South Bay Real Estate

2 more closed escrows

Escrow closed last week for two of my buyers: 13044 Pacific Promenade unit 111 in Playa Vista and 28123 Ridgefern CCt in Rancho Plaos Verdes now have new owners. That puts me at 9 closed transactions for 2010. A few comments.

Pacific Promenade was a bank owned REO. I'm fairly certain the listing agent never saw the property, but that's not unusual with foreclosures. The unit was in fairly good shape except for some of the usual bizarre colors almost all foreclosures are painted. No appliances of any sort, although the cabinets in the bathroom and kitchen were intact. My client got a fairly good deal - under $500K for realtively (2004) new construction on the Westside.

Although the bank addendum indicated that the seller was not going to pay for anything such as transfer fees, NHD reports, back HOA dues etc., when it came down to it, they did follow local custom and my client didn't have to pay for anything out of the ordinary. What was strange was that at the last minute, the HOA management company and a collection agency who was going after the back dues had a total disconnect as to where the funds the asset manager were supposed to be applied. Got worked out, but took an extra 10 days to close escrow.

There are some good deals in Playa Vista now that prices have dipped back to slightly above where they were when many of the buildings were built. Nice community but all in all, it still is an expensive place to lve due to two HOA fees and the Mello Roos taxes.

Ridgefern (picture) was a nice end unit townhome in the Mira Verde complex. The $600-700K price point is very active in a number of the communities off High Ridge including this one, The Terraces, Hilltop, and a few others. I seem to be spending a good deal of time up there lately. Many of the units represent good value considering the size, location, and views. Unfortunately, it's hard to find any property that doesn't have some level of deferred maintenance in relation to plumbing, termites, leaks, dry rot, etc.

If you are inetrested in these areas or others, you can search the entire MLS anytime at www.socalistings.com or access a powerful foreclosure database at http://tinyurl.com/search4closures.

Housing Prices - Market Update

I recently posted an article from USA Today titled "Home Prices Could Sink without Tax Credit" to my FaceBook account. The reporting discusses the anticipated effect the expiration of the various Federal Tax Credits available to both first time buyers and more recently repeat buyers will have on prices. Basically, they regurgitate the usual drivel that in the absence of an incentive for first time buyers, the market will collapse. The market may implode, but for entirely different reasons.

There are three significant determining factors that may move prices down again this year and into 2011 and for the most part, I have not seen much discussion on the blogs or elsewhere mentioning the following.

1. There is not an endless supply of first time buyers: Any recovery predicated solely on first time buyers is built on significantly false assumptions. Not every first time buyer will, or even wants to be a home owner. There are many valid reasons for renting and it serves many people's financial requirements and lifestyle well. In speaking with brokers in the area, everyone is noticing a slowdown on the buy side, particularly first timers. A reasonable conclusion might be that almost everyone (FTB) who is going to buy has already taken advantage of the low interest rates, tax incentives, and depressed prices.

2. The published numbers of "underwater" home owners is understated: I have seen numbers thrown around in the 25-30% range on a national basis. In Southern CA, the true number is over 40% and in some areas over 50%. What I am specifically referring to is home owners who either owe more than their home is worth or who don't have enough equity to sell when transaction costs (5-7%) are taken into account. Consequently, there are many potential sellers who simply are stuck where they are for as long as they can make their payments. These may be families who in other times were move up buyers or even downsizing sellers.

3) This gets very ugly when the investors leave the table: In this example I am referring to the investor who is buying rental properties (not the flipper). Real life example. A few days ago, my partner and I submitted an offer on a 2 unit rental property in the Hancock Park area. The property was priced to sell at $400,000. Our client offered $450,000 (although I did advise him to go higher). He is an all cash investor who can close in 10 days. The REO listing agent informed us that they have over 100 overs many of which are all cash and most of which are significantly above list price. Our client is just one of dozens thinking the same thing. Owning real estate pays a lot more than bonds, CDs, or other "safe" investments. Once there are other reliable safe harbors (not gold or stocks) and prices rebound a but more, many of these all cash investors will be long gone.

In conclusion. While tighter inventory should push prices up (standard supply and demand), artificial elements (government supported lower interest rates and tax incentives) may have boosted a market that was otherwise on life support. It will probably only be apparent in the rear view mirror as to whether it was pent up demand and a new affordability which collaborated to stabilize the market or other elements entirely. Let me know what you think.

Remember, you can search the entire MLS for Southern CA as well as access a powerful foreclosure database at www.socalistings.com. Follow me on Twitter for daily Real Estate "tweets".

Reports show declines in mortgage defaults

Reports show declines in mortgage defaults

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