Market News-Have we turned the corner?

Warmington starts building anew, Phase 2 of a gated neighborhood in Chatsworth, 12/2011 >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>I like to touch base any time I think you'd appreciate my latest market take. The Real Estate market is getting stronger, aided by seasonal activity (a preponderance of sales take place in the four months May June July August), sales remain steady in all areas of the market. I must emphasize this is locally in Southern California. On a national basis you'll see all kinds of gloom and doom. Foreclosures continue to rise unabated. Floods in the Midwest. Gigantic wildfires in the Southwest. But not here in So Cal! In The SFV-Malibu-Conejo-Topanga markets where I do most of my business, foreclosures seem to take up a smaller and smaller portion of the market. I know this firsthand, because I have an investment group that actively seeks these out. Flips are still very possible in this market. This brings me to a phenomena I associate with market bottoms- the CASH buyers are very active in our market. Maybe you've noticed, maybe you haven't, but sales volume in the equity (stocks) markets has tumbled. Any guy on Wall Street will tell you the retail buyer has disappeared. That's because there's more money to be made in real estate. There's also the big brokerages like Goldman Sachs forming investment groups, with what appears to me to be a 3 or 5 year window. They are paying top dollar- often in excess of list price. According to the National Association of Realtors monthly Realtors Confidence Index survey, cash buyers are a steady 35% of the market at the moment. You always see "hot money" at the market bottoms. Also, in the hottest locations, developers have started building again. Look at Warmington. They are finishing the "phase two" of all their gated developments. There's one on Topanga north of Devonshire. So if I were to venture an educated guess, this market is at or near a bottom, and has been so for about seven months, bumping along, with maybe another eight to ten months to go. If you're one of those "waiting for things to go down" buyers, well, look around, they have! I'm not trying to panic you into anything- I think you probably have about six months, maybe more, to grab a good deal at these prices. I sent a very similar letter to my buyers back in 1992. That was the bottom then, and things took another two years to get cooking. So keep looking, there are great bargains out there. The only wild card to me is how long interest rates stay at the bottom like this. I am available any time for your questions, and don't be afraid to leave your number. I have a lot of people in my database. You won't get called relentlessly. I simply do not have the time.

5 Things To Do NOW If You Want to Buy A Home In 2012

By Tara-Nicholle Nelson | Broker in San Francisco, CA. At this point in December, it can start to feel like the New Year – along with all our hopes, dreams, wishes and expectations for it – are barreling down on us. Personally, I’m a rabid Resolution-setter, and I have a pretty strong track record of making New Year’s changes actually happen – and stick. But what I know after years of using the New Year as a great excuse to set and meet some goals is that it’s very, very helpful to get a head start, ramping-up to new habits, behaviors and target goals achievements starting in December. If you’re one of the millions who has an eye on 2012 as the year in which you’ll buy a home (first or not), here are five things you can do now to put yourself on the right path: 1.Check your credit. Take my word for it: there is no bad surprise worse than a bad credit surprise. Okay, maybe there is one thing worse – a credit surprise you receive while you’re in the midst of trying to buy a home! Recent studies have revealed that a record high number of real estate transactions are falling out of escrow, and that credit “issues” are a leading cause of these dead deals. Your best chance at catching and correcting score-lowering errors and other derogatory items before they destroy your personal American Dream is to start checking and correcting while you still have time on your side. 2.Do your research. The more rapidly the real estate market changes, the more it behooves smart buyers to study up before they jump in. And now’s the time – you can start doing online and in-person research into topics ranging from: · Target states, cities and neighborhoods. Whether you’re relocating or simply trying to narrow down the local districts to focus on during your 2012 house hunt, December is a great time to start your online research into decision-driving factors like tax rates, school districts, neighborhood character and even prices in various areas. Resident ratings and reviews sites like Trulia and NabeWise can help you make the neighborhood-lifestyle match. Once you narrow things down and start speaking to local agents, ask them to brief you on the local market dynamics, including how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search. (And yes, Virginia, there are areas where homes sell for more than asking, even as we speak!) · Real estate and mortgage pros. If you don’t already have your pros picked out, now is the time to get on the horn or drop an email or Facebook message to your circle of contacts, asking them for a referral to a broker or agent they love. Follow up by: checking whether these pros are active in answering questions on Trulia Voices, searching for their name and seeing what sort of feedback on them you can cull from the web, then giving them a ring and launching a conversation about whether you and they might be a good partnership. · Short sales and REOs. Distressed property sales are not for the unwary. If you want to target upside down or foreclosed homes, or are planning to house hunt in an area where many of the listings are described as short sales or foreclosures, get educated about what you can expect from a distressed property purchase transaction before you get your heart set on a short sale. · What you get for the money. Online house hunting is a powerful tool – especially when it’s cold and wet! But there comes a point in your house hunt where you’ve got to just get out into the actual physical homes you’re seeing online in order to get a strong, accurate sense of what home features, aesthetics and location characteristics correlate with what price points. · Mortgage musts. You can read a bunch of articles about mortgages and get yourself pretty far down the path toward qualifying for a home loan, but you can only get a personalized action plan for a smooth road ‘home’ by talking with a local mortgage broker and having them assess your basic financials. They might say you need to move funds around, pay a bill down or off or produce some sort of documentation from your employer. And the time to start all that is now. 3.Fluff up your cash cushion. So, you’ve saved up your 3.5 percent down payment. Perhaps you saved a little extra for closing costs. Or maybe you’re even one of those uber-aggressive 20-percent-down-ers. No matter how much you’ve saved, you’ll find that you could use more once you activate your home buying action plan. Mark my words – after closing, you’ll crave extra cash to do some repairs, upgrade a couple of things, buy appliances or even just to hold onto in order to minimize your anxiety about depleting your savings! So, if homebuying is on your personal 2012 action plan, don’t go hog wild on holiday gifts. Instead, wait until next year and give yourself the gift of a home. 4.Shed some stuff. Sell it. Donate it. Give it to relatives who’ve always coveted it. Just get rid of it. If you do it before year’s end, you can kill three birds with one stone: (a) getting some cold hard cash to go toward your savings, (b) getting some tax receipts so you can deduct the value of your donations in January, (c) minimizing money spent on holiday gifts for loved ones and these two bonus birds – clearing the mental clutter that physical clutter creates and prepping for your move in advance. 5.Sit very, very still. Sometimes, the best way to further our goals is to stop tripping ourselves up. In that vein, commit right now to refrain from making any major financial moves until you buy your home. Don’t quit your job to start that personal chef business (yet), don’t pull a bunch of cash out of your savings account (without getting clearance form your mortgage pro first), and don’t start buying cars and boats on credit – even if you do love the idea of putting the red bow on the car you give your wife, like in the commercials. I assure you, the bow you’ll be able to put on that house or condo will be much bigger, redder and more tax-advantaged!

Foreclosures redux

To the right is the interior of a gorgeous bank owned home in Bell Canyon. I just got off the phone with the bank and they had an accepted all cash offer as of last week. Guess what? For some reason the buyer couldn't (or wouldn't) perform. So this thing is on the market again. It's a monstrous house with a wonderful design and some really creepy issues lurking. Remember that the banks do not have to disclose anything. You're on your own. This particular property is high stakes. All cash offers only. Listed at a million three. Fixed up, a clear 1.6 million or more kind of property. Problems? There is NO landscaping on the entire 35000+ sq. ft. Lot. The retaining wall in the back yard is illegal and has to come down. There are City and County Notices of illegal grading. there is an "issue" with the septic pumping system. Inside the home is the framing of an illegal room built OVER a two story living room. A real "what the hell?" structure that makes absolutely no sense. There's a leak that appears to be a bad connection in the upstairs spa tub. These problems are the apparent ones. Lord knows if there are any issues with the electrical.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>BUT
If you want to take a big bucks flyer on this place, there are big bucks to be made.
The investors bidding on this place know this,and they all have their own formulas that lead them into what to bid. There are even sophisticated algorithm based programs that will tell you what to bid. I actually have one of these. I'm going to assume the winning bid to be around 850k. Maybe up to 925. Then you have to fix the retaining wall and yard. I'd go with natural landscaping and a small grassy area together with a shallow pool and spa that doubled as an architectural landscape feature:probably about 60k. Add the cosmetic repair of removing the framing in the two story living room. About 20k. Paint and repair upstairs tub leak. Another 20k.
Reserve for issues that appear: 50k. You're into the property for a million and fifty thousand. Flipping? Get it staged, another 10k. List at 1.7 million.
Take the first offer you get over a million five. Pay closing costs. Et Viola. a cool $350,000 profit. All in 90days if you do it right.

Who's with me?

Existing-Home Sales Rise Unexpectedly in October

This via Linked In's news arm, DSNews:
Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).


The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.

Housing inventory fell 2.2 percent to 3.33 million existing homes available for sale as of the end of October, which represents an 8.0-month supply.

That’s down from an 8.3-month supply in September. NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.

Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.

NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.
Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.

According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.

According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.

“A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”

NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.

“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”

Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”

NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.

Certainly this has been the case in my neck of the woods, which is Malibu/Topanga/Calabasas/Conejo Valley. Activity and sales both have been strong with traffic up significantly. There is pent-up demand that is the driving factor underlying all this.
Give me a call if you'd like to know what your home is worth in today's market

Foreclosure vs. Short Sale: study shows some surprises

This From Harris University's Real Estate Insider News:

How much impact does a short sale have on FICO® Scores? How about a foreclosure? Since I frequently hear these questions from clients and others, I thought I’d share new FICO research that sheds light on this very subject.

The FICO study simulated various types of mortgage delinquencies on three representative credit bureau profiles of consumers scoring 680, 720 and 780, respectively. I say “representative profiles” because we focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All consumers had an active currently-paid-as-agreed mortgage on file.

Results are shown below. The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.




All in all, we saw:

■The magnitude of FICO® Score impact is highly dependent on the starting score.

■There’s no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure.

■While a score may begin to improve sooner, it could take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed.

■In general, the higher starting score, the longer it takes for the score to fully recover.

■Even if there’s minimal difference in score impact between moderate and severe delinquencies, there may be significant difference in time required for the score to fully recover.

This study provides good benchmarks of score impact from mortgage delinquencies. However, it is important to note that research was done only on select consumer credit profiles. Given the wide range of credit profiles that exist, results may vary beyond what’s in the charts above.
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The only surprise to me was the minimal difference in FICO damage between a Foreclosure and a short sale. Brings into question all the extra hoops and such necessary for a short sale. There is one difference though; it appears at ground level that there are time differences as a short sale often takes six months or more to resolve. Six months opportunity to save for a new start might be significant to many folks.

More as this story develops.

If you have questions about this research, I encourage you to post them here on the blog.

Buy a House, Get a Visa: Congress Looks to Lure Foreign Nationals

Attention Canadian snowbirds, well-heeled Brazilians and boom-era Chinese nationals looking for a little piece of that increasingly elusive thing called “The American Dream.”

America has your number and, literally, it’s $500,000.

In a comprehensive bill that aims to spur foreign travel and spending in the U.S., Senators Charles E. Schumer (D-NY) and Mike Lee (R-UT), have proposed providing a three-year residential visa to foreign nationals who invest at least $500,000 in residential real estate in the U.S. At least $250,000 must be spent on a primary residence where the visa holder will live for at least 180 days out of the year while paying taxes to the U.S.

Investor Warren Buffett offered an early version of this real estate inducement back in August. During an interview on PBS, Buffett suggested that if the U.S. altered policy and opened the door for “rich immigrants,” those resources would be welcomed in a struggling U.S. economy, especially in the area of residential housing.

Inducements for foreign national purchase of U.S. real estate is seen another important step towards bolstering prices and shoring up markets in foreclosure-centric areas.

“There is no silver bullet out there. And really, the path forward is a lot of small steps like this that we’re going to take,” according to Stan Humphries, Zillow’s chief economist.

Real estate analysts have said this proposal could lift demand for U.S. homes and help ease the housing crisis. According to Humphries, foreigners spent more than $80 billion on U.S. homes last year, a 24 percent increase from the year before. A quarter of those buyers were Canadian. Another 25 percent of foreign investors in residential U.S. property is made up of investors from China, Mexico, United Kingdom and India — a percentage that could be boosted should the proposal become law.

Humphries is not alone in advocating myriad measures for alleviating the real estate doldrums. Editorial writers at newspaper around the country are also weighing in.

“Offering smart and abundant pathways to foreign investment in our domestic markets and legal immigration have always been important to America’s long-term economic growth. We wish there were political will to provide even bolder solutions. But it is gratifying to see Lee and Schumer reach across the aisle to identify these politically palatable and modest ways to provide for increased tourism, foreign investment and residential immigration,” said the Deseret News in Salt Lake City, UT.

However, critics question whether the measure is an unnecessary, if not unwarranted, inducement. Debate is being waged around key issues:

■Given the level of investment already, do foreign nationals need further incentive?

■Will foreign buyers actually help spark another real estate bubble, at least in some specific markets generally attractive to non-U.S. investors?

■Is the U.S. housing market’s recovery more dependent on far more broad recovery of the entire U.S. economy?

■Is the residency visa a political ploy to fend off criticism that incentives are being given to foreign investors instead of U.S. citizens, many of whom have been forced out of the U.S. real estate market?
Schumer’s office said the inducement extends beyond the actual real estate purchase. If foreign nationals with cash to buy $500K homes are on U.S. soil, then they are spending money on gas, groceries and other goods and services that bolster local economies.

With a three-year time frame applied to the residency visa, the proposal would also create more enforcement demands. Are foreign nationals living in those properties? What happens when the visa expires?

But Congressional supporters say The Visa Improvements to Stimulate International Tourism to the United States of America Act (VISIT-USA Act) would remove bureaucratic red tape that stifles travel and investment in the U.S. Foreign buyers would not be granted work visas and they would still be subjected to criminal background checks and other safeguard measures.

The proposal has gotten the thumb’s up from the U.S. Chamber of Commerce, the U.S. Travel Assocation and the American Hotel & Lodging Association.

An Update on Housing and Financing

by Abbie Higashi

The housing market continues to bring in mixed reviews. As median sales prices and 2012 home sales predictions edge up slightly, we continue to struggle against market forces such as funding challenges and a continued stream of distressed inventory that detract from upward sales trends. Even positive events such as declining interest rates have a certain negative market impact. With, mortgage interest rates edging back down to historic lows, homeowners jumped on the opportunity to refinance into long term, fixed rate loans. While such activity is generally seen as a positive economic force, the unfortunate tangential effect was to overload processors with loan files. Even with financial institutions prioritizing purchase files for closing, the unforeseen increase in volume invariably caused delays in file reviews simply due to capacity. Many of our realtors in fact experienced delays in closing of their transactions due to such heightened residential mortgage activity where closings scheduled for September pushed into October.

Also, the major financial institutions all appear to have experienced continued funding challenges related to appraisals. As HVCC (Home Valuation Code of Conduct) metamorphosed into the industry standard for appraisals, mandated appraisal independence and advent of AMCs (Appraisal Management Companies ) have, as many feel, sacrificed local knowledge – whether produced by the Realtor, consumer, or local appraisers - for the sake of preserving an objective standard of independence. Shifts in liability and indemnification to the individual appraiser have also produced a level of conservatism that, in conjunction with other levied standards, have inadvertently led to arguably inaccurate and undervalued appraisals. As a result, transactions are delayed while homebuyers and sellers scramble to renegotiate pricing terms, seek an additional appraisal, or pull together funds to make up for the difference in originally stated loan to value and revised loan to value amounts.

Further challenges related to home financing have also surfaced directly from the lending institutions themselves. Many real estate professionals have experienced last minute conditions or de novo file reviews on the part of underwriters while operating under the belief transactions were clear to close. These have occurred with all major national lenders, including Bank of America. These unforeseen issues frustrate home buyers and home sellers not just because of the delay in closing needed to clear the conditions, but also in the many “hoops” buyers are suddenly subjected to in order to produce the information needed to meet the conditions. Many of us have heard our Buyers’ exasperated claims of having to dig through their attics to find old documents to prove, for example, that prior liens have been cleared or other properties are owned free and clear and made to feel that they are now the cause of the delay.

If there’s strength in numbers, perhaps knowing that real estate professionals across the nation are experiencing the same struggles allow us to find the strength to pull through these challenging times. Additionally, major lenders are also taking definitive steps to improve upon their underwriting and fulfillment processes and set hard standards for on time closings, with built in guarantees to consumers. Lastly, implementation of the UAD (Uniform Appraisal Dataset) in January 2012 should also assist in improving the quality and consistency of appraisals. With this in mind, we should all be able to look ahead with a degree of real optimism to balance the current sense of frustration.

.Abbie Higashi is the Corporate Broker at ZIp Realty, Inc.