According to the Los Angeles Times article using data from Dataquick, "Los Angeles County's median price rose 5.3%, to $547,000, and sales slid 23%, and Orange County's median was flat at $640,000, as sales fell 19.8%."

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