Litigation doing away with fees charged by R.E. companies for other services, i.e. "transaction coordination or TC fees." See www.coastalcommunityhomes.com

Housing Market - Do You Recognize The Bottom ...

Buyers, sellers and many observers on the sidelines are trying to figure out where is the bottom of the housing market.  News outlets report new single family home construction starts rose 2.8% to 368,000 in April, after rising slightly in March as well.  In addition, micro-markets are seeing a reduction of inventory in certain price points as buyers come out for the summer selling season.  Meanwhile, during the same period other new residential construction (apartments, condos, etc.) suffered a decline of almost 46% - the reasons cited were falling rents and tight financing.  In the meantime, everyone seems to be tracking foreclosures which is deceiving due to the national moratorium commencing in the 4th quarter through the end of the 1st quarter of 2009.  

This stream of information is like watching an intense match point volley in a closely contested tournament.  Is the market up, down, false bottom or - well just wait a second and a pundit will serve up a new volley by "spinning" a statistic coupled with a compelling rationalization.  One can debate the relevance of the discussion; but we will leave that for another blog.  

If you really want to know the status of your market and if a bottom is near you may need to consider other factors.  Instead of looking at the national market or even the regional market, buyers and sellers should track their micro-markets looking at the historic and current trending patterns.  Find out current prices for comparable properties, trend historic highs and lows over the past five to seven years (real estate typically runs in seven year cycles).  In addition, track inventory levels in your markets - determine total number of homes on the market, pending sales and the absorption trends.   High inventories (as compared to historic norms) of comparable properties and slow absorption rates signify pricing issues given demand.  Market pricing may still trend downward regardless of the national economy.  Low inventory levels or high absorption rates suggest higher demand and price stability or price increases on the horizon.

For example in Long Beach you can look at a micro-market, i.e., Bixby Knolls, and see different supply and demand forces at work.  Foreclosures at the lower end of the market (ranging from low 200K to mid-400K) typically have several offers each trying to outbid each other.  It is not uncommon in this market niche to witness closed sales prices above original list prices.  Yet in the same micro-market the 500K and up price point, the market is almost completely dormant.  A few would rationalize that financing in this market segment is more difficult to obtain.  If you believe the Feds, then this should not be the case because Fannie and Freddie have upper loan limits around the $720K range.  But financing (interest rates, terms and underwriting requirements) is significantly more difficult to secure in the upper loan limits.  Therefore, you see greater price fluctuation and a general market softness - sellers willing to take less for significantly more.

What is your local marketing doing?  I'm interested in hearing from you - be your own economist.  Let me know.

To catch up on the latest developments in S.CA real estate see http://ping.fm/XFpoT

Short Sales Evolution ...

Historically most realtors shy away from short sale transactions.  Although the list price of the home maybe attractive and difficult to pass up, most realtors avoid them if possible because of the uncertainty of success and long time delays.  This may be changing as reported by several news agencies recently.

More lenders are willing to approve short sales transactions because they ultimately save the institutions carrying and marketing costs.  In addition, they turn the asset over in a declining market that may evidence a greater erosion of value (assuming the lender takes over the property in foreclosure).  A few financial institutions are pushing for government intervention in setting forth standards and processing policies.  This may pave the way for a greater number of short sale approvals.  Bank of America for example will accept 5% of the total sale's transaction value if they are in second position; and conversely they will approve the same consideration in cases they are in first position.

This may bode well in the future for helping dilute the effect of a swell of foreclosures hitting the market.  Over time it may reduce the burden that foreclosures have on the local micro markets.  But as with everything in real estate today ... hold on time will tell how this current market cycle ends.

Interesting Market Cycle ...

If you believe the newspapers and the news reels, then we are in a buyer's market.  That doesn't necessarily tell the real story behind this market cycle in various micro-markets in Southern California.  If you look behind the numbers in L.A. County, the market for homes priced under $300,000 increased by 2,137 sales in March 09 as compared to March 08.  This represents a three hundred percent increase in sales for that calendar month from one year to the next.  For March 2009, this price range represented 49.4% of all closed transactions.  Listing agents are finding that homes in this price range oftentimes will have multiple offers prior to opening of escrow.  In cases involving multiple offers listing agents are able to negotiate the prices upwards for these homes.

Homes priced between $300-$400,000 in L.A. County increased during the same period by 278 transactions (representing a 33% increase).  This price range represented 19.0 percent of the total sales for March in the County.  The price range from under $300-$400,000 by most realtor's definition is a sellers market.  Shrinking inventories when adjusted to seasonal trends, and increased demand will yield higher prices for these properties over time.  In addition, there are ample financing sources for buyers in this price range (which reduce a buyer's closing costs and/or down payment requirements), i.e., FHA, first-time home buyer programs, down payment assistance programs, conventional loans, etc.  These market trends bode well for sellers as well as for buyers.

Over $400,000 the market turns downward.  The March numbers show less demand evidenced by prices dropping and totals sales dropping while inventory levels continue to rise due to the pending summer season.  In March 09, the number of homes sold in this price range dropped to 1,013 transactions (a 277 transaction drop from March 08).  A 21% reduction from one year to the next.  Oftentimes these listing stay on the market longer, sell for less and have difficulty closing due to financing issues.  So qualified buyers with down payment flexibility and patience have significant clout and leverage in this market.  

Investors and home buyers who can qualify for higher priced homes are entering the lower end of the market because of perceived value.  Unfortunately these buyers are not prepared for the increased competition for these properties.  Buyers who are looking to take advantage of the lower end of the market need to be prepared financially to move quickly because with every hesitation and uncertainty breeds competition for these properties that ultimately drives price and availability.  

Other strategic decisions can be made to increase your chances of success if you are interested in bank REO ("real estate owned") or "short-sale" properties.  Currently, bank REO properties represent 60% of all sales in Southern California.  Although these properties are theoretically the same as non-foreclosure properties, there are strategies that will give you an advantage when negotiating the purchase of these types of properties.  Your typical realtor who is unfamiliar with REO transactions or short sales may place you at a serious disadvantage.  So beware.  

 

Buyers entering the So. California $300 to $400,000 price range needs to assemble your team so that you can utilize your time efficiently while maximizing your investment (by reducing your financial and legal liability).  Get pre-qualified and move strategically into the market segment that fits your investment goals and quality of life style.  Select your realtor and your mortgage lender/broker with care and they will guide you through the various legal and financial mazes that arise throughout the process.   

For sellers, marketing strategies will vary depending upon your price point, location (micro-market) and your specific situation (the "why" your selling).  Locating the right realtor who has the expertise, experience, attitude, commitment to service, and team in place will improve your chances of selling your property within a reasonable period of time and for a price that makes sense for you.

If you are a pending buyer or seller interested in exploring your options; then either visit www.coastalcommunityhomes.com or email Jim Peys at jim@peys.net.  For buyers interested in exploring your financing options you should email Adriana Lanting at adriana4loans@gmail.com.  You can follow us daily on Twitter under JTPAssociates and Adriana4loans.  Regardless of whether you are a buyer or seller in this market, we have the right mix of solutions (products and strategies) and commitment to our clients that will insure your success!