Housing and Economic Forecast Points to Rising Activity

Home sales are expected to stay on an uptrend through 2012, although the performance will be uneven with mortgage constraints weighing on the market, according to experts at a residential real estate forum today at the Realtors® Midyear Legislative Meetings & Trade Expo here.

Lawrence Yun, NAR chief economist, said existing-home sales have been underperforming by historical standards and will rise gradually but unevenly. “If we just hold at the first-quarter sales pace of 5.1 million, sales this year would rise 4 percent, but the remainder of the year looks better,” Yun said. “We expect 5.3 million existing-home sales this year, up from 4.9 million in 2010, with additional gains in 2012 to about 5.6 million – that’s a sustainable level given the size of our population.”

Mortgage interest rates should rise gradually to 5.5 percent by the end of the year and average 6.0 percent in 2012 – still relatively affordable by historic standards.

“A huge volume of cash sales, supported by the recovery in the stock market, show that smart money is chasing real estate. This implies that there could be a sizeable pent-up demand if mortgages become more readily accessible for qualified buyers,” Yun said. “The problem isn’t with interest rates, but with the continuation of unnecessarily tight credit standards that are keeping many creditworthy buyers from getting a loan despite extraordinarily low default rates over the past two years.”

Yun said that if credit requirements returned to normal, safe standards, home sales would be 15 to 20 percent higher. He added that some parents are buying homes with cash for their children, and offering them loans which provide better returns than bank accounts or CDs.

Yun projects the Gross Domestic Product to grow 2.5 percent this year and 2.7 percent in 2012, adding 1.5 million to 2 million jobs yearly over the next two years. The unemployment rate should decline to 8.8 percent by the end of 2011 and average 8.6 percent next year, returning to a normal level of 6 percent around 2015.

Housing starts are forecast to rise but remain below long-term trends, reaching 603,000 in 2011, up from 595,000 last year, and continue growing to 908,000 in 2012. New-home sales are seen at a record low 320,000 this year, rising to 487,000 in 2012. “A recovery in new homes will be slow because of the extra price discount in the existing home market,” Yun noted. In March, the typical new single-family home cost $53,300 more than an existing home.
Inflation appears to be relatively modest for now, with the Consumer Price Index rising 2.9 percent this year. “We’ll be closely watching the impact of fuel costs on consumer spending and inflation – that would slow economic growth, job creation and home sales,” Yun said.

Apartment rents are trending up, and are likely to rise at faster rates as vacancies decline. Following the correction in home prices, it has now become more affordable to buy in most of the country. “Twice as many renters had enough income to buy a home in 2010 in comparison with 2005, so we have a much larger pool of financially qualified renters,” Yun said. “Rising rents and excellent housing affordability conditions will encourage potential buyers who’ve been on the sidelines.”

Yun expects the median existing-home price to remain near $170,000 over the next two years, which would mark four consecutive years of essentially no meaningful price change.

Frank Nothaft, chief economist at Freddie Mac, holds similar views on the outlook. “Economic activity will accelerate this year – there will be no double dip in the economy,” he said. Nothaft is more optimistic on job growth, expecting 2.0 million to 2.5 million jobs created in 2011 with unemployment dropping to 8.4 percent by the end of the year.

Nothaft expects the 30-year fixed-rate mortgage to trend up to 5.25 percent by the end of the year, and for home sales to rise 5 percent. “National home price indices are close to a bottom and prices are likely to bottom sometime this year,” he said.

Refinancing activity in 2011 will be only half of what it was last year. “As a result, banks may become more willing to lend to home buyers,” Nothaft said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries

FHA to offer 12-month grace period to unemployed borrowers

The Federal Housing Administration says the extended grace period for out-of-work borrowers applies only to FHA-backed loans.

Some unemployed Californians facing foreclosure may be able to delay or avoid losing their home. Starting August 1, the FHA will allow qualified homeowners with backed mortgages to stop making monthly payments for 12 months before the foreclosure process begins. Banks servicing the loans would need to approve of the deal.

Gugin said allowing some unemployed homeowners to go without making a monthly payment for twelve months will help some families. About a fifth of the home loan market in California are mortgages backed by the FHA, Gugin estimates.

"I don't think we're going to see a point where we go from 25 (thousand foreclosures) back to five in a year. I think it's going to be a gradual decline and perhaps this is the year where we see the gradual decline because we haven't yet," Gugin said.

"There's still the middle person in the servicer that has to implement the program, and that can still remain a challenge regardless of what the policy (is), Gugin said. "It gives us another option, but it's not a silver bullet."

The extra grace period also applies to homeowners in the government's Making Home Affordable modification program.

Internet Bargain?

ONLINE

I found this, or rather, one of my clients found it, which brought it to my attention. I'm always amazed at what my clients find searching our ZIP Realty Website. The market is currently chock full of opportunity, and interest rates haven't been this low since post war America, and by that I mean post WW1!
So, back to this place: looks pretty neat, huh? The price is 50k under the market in that neighborhood. I get pretty excited. Then I visit there. Ho-ly shit. I'm not sure what kind of filter the guy that took these pictures used, but I want one. The place was a hodgepodge of poorly done and mismatched improvements, the floor reminiscent of the haunted miners shack in Knotts Berry Farm. There were roaches and spiders scurrying everywhere. That garage looking thing back there? Bootleg guesthouse. The bones of this house are 1941 vintage, but I suspect it was more of a bunkhouse back then; there were several large ranches it could have been a part of in that era. The exterior paint was amateur and the wood peeling everywhere. Major termite damage was visible just upon casual inspection. I told my client who was looking at it (her hands were drawn up tightly together at her chest, body language tells all!)that it would never do for her. There's another guest unit behind the bootleg one, which purports to be permitted. So there's kind of upside if you can save that roof, bring back the garage and get rid of all the termite infested siding. In the home, you'd better plan on jackhammering the slab, and repouring it. While you're at it, add on another bedroom/bath. The tab for all this would probably be about 50k. That makes it even with the neighborhood comps, and you could probably use it as income property.
But the condition in person vs the photo online was like night and day. I imagine internet dating is a lot like this.
The moral of this tale? BUYER BEWARE! ALWAYS SEE THINGS IN PERSON.
REALITY

Gallup: Time Is Right to Buy

By Steve Cook at RISMEDIA
RISMEDIA, May 5, 2011—Consumer attitudes towards the housing markets are echoing views in the years immediately preceding the peak of the housing boom, according to a new national survey by the Gallup poll. Americans continue to see a buyer’s market in housing, according to an April 2011 Gallup poll. Sixty-nine percent of respondents say now is a good time to buy a house.

Historic Gallup data shows that many Americans also thought it was a good time to buy between 2003 and 2005, when housing prices were increasing and getting financing was relatively easy. Those attitudes began to change in 2006 as some homebuyers began to realize a housing bubble was taking shape in local markets across the country.

Men (74 percent) are about 16 percent more likely to see now as a good time to buy a home than women (64 percent). Those living in the West are the most likely to hold this view (75 percent), 17 percent more than those living in the South (64 percent). Americans making $75,000 or more a year (86 percent) are 18 percent more likely to see 2011 as a good time to buy a home than those making $30,000 – $75,000 (73 percent), and 72 percent more likely than those making less than $30,000 (50 percent).

Americans’ expectations for home prices in their local markets are slightly better now than they were in January. Currently, 30 percent of Americans say home prices will increase and 28 percent say they will decrease in the next year.

Research Firm Says U.S. Housing Has Never Been This Undervalued

The continuing depreciation of residential property values at the end of last year has made housing look more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics.

Based on the latest Case-Shiller home price index, Capital Economics’ study shows that in the fourth quarter of 2010, housing was 21 percent undervalued when compared with disposable income per capita.

Looking at data included in the index published by the Federal Housing Finance Agency (FHFA), the firm found that housing in Q4 was 15 percent undervalued as measured against individuals’ disposable income.

Capital Economics says its results illustrate “housing is exceptionally undervalued,” and the gap is getting bigger. In its third quarter 2010 report, the research firm pegged the Case-Shiller index readings as 19 percent undervalued and the FHFA index as 14 percent below what would constitute a balanced housing value in relation to income.

The recent fall back in house prices, coupled with low rates, explains why the initial monthly mortgage payment on a median priced house bought with a 20 percent down payment has fallen to a record low of 13 percent of the median income, Capital Economics pointed out in its report.

Home prices in 29 states hit a new cycle low in the fourth quarter of last year, and the research firm says on both
the FHFA and Case-Shiller house price indices, housing now appears close to fair value when set against rents.

Such favorable valuations mean there is plenty of scope for housing to perform well in the medium-term, according to Capital Economics, but over the next year, the firm says the combination of weak demand, high supply, and more forced sales of foreclosed properties will push prices lower.

As Capital Economics pointed out, the sharp fall in the mortgage delinquency rate at the end of last year means there are fewer homes in the foreclosure pipeline, but the elevated number of defaulted properties still in process means home values will continue to be negatively impacted by the presence of distress for some time.

On top of low prices, mortgage rates have fallen back a bit in recent weeks, leaving them even further below the 20-year average of 7 percent, the firm’s analysts wrote. Last week marked the third consecutive week that rates have continued to decline. A national survey conducted by Freddie Mac shows that the average 30-year fixed-rate has dropped to 4.87 percent, while the 15-year fixed-rate has slipped to 4.15 percent.

When you wrap declining home prices and historically low mortgage rates together, Capital Economics says, “The incredibly favorable affordability and valuation environment is the housing market’s one big positive.”

But despite this fact, mortgage applications have remained subdued. While buyer demand is notably weak by conventional standards, Capital Economics says the decrease in mortgage apps of late reflects, at least in part, the prevalence of cash buyers.

The company says the recent “de-valuing” of housing stock appears to be attracting cash buyers and investors back into the market.

They have driven 70 percent of the increase in existing home sales seen since last July, particularly among heavily discounted foreclosed homes, Capital Economics pointed out. Over that same period, first-time buyers have been responsible for just 6 percent of the increase in sales of previously owned homes.

New Home Development in Western Malibu

IF you're driving up around Leo Carrillo and venture a little North on PCH to County Line Beach, there's a little Beach Shack style dive called Neptune's Net. They used to feature seafood so fresh it was still alive in tanks out back. Many's the time I made a special drive just to get a plate of their steamed clams and sit on the patio at sunset. I don't know if the place is as good any more as my memories from then. There's a road that winds up the bluffs above Neptune's, and you may have noticed the fervent activity of earth movers and graders there. This is part of the western outpost of Malibu,the Gated community of Marisol. Honestly, this really IS an outpost; I think Malibu officially ends about six hundred yards north of here. While many question the wisdom of building on these oft-shifting bluffs, the technology to stabilize these hillsides known for their kinetic activity has developed to such a point that multi-million dollar homes are being built there.

This from the Los Angeles Times :

A luxury planned community has opened at the western end of Malibu and listed its beachfront showcase home at $17 million.

Called MariSol Malibu, the gated community will contain 17 properties on 80 acres. The 13 oceanfront estate sites have beach frontage ranging from 130 to 210 feet.

The showcase estate, sited on an acre, has 6,800 square feet of living space containing a 60-foot-wide great room with 14-foot ceilings, two bars, a refrigerated wine cellar, a gym, two master bedroom suites, two additional bedrooms and six bathrooms. Outdoors is an additional 3,000 square feet of sheltered courtyard space. There is parking for 10 cars.

Luxist, a blog whose name says it all together with top rate writing and style points, has this to say about Marisol:

Malibu hasn't seen this level of pristine land since May Rindge locked up her gates and tried to block the railroad and county road from coming through her home. The Rindges bought the 13,300 acres of Rancho Malibu for $10 an acre in 1892 and while developer Richard Morris is certainly looking to fetch a little more, you can totally see what the Rindges saw way back when. It's just a breath-taking location, and as they say, nobody is manufacturing any more oceanfront land, are they?

Marisol Malibu features a 10,000-square-foot single-story main home. It has a 60-foot-wide great room with 14-foot tall ceilings, a fully equipped wet bar and two master bedroom suites both with oak ceilings and views of the surfers below. There are two other bedrooms with mountain views. The home has a state-of-the-art home theater, an open chef's kitchen, refrigerated wine cellar, gym and landscaped grounds with an infinity-edge lap pool and three patios. There is an outdoor dining pavilion and an ironwood deck on the 4,000 square foot bluff "beach." The home has a water wall of rock quarried from the site and set in a a fern and oak garden. The driveway is made of hand-hewn cobblestones of native rocks. There is parking for 10 cars. All the electronics are centrally controlled b a Creston smart system and 10 security cameras patrol the property.

Including the showcase property, Marisol has 13 oceanfront one-acre estate sites and three two-acre flat sites for estates to be built elevated above the oceanfront sites. There is also a 57-acre hillside retreat that overlooks the whole project and 10 miles of rugged coastline. The lots range from $4 million to $9 million.

Jack Pritchett of Pritchett-Rapf & Associates of Malibu, and Chris Cortazzo of Coldwell Banker Malibu, share the listing.

Not sure how they can refer to up on the bluffs as "beach frontage" But the way the acoustics work up there, you can hear the waves, which is worth a lot. But 17 Million? Not sure about that.
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If you've got 17 million to spend chances are you've got another 17 to match the first, in which case you might be in the ballpark for this landmark Malibu Estate on the pinnacle peaks off Kanan Road:

Yes, Rocky Oaks reduced the price back in December from 65 million to 49 million. Located in the new "wine corridor" of the Malibu hills The estate has its own award-winning vineyard, a large Tuscan home, plus additional pads for a potential helicopter landing site, guest house, and guard gate. The acreage includes terraced vineyards and orchards of approximately 75 citrus trees and 50 fruit and nut trees. The hillside location also offers panoramic views of the ocean and distant vistas of city lights in all directions. This area is home to at least ten active producing wineries by my count, and this estate ranks among the most baronial in feel and presence. If they turn you down for 34 million, that's just crazy, in my opinion. But call me and I'll provide you with several logical alternatives if you want a similar property in this price range.

Architect's Masterpiece in Pacific Palisades

This home isn't for sale, but it's so gorgeous I had to share. Besides, it will be someday, and when it does, you'll already be familiar with it. From this article in today's Los Angeles Times by Sean Mitchell, which is a wonderful tribute to the man Ray Kappe. This home was built on a Palisades lot that was considered unbuildable because of the high water table; a small stream actually runs through it. So, much like Frank Lloyd Wright's Fallingwater architect Ray Kappe chose to incorporate the streams and hillside into the home rather than create a grade pad. The effect is stunning and transcendent.


Front entry-note the stream bed.


Master Bedroom. Note the use of built ins.
Lack of stair rails enhances the view, but increases the vertigo. The vista produced here is magnificent . The thing about an architectural piece is every way you look in the home there is interest for the eye.

Great kitchen with all the bells and whistles, and a great informal dining place.

What a wonderful fireplace and conversation area. The green carpet is intended to bring the outside in. The wall/window ratio is 50%, which is not permissible today.
I know most of the players in the architectural specialty market. I prefer to deal with everyone as it's a more democratic approach to the market. If you have a specific interest in architecture, give me a call and let me know your needs.