NEW HOME SALES SOAR

From Todays WALL STREET JOURNAL Sales of newly built homes soared in April as buyers rushed to take advantage of an expiring tax credit.

The Commerce Department said Wednesday that sales of new single-family homes rose 14.8% from the prior month to a seasonally adjusted annual rate of 504,000.

Demand for new homes had also surged in March, when sales climbed 29.9% from the prior month. Sales in April were 47.8% higher than a year earlier

The recent surge in housing sales was likely the result of expiring government incentives, which provided an $8,000 tax credit for first-time buyers and a $6,500 credit for repeat homeowners. Contracts for those homes had to be signed by April 30. Buyers have to complete purchases by June 30.

The housing market is stabilizing after both sales and prices plummeted during the recession. Sales of existing homes, a far bigger number than newly built homes, jumped 7.6% in April, the National Association of Realtors said earlier this week.

Construction of new homes also is picking up. Starts for single-family homes rose 10.2% in April from March, the fourth-straight monthly rise, Commerce said earlier this month.

New-Home Sales Jump
Indices of home prices are no longer dropping precipitously; the closely watched Case-Schiller index has fallen for the past six months, but is above year-ago levels.

Some economists say the April tax-credit deadline pulled forward some sales that, with the absence of the tax credit, might have taken place this summer. That could cause home sales to sag in coming months.

"Sales are on a mildly upward trend if you kind of look through those numbers," said Peter Newland, a Barclays Capital analyst, "but certainly that won't be apparent in the next few months, as you see the payback from the tax credit."

The increase in sales brought the backlog of new homes down to five months, based on the current rate of sales, from 6.2 months in March.

The median price of a new home fell to $198,400 last month from $219,600 in March, which was likely influenced by the tax credit also.

"Those who wanted to tap the tax credit tended to buy cheaper houses," said Aichi Amemiya, a Nomura Securities International Inc. economist.

History for sale in Calabasas

When we were young, riding the trails of Malibu Canyon bareback, this ranch was occupied by ......ghosts of the past. More than once we heard eerie noises coming from this house, and one of my relatives from south of the border once heard the noises and said somberly "La Llorona", reverentially nodding his head. "La Llorona" was a mythic tale of a heartbroken woman whose soul mourned so deeply her cries of sadness were often heard on the night wind.

Fast forward to present day, this place has been de-spooked,all spiffed up, and is on the market for 899,000. Not bad for an acre in Calabasas, an actual slice of the old west, built in 1916, 3 BR 2 BA, 1700 Sq Feet. 1.2 acre parcel, a far cry from the past days when this ranch was probably six thousand acres or so, and stretched eastward through Mulholland to the Stokes family compund and south all the way over to the Tapia Hacienda and Casa Medina farther up the Malibu Canyon. I imagine if you listen on a warm summer night when the Santa Anas blow, you may yet hear a dim echo of a distant past where love made ghosts cry eternally in the night......
Call me to view this and other Calabasas Horse properties.

Real Estate Cycles

Nice house, huh? This is one of several homes in a small gated community that I sold as new in the 90's. Right after the upswing of the LAST real estate cycle low of 1993. I'm mentioning this because we sold these homes (7900 -10,100 sq ft., 1/2 acre- 1 acre lots) from $800,000 to 1,100,000.

Fast forward to the current real estate cycle low. Based on experience, I'd say we passed it, or we're in it, but factors seem to point to increased activity and slight increases in property values which indicate the cycle is beginning anew.

This is important, because a lot of you don't know that there are professional doomsayers who are part of a cottage industry and since the last real estate cycle, they have become VERY active, because FEAR always sells.

They tell you that the entire real estate market is melting down, that wave after wave of defaults are about to hit, that "peak oil" will render suburbs vacant wastelands. And they ask you to subscribe, and once people do this , they have a vested interest in accepting this narrative, so there's even more negative background noise in the real estate market than ever before.

If what they were saying was true, you'd see property values decline to zero. Less than zero. I have seen this, but never in California urban markets. If what the doom and gloomers said was true, you'd see prices decline to previous cycle lows, right?
Well. Not exactly. Those homes in the gated community I sold in 1994 for a million dollars? At the top of the last cycle one sold for 4 million dollars. Today? they are on the market for 2.1 million to 4 million. But, and this is important, THEY NEVER DECLINED TO THE ORIGINAL SALES PRICE, OR LESS.

In fact, I often point out to people folks that bought at the high of the last cycle in the 90's were "underwater" for a time, but eventually the old high was surpassed as the next cycle gained strength. Folks that bought at the high in the 90's cycle eventually saw gains of over 30% in their home value. If what the real estate doom gurus are saying was correct, this would not have happened. Homes would be selling for $46,000, a price average from 1974. Didn't happen.

As for the next "wave" of defaults, which will drag the markets down again, banks have learned from the past cycle. The important take-away from the S&L crisis was that you can't throw all your defaults on the market and not have it affect your other holdings. These days, lenders are packaging these defaults in portfolios of ten- twelve properties, and selling them to investors. The investors in turn improve the properties, and rent them for cash flow investment, or sell them at a profit. Either way, the default property is improved, property values propped up, and the markets are much more stable.

Stop thinking of your home as an "investment". That's Wall Street trying to use a false comparison. They want you to put your money in the market, and often play up the negative aspects of market cycles. Your home is actually a savings vehicle. On the ZIP Realty website, there's a link called "investor info". This is a great tool that illustrates what I'm talking about. It shows how much equity you will have in your property, aside from the market conditions, if you make your payment for ten years. That's a real number, not projections from a guru. Keep that in mind.