So Cal Real Estate News

(11/14/11)  I originally put this post up over three years ago, and came across it as I was reviewing some of our older posts.

I clicked on the link, an OC Register story about the gentleman to the right, and found it as inspiring as ever, in a market that, sadly, hasn’t changed all that much from 2008.

Woke up this morning to one of those stories that makes you thankful for what you have. Even if it is going down in value.

Worth a read:

“Pride in A Paycheck”

There’s more to life than money. Way more.

Living within a budget is like flossing your teeth–everybody knows how & knows they should but nobody has the time.  If you need to save up a down payment to buy, or if you’re behind on your mortgage or other bills, it’s time to make the time!

The secret of the best seller, The Millionaire Next Door is simple:  spend less than you make.  To do that, most of us need to either reduce spending or increase income, or (more…)

(February 10, 2011)  At 9 A.M. Eastern Standard Time, on the last Tuesday of every month, McGraw-Hill’s Standard & Poor’s Unit releases the  Case-Schiller Home Price Index for the previous month, just like clockwork.

The news media love it:  “Breaking news” on housing they can schedule into their calendar months in advance, just like DataQuick’s monthly median home sales price reports.

Conversely, Case Schiller must love the media. If it’s the last Tuesday of the month, Case-Schiller will on the radio,  be all over the internet, in the networks’ evening news, and in the next day’s paper.

There’s one thing to love about the Case Schiller Home Price Index, and at least two (more…)

It's your money!

Yesterday I gave you detailed information about filing to get your Orange County, CA Property Tax reduced.

Since informal appeals for the 2009-2010 tax year must be postmarked today, here’s the instant version:

3 Quick steps to find out if you should file:

(more…)

(10/8/08)  I’ve been teaching brief buyers’ and sellers’ classes for the city of Lakewood for about 20 years now.  I like to do a buyers’ class early in the fall each year in anticipation of the market bottom that usually occurs during the winter months (see “Real Estate 101:  Our 2 market cycles.”)

Several months ago we scheduled this year’s class with Lakewood’s Community Services Department for this Saturday, October 11, from 9 – 11 a.m. at Lakewood’s Mayfair Park (details & registration link here). At the time, we were anticipating at least the annual market bottom and possibly a cyclical bottom as well, but we weren’t exactly anticipating the events of the last few weeks!

The current market presents that rare combination of low prices and low interest rates that usually mark a bottom.  That bottom could be occurring right now, or it could still be years away.  Regardless, smart buyers should prepare now for the bottom that eventually will come.

Our little class includes basics of buying, an overview of foreclosures, break-out sessions for first time buyers, move-up buyers, and investors, an overview of current lending options, and an up to the minute discussion of the current market and what may be anticipated.  It’s open to all, whether Lakewood residents or not.

Blair and I were both teachers when we first went into real estate, and we enjoy getting back into a classroom setting from time to time.  My decision to buy my first home way back in 1976 was largely based on information I received in a similar, but longer, Saturday class taught by Los Angeles realtor Scotty Herd for UCLA’s extension program.  It gave Barb and I the information, tools, and confidence we needed to make that first purchase.  The buyer and seller classes we do give us an opportunity to discuss real estate in a classroom, rather than selling, setting.

If you know of someone who may be thinking about buying in the next year or two, this course would be an excellent opportunity to get some useful information.

We’ll also be doing a similar class for sellers on January 24, same place, time & price (info & reg link here).  You can also call us directly at 562.822-SOLD if you have questions or want additional information.

(8/1/08) Frequent readers know Blair & I have been candid about what we don’t know during this amazing real estate market cycle here in Southern California. (See “How low will prices go?“)

But today, as I was looking through the Orange County Register’s Friday new homes advertising section, it suddenly hit me:

Prices on most So Cal new construction have either already hit bottom, or will be hitting bottom between now and December 26.

So, if you’ve always wanted to live in a new home, I suggest you start doing your research now.

Why now?

Simple:  Supply and demand.  New home permits have been way down for over a year now.  Most developers may be as addicted to building as a drug addict is to dope, but they aren’t crazy.  And even if they are, their bankers aren’t.  There just isn’t that much additional inventory coming onto the market.

In most segments, we’re in the final phases of a clearance sale, and the stores haven’t been ordering new inventory for some time.  Essentially, they’re going of business–some permanently, others temporarily.  And the “going out of business sale” is winding down.

Exactly which new construction?

In the developed areas of Orange, San Diego and Los Angeles Counties, the lower end of new construction will probably hit bottom first, as may also be the case in resales.  That would include almost all starter homes, especially condo/townhomes/lofts and “C” neighborhood detached homes.  As Lyon Homes reported today, the lower end homes are now the bulk of their sales, allowing them to sell out these tracts earlier.

In the outlying areas, it’s a bit trickier due to the impact of high commuting costs and economic problems from the building slowdown itself.  The areas with shorter commutes will most likely bottom first.  High end, move-up tracts may have further down to go as well.  Do your homework and look for desperate builders or whole tracts that are now bank-owned.

What about resales?

The glut of bargain basement new homes needs to be cleared out to stabilize resales, so this would be a step in the right direction.  There are two additional problems facing resale housing:

1. The glut of foreclosures and “short sales,” especially on the low end.
2. The lack of the normal buyers for move-up homes, because most owners of starter homes either already moved up during the boom or else have had their equity disappear during the plunge.  For example, last weekend we held open a beautiful Los Alamitos five bedroom, three bath pool home. Over 50 people came through, and most of them fell in love with the home.  Unfortunately,  almost all of the potential buyers had another home they needed to sell first.  In most cases, that home had been taken off the market because they couldn’t sell it at a price that they felt they needed to make the move, including one family that was making a lateral move back to California from Florida.  (The first Florida summer will do that for you!)  Same problem that Lyons is having with move-up homes.  On the flip side, prices have been “stickier” on most move-up resales, due to both a lack of competition from foreclosures and the ability of their sellers to wait out the downturn.

For resales, we’re sticking for now with our latest projections (see”An optimistic update on our projections of a home price bottom“).  In short, we think the odds are for a bottom either this coming winter or next, but it’s too close call as to which.

What to do?

• If you’ve got your heart set on a new home, start looking now and be ready to close before year’s end.
• If a resale will do, get your “ducks in a row” by figuring out what you’ll qualify for and what your home might sell for if you’re moving up, or if you’d be better off refinancing out your down payment now and renting it out.  (You’d need to close escrow on it within 3 years of moving out or you lose your tax free $250,000/$500,000 exclusion of capital gains.)  This winter should be good–prices have already dropped more than I’ve ever seen in my 28 years as a Realtor and broker.   But prices might be better in winter of ’09-’10.

We think the deciding factor should be your personal situation.  For more, check out our classic post on “What to do when nobody knows what’s next.”  Of course, we’ll try to answer any question you leave in the form of a comment below.  You can also feel free to go to “About Us” and scroll to the last few lines to get our phone numbers, or simply put “contact me please” in the comment section below (click the word “comments” below if there’s no box to complete).

Times of great opportunity are ahead.  For many new home buyers, they’ve already arrived, and quite possibly for resale buyers as well.  Praying for wisdom might be a good place to start!

As you may know, a few weeks ago we started what we hope will be the first of several local real estate blogs with LakewoodRealEstateNews.com. Blair and I work both sides of the L.A./Orange County line, and we hope to later add possibly Long Beach and West Orange County blogs as well, maybe more.  You can’t live in Southern California for over 50 years and sell real estate here for almost 30 without getting to know quite a few communities.

Earlier today we put up a post there based on my first home purchase way back in 1976.  We focused primarily on some unique situations in Lakewood, but there are some interesting issues that apply to most Southern California communities.  Especially interesting was a price and rate comparison between 1976 and 2008.  Maybe we’re closer to the bottom than I thought, even with IndyMac’s failure today and all the problems with Fannie Mae and Freddie Mac.

If you’re interested, this link will take you straight to today’s post, “How to pick a Realtor:  Don’t make the mistake I did!”

Enjoy. . . and learn–from my mistakes!

This is the second of three posts on three homes that recently closed escrow on the same block in Lakewood, CA. The first was “A Tale of Three Listings: The probate seller’s big mistake,” and in a few days we’ll post the last, “The team that made it happen.”

I “flipped” my first house back in the late 1980s, before those cable networks that made “flipping” popular were even invented.

As an experienced Realtor who has advance access to listings & who can save on commissions, you might think that I’ve flipped scores of homes since then, but you’d be wrong. I’ve actually only flipped a handful or two of properties over the last 20 years. That’s partly because I’ve become more of a buy and hold investor, but it’s also because “flipping” is much harder than it looks.

In the early 90′s a colleague and former partner of mine began “flipping” homes as a business. He developed a model that worked well for him, with some unique means of acquiring the properties you won’t find at a seminar or on a DVD or TV show. According to him, the key to success was acquiring the property substantially below market. As he explained it to me once, “We’re basically pirates. The key is to steal the property.”

Each flip has to be carefully evaluated, but I want to pay at least 20% below market, preferably 25% – 30%. My colleague prefers more than that.

I have to laugh when I watch “Flip this House” and similar shows, especially the part at the end where they compute their “profits.” After spending way too much overdoing their improvements, some bright-eyed young Realtor is brought in to rave about the house & tell the flipper how much they’ll get for it.

These agents may be young, but they’re well schooled in the number #1 way to get a listing–tell the seller what she wants to hear (see ” Top 5 ways NOT to pick an agent“). They generally quote an unrealistically high price. Then on the screen the show computes the flipper’s mythical profit, completely ignoring costs of purchase, selling costs like commission, or holding costs like monthly mortgage payments.

Well, that approach to flipping may sometimes work when homes are going up by thousands of dollars every month because everybody and his dead dog can qualify for a loan (see “How we got into this mess“). But in a flat market, let along a down market, flipping calls for skills that even most Realtors don’t have.

As is illustrated by this sad story.

When this home hit the market last September, it was priced 5% – 10% below market. It was the classic case of the lazy seller and lazy agent. The home was occupied by a pack-rack tenant who also made it almost impossible to show. The correct remedy would have been to get the tenant out & do a quick & cheap fix-up, rather than drive down neighborhood values. Instead, they priced it low & sold it quick. It was the first home in the neighborhood to list below $400,00, and the agent who bought it negotiated the price down to $390,000. He opened escrow late in September and closed it mid November, according to the SoCal Multiple Listing Service.

I thought about buying it myself, but I knew prices always move lower as we move through the winter (see “Our Two R.E. Market Cycles“), and I expected the coming winter to be especially brutal. Plus, the selling price wasn’t near 25% below market.

Long story short, it was bought by an agent who bragged to me how he’d flipped 60 homes. I hope he banked his profits. He had the concepts down, but not for a down market. During the five months it took him to close escrow on his purchase, fix it up, and put it on the market, prices plummeted. He did a nice job of sprucing it up and staging it, but he was used to prices going up $5,000 or more a month. This time, they were going down.

After wasting a couple weekends trying to sell it by owner, this Realtor put the home in the Multiple Listings for $475,000 on February 8th. He eventually reduced it to $449,000, which he told me was what he needed just to break even. I guess he didn’t, because it was later reduced to $429,900. In mid April it went into escrow and it closed on May 21 at $428,000.

That was less than 10% over what was paid for the home, and resulted in a loss of over $30,000 by the flipper’s own projections. Four months of work to lose over $30,000!

In a normal market, let alone in the current down market, flipping is not for amateurs. In this case, it wasn’t for professionals, either!

Please bear that in mind next time you’re watching “Flip this House!”

In a few days, we’ll discuss the third sale on this same block, “the team that made it happen.”

(4/15/08)  Yesterday’s paper brought an uplifting story that helped put our real estate woes in perspective.

Today’s paper was a little more brutal. “The Next Big Quake: Big One Nearly Certain by 2038,” screamed the Register. The Times was a bit gentler: “Likelier here: the next Big One.”

Fortunately, I try to start each day with a something a little more inspiring. This year I’m reading through Wisdom for Today, a daily devotional by my Pastor, Chuck Smith.

Appropriately enough for April 15th, today’s devotional was taken from the Biblical book of Job.

It’s based on advice the troubled Job received from Eliphaz, a friend who had come to “comfort” Job in his distress. Possibly the oldest book of the Bible, Job could have been written yesterday for today’s California home owners.

Titled “Nothing + Nothing = Nothing,” today’s devotional is taken from Job 15:31, “Let him not trust in futile things, deceiving himself, for futility will be his reward.”

Here’s the first paragraph of “Pastor Chuck’s” thoughts on the passage:

“In his attempt to understand why God had stripped Job of all his possessions, Eliphaz reasoned that Job had foolishly put his trust in those possessions. Though Job had not done so, Eliphaz was right in speaking against the folly of those who are lulled into a deceptive sense of security by their wealth.”

Like maybe thinking Southern California real estate can only go up in value?

Bottom line, even if that were true, you still can’t take it with you!

1,500 years after Job, Jesus put it this way:

“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” (Matthew 6:19-21)

I find that last sentence especially interesting. Jesus’ reason for not focusing on material wealth wasn’t so much that “you can’t take it with you,” as that it will distract our hearts from far more important things. Things that are eternal, like our family, our neighbors, our character and God.

Hopefully the last few year’s “shake up” in Southern California real estate values or the coming “shake up” reported in today’s paper will help us all focus more on things that can’t be shaken.

Got into a little “discussion” today on Jon Lansner’s O.C. Register Real Estate Blog about why prices are dropping faster inland than on the coast. Thought it might be worth repeating here.

Here’s the initial question, posed in a comment by “Jimmy:”

How bizzare. While you are all looking for a bottom in inland real estate, I am still waiting for a price decline in CdM (Corona del Mar). This is so unusual that it should be a real concern. You have to be concerned about making any real estate investment until someone explains why CdM and NB(Newport Beach) seem to be hanging on while some inland locations plummet.

Here’s our response:

There are at least 4 reasons the Coast & the I.E. are on different tracks:

1. Tons more new construction in the I.E. Unsold inventory, possible overbuilding, & lots more recent purchases near the peak being foreclosed. Plus lots more subprime home loans. Last time I checked, the I.E. offices of the firm I work for had hundreds of unsold REOs in their listing inventory.
2. Lots more equity near the coast. These are prime, move-up, destination neighborhoods. People buy there and stay put. And they generally put money down–lots of money–from the home they’re moving out of. CdM and NB ain’t exactly “starter” neighborhoods. And the folks who do start out there usually have a big chunk of change to put down anyway.
3. Supply and demand. There’s still dirt to build on in the I.E.
4. Gas prices. Not to mention traffic. Who wants to live on the 91 with gas this high & heading up?

There is a theory out there that a dropping tide will eventually lower all ships. I suspect that’s true, but if it does come don’t look for as big a percentage drop on the coast as inland.

Hope that helps.

I remember back during the last big slump, in 1994 when you could hardly give a home away in the inland parts of South Orange County. Bach then there was more new construction there–it was a bit like the Inland Empire was today, but South OC was a lot closer to being built out. South OC prices jumped dramatically during the last boom, and today they’re not down nearly as sharply as the I.E.

We’re still thinking prices throughout So Cal will probably be lower this November and December, but nobody knows for sure, as we keep saying.

The best time to buy is just before the bottom.

When REOs in the I.E. are selling for less than the cost of land, it may be a good time to buy, or at least to write some lowball offers. Auctions can be another thing (see “Foreclosure Tips“)