Investor Interest Remains High During 3 Year Low

Southland February Home Sales At 3-year Low; Investor Interest High

La Jolla, CA---Southern California’s housing market remained sluggish in February despite relatively strong demand from investors and others paying cash for homes. Prices appeared fairly flat as many potential home buyers stayed on the sidelines and waited – whether for a sign values have bottomed, job security has improved or credit has loosened, a real estate information service reported.

Last month 14,369 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was down 0.6 percent from 14,458 in January, and down 6.4 percent from 15,359 in February 2010, according to DataQuick Information Systems of San Diego.

A small change in sales – up or down – between January and February is normal for the season. On average, sales have risen 0.6 percent between those two months since 1988, when DataQuick’s statistics begin.

The total number of homes sold last month was the lowest for a February since 2008, when 10,777 sold, and the second-lowest since 1995, when 12,459 sold. Last month’s sales fell 19.5 percent short of the Southland’s average February sales tally – 17,848 – since 1988.

The 847 newly built homes sold in the region last month marked the second-lowest level on record for a February, behind 842 sales in February 2009. Builders continue to struggle to compete with prices on resale homes, especially distressed properties.

Last month’s distressed sales – the combination of sales of foreclosed homes and “short sales” – accounted for well over half of the resale market.

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 37.1 percent of resales last month, up from 36.8 percent in January but down from 42.4 percent a year ago. Over the past year foreclosure resales hit a low of 32.8 percent last June but since then they’ve trended higher. Foreclosure resales peaked at 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 19.8 percent of Southland resales last month. That was up from an estimated 19.7 percent in January, 18.4 percent a year earlier, and 12.0 percent two years ago.

The abundance of distressed homes for sale continues to attract unusually high levels of investor and cash-only buyers.

Absentee buyers – mostly investors and some second-home purchasers – bought a record 26.1 percent of the Southland homes sold in February, paying a median $198,000. Since 2000, absentee buyers have purchased a monthly average of 16.2 percent of all homes sold. (Absentee data go back to 2000.)

Buyers who paid cash accounted for a record 31.7 percent of February home sales, paying a median $200,000. That was up from 30.4 in January and 30.1 percent a year earlier. The February cash level was the highest for any month in DataQuick’s statistics back to 1988. The 10-year monthly average for the percentage of Southland homes purchased with cash is 13.1 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

“The January and February sales data can be interesting, but we always caution that historically they’ve been a poor barometer for the rest of the year. What the past two months do tell us is that lots of people have bet, often with cash, that housing at today’s prices will prove a solid investment,” said John Walsh, DataQuick president.

“This spring we’ll see an infusion into the market of more traditional buyers, who aren’t necessarily purchasing with an investor mindset. If the stars line up right – low prices, low mortgage rates, available credit, higher job growth and higher consumer confidence – we could see sales shoot back up to more normal levels. There’s pent-up demand out there. Lots of people have been waiting for the right time to buy. But they’ve got to feel more confident in their jobs, they’ve got to qualify for a loan and, for some, they need to be convinced prices are at or near bottom. One group will still be stuck on the sidelines, though: Those who owe significantly more on their mortgages than their homes are worth.”

The median price paid for a Southland home last month was $275,000, up 1.9 percent from $270,000 in January, and unchanged from $275,000 in February 2010. In January this year, the median fell slightly (-0.6%) from a year earlier, marking the first year-over-year decline since October 2009.

The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.

At the county level last month, the overall median sale price fell on a year-over-year basis in four counties and was unchanged in two. Declines from a year ago were logged in Orange (-1.7 percent), Riverside (-1.0 percent), San Diego (-4.3 percent), and Ventura (-1.4 percent) counties, while the median was the same as a year ago in Los Angeles and San Bernardino counties.

The median paid for the largest home-type category – resale single-family detached houses – fell year-over-year last month in Orange (-3.1 percent), San Diego (-3.1 percent) and Ventura (-9.6 percent) counties. The other three counties recorded annual gains ranging from 2.6 percent in Los Angeles and Riverside counties to 3.6 percent in San Bernardino County.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 32.2 percent of all mortgages used to purchase homes in February. That was the lowest level since August 2008, when 26.8 percent of purchase loans were FHA. Last month’s FHA level was down from 33.2 percent in January and 36.8 percent in February 2010. Two years ago FHA loans made up 36.9 percent of the purchase loan market, while three years ago it was just 6.5 percent.

Last month 18.1 percent of all sales were for $500,000 or more, down from a revised 18.3 percent in January and down from 18.5 percent a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 26.8 percent of homes sold for $500,000 or more.

Viewed differently, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 34.6 percent of total sales last month. That was up from 33.4 percent in January and up from 32.7 percent a year ago. Over the last decade, those higher-end areas contributed a monthly average of 37.1 percent of regional sales. Their contribution to overall sales hit a low of 26.2 percent in January 2009.

High-end sales still suffer from tight credit policies. Adjustable-rate mortgages (ARMs) and so-called jumbo home loans have been relatively difficult to get ever since August 2007, when the credit crunch hit.

Last month ARMs represented 7.8 percent of Southland purchase loans, up from 7.0 percent in January and 4.1 percent a year ago. Last month’s figure was the highest since August 2008, when it was 10.5 percent. Over the past decade, a monthly average of about 38 percent of purchase loans were ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.6 percent of last month’s purchase lending, up from 15.2 percent in January and 14.8 percent a year earlier. However, in the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40 percent of the market.

Last month the percentage of Southland homes that was flipped – bought and re-sold on the open market within a six-month period – was 3.2 percent. That was up from a “flipping” rate of 3.1 percent in January but down from 3.4 percent a year earlier. Flipping varied last month from as little as 2.4 percent in Ventura County to as much as 3.8 percent in San Diego County.

DataQuick Information Systems monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,174 last month, up from $1,128 in January and down from $1,180 in February 2010. Adjusted for inflation, current payments are 48.1 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 57.4 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported

Freddie Mac Launches YouTube Videos to Dispel Foreclosure Myths

http://www.youtube.com/FreddieMac

Freddie Mac is going 21st century by utilizing the Internet to inform distressed homeowners. Today, it released a new video series on its YouTube Channel. The videos are designed to help consumers separate foreclosure fact from fiction.

Each 90- to 120-second video dispels one of five common myths that could prevent people from keeping their homes if they face foreclosure. It is based on content from the Freddie Mac Get the Facts on Homeownership education and outreach materials.

"Individuals are worried about scams and fraud, and don't know who to safely turn to for help," said Dwight Robinson, Freddie Mac senior vice president of Corporate Relations and Housing Outreach. "The videos provide information and resources that just might keep individuals from losing their home."

The Freddie Mac YouTube Channel covers the following misconceptions about foreclosure:

►Myth 1: If my house is foreclosed, I can never buy a house again—the foreclosure will stay on my record forever.
Truth 1: Foreclosure can have a devastating effect on your finances and you personally, but you can recover. Use the time after foreclosure to prepare yourself for successful homeownership the second time around by creating a spending and savings plan and rebuilding your credit.

►Myth 2: I should stop paying my mortgage so I can get assistance with my mortgage payments.
Truth 2: Stopping payment on your mortgage only hurts your situation and can expose you to foreclosure and credit difficulties that could require years to rebuild.

►Myth 3: If I'm late on my monthly payments, I'll lose my house.
Truth 3: If you have a financial hardship and fall behind, it's possible to keep your house and get back on track if you contact your lender as soon as possible to discuss your options. You can also contact a HUD-approved housing counselor by calling the Homeowner's HOPE Hotline at 888-995-HOPE (4673).

►Myth 4: I am getting many offers for help from a variety of people. They are probably all scams.
Truth 4: Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their home. It's important to always open and respond to communications from your lender, particularly if you've already missed a mortgage payment. In addition, if you are in a financial crisis or facing foreclosure, make sure you work with your lender or a HUD-approved counseling agency to avoid common scams.

►Myth 5: My lender is not responding to my inquiries, so I should just give up and face foreclosure.
Truth 5: Whatever you do, don't walk away, and don't give up. It may take several attempts to reach your lender because their call volume can be very high.

"Housing counselors and lenders have traditionally delivered the Get the Facts messages to consumers," said Robinson. "Today, we are utilizing a popular and powerful tool—YouTube— to deliver this pertinent information to consumers."

http://www.youtube.com/FreddieMac

Local Events: 2nd Glass Wine Riot (Santa Monica)

If you are looking for something to do this weekend here in Santa Monica, check out the 2nd Glass Wine Riot! Grab your friends and sip on some of the finest wines from around the world!

Date(s): 03/25/2011 - 03/26/2011
Recurring daily
Times: Opening Night Friday, March 25 7-11pm; Saturday, March 26 1-5pm & 7-11pm
Location: Santa Monica Place
Phone: (800) 430-1553
Admission: $60 opening night, $50 regular admission

Here is what the 2nd glass company has to say about the event

Sip over 250 different wines from every region of the world, all while rocking out with a few thousand of your closest friends. Discover a new Cabernet from California, sip on a Malbec from Argentina, hit up German Rieslings and wash 'em down with grapes no one can pronounce from Portugal. We have you covered in the education department with free, 20-minute Crash Course Wine Seminars and our Wine Intelligence Unit, staffed by winos who are excited to answer any question. Between sipping and learning, be sure to hop in the photo booth, enjoy the DJ, munch on tasty restaurant food pairings (for a few extra bucks), and just plain have fun! You'll walk out with a new list of favorites all stored on your phone thanks to our custom Second Glass Mobile App.

No, we're not some big, huge company. Second Glass is owned and operated by a handful of people all under 30 who just want everyone to drink more wine. After four successful and sold-out events in Boston, we're taking the show on the road to spread the Wine Revolution coast to coast!

For more information check out the 2nd Glass Event Website

Event Location

Obama extends foreclosure prevention program

The Obama administration has given another year of life to an foreclosure prevention program allowing certain borrowers to refinance underwater mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

The Home Affordable Refinance Program had been set to expire June 30. HARP, as it's known, will now continue through June 2012.

With 30-year fixed-rate mortages below 5%, the level they have inhabited much of the past two years, that may provide an attractive option for some homeowners.

One catch is that they can't be too underwater -- their Fannie Mae or Freddie Mac mortgages can be no larger than 125% of the value of their homes. They also must be current on their loan payments.

When HARP was announced in March 2009, the intent was to provide up to 5 million replacement loans to homeowners on more favorable terms.

That proved unattainable, as did the goal of the sister plan known as Home Affordable Modification Program. HAMP, as it's called, initially aimed at modifying the terms of existing loans to help up to 4 million homeowners avert foreclosure.

While far off the ambitious early marks, Fannie Mae and Freddie Mac had provided 621,803 refinance loans under HARP as of Dec. 31, 2010, compared to 579,650 permanent modifications provided by HAMP.

The HARP program initially was designed to handle loans amounting to 80% to 105% of the value of the home. But as property values plunged, putting millions of homeowners further underwater on their mortgages, the loan-to-value ratio was increased to 125%.

In addition to extending the program for a year, Freddie Mac will exempt HARP loans from certain recently announced increased fees, according to Fannie Mae and Freddie Mac's overseer, the Federal Housing Finance Agency.

The FHFA also said that Fannie Mae is changing its previous eligibility cutoff of Jan. 1, 2009, to May 31, 2009, meaning another five months of loans may be considered for a HARP refinance.

New Listings 3/13 - 3/19

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SQ. FT.: 4,183

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Open up the large double door entrance to this expansive and luxurious condominium in the heart of Brentwood. Kept in tip top condition this unit boasts, newer carpet, stainless steel appliances also it being an interior unit allowing for privacy in addition to an additional tandem parking space below with very easy access. This is a Short Sale, Listing Agents are Certified Pre-Foreclosure Specialist.

U.S. Real Estate Looks Promising to Global Foreign Investors

The U.S. real estate market today offers a stronger investment opportunity than it has in the last 10 years, according to the Association of Foreign Investors in Real Estate (AFIRE).

The association’s 19th annual survey, highlighting trends in international real estate investment, reveals that nearly 65 percent of respondents indicate the United States offers the best potential for capital appreciation. That’s 54 percentage points over second-ranked China.

AFIRE says this is the highest positive response to the question of the U.S. market’s potential since it was first asked in 2000, and a dramatic reversal from 2006 when only 23 percent chose the United States as the best global investment opportunity.

“As the fear of a double-dip recession has faded, investors are becoming more enthusiastic about the prospects for the U.S. economy and are taking aim at real estate investment opportunities in the U.S.,” said James A. Fetgatter, chief executive of AFIRE.

“However, their strategy is more akin to a rifle than a shotgun,” Fetgatter added. “Except for multi-family housing, they are not scattering their interest throughout the U.S. but rather narrowly targeting it to New York City and Washington, D.C., to an even greater extent than in previous years.”

New York City and Washington, D.C., scored almost four times higher than third place Boston among the top five U.S. cities for foreign real estate investment. San Francisco and Los Angeles rounded out the list.

Multi-family properties remain investors’ first choice in 2011, followed by retail, hotel, office, and industrial real estate.

Seventy-two percent of respondents plan to invest more capital in the United States in 2011 than they did in 2010, and 40 percent said they are more optimistic about its potential than they were last year.

The survey’s respondents hold more than $627 billion of real estate globally, including $265 billion in the U.S. The survey was conducted in the fourth quarter of 2010 by James A. Graaskamp Center for Real Estate, Wisconsin School of Business.

Based in Washington, D.C., AFIRE preserves and promotes investment in cross-border real estate. AFIRE has nearly 200 members representing 21 countries.

Source: DSnews

California Realtors push for easier short sales

Even as home seizures stall nationally with big banks facing a potential overhaul of the foreclosure system, California’s real estate agents want to see an alternative to foreclosure made simpler.

The short sale, in which a lender allows a borrower to sell their property for less than what is owed, remains doggedly difficult to do, the California Assn. of Realtors contends in an open letter published Thursday in seven major California newspapers, including the Los Angeles Times.

The real estate group is pushing for banks to approve more short sales and for regulators to streamline the process. The real estate agents argue that short sales are better for consumers and banks.

“We’re focusing the spotlight on short sales and calling on regulators, elected officials, nonprofits, business organizations, companies and individuals with a stake in California’s economic future to resolve this issue and others that get in the way of a recovery,” Beth L. Peerce, president of the Realtors group, wrote in the letter.

Source: La Times

Developer unveils high-rise condos for site near Century City

Plans were unveiled Wednesday for a $184-million luxury condominium tower on a highly sought-after site on Santa Monica Boulevard between Beverly Hills and Century City.

Miami-based developer Crescent Heights said it had begun the process of seeking approval from Los Angeles officials to build a 283-unit tower at 10000 Santa Monica Blvd. The condos would be on the small side for the local luxury market, selling at an average of $1.5 million for 1,200 to 2,000 square feet.

The project “is styled to be modern, elegant, chic and environmentally friendly,” spokesman Steven Afriat said. It would look like “a totally modern aesthetic in glass,” he added, with few of the glass pieces being the same size.

The previous owner, Irvine builder SunCal Cos., had planned to build a 45-story luxury condominium tower designed by prominent French architect Jean Nouvel. SunCal had paid $110.2 million for the property in 2006 after winning a bidding war with New York real estate mogul Donald Trump. The housing market cooled in the recession, however, and SunCal filed for Chapter 11 bankruptcy protection on the property in late 2008.

Crescent Heights bought the land in November for $59 million, according to public documents. Its proposed 486,000-square-foot building would rise between 36 and 39 stories. Approval, planning and construction could take about six years, Afriat said.

An earlier owner of 10000 Santa Monica Blvd. demolished a five-story office building completed in the 1970s that housed several tenants, including Jimmy’s restaurant.

Other residential projects developed by Crescent Heights include the Remington on Wilshire Boulevard and the Regatta in Marina del Rey.

-- Roger Vincent

Image: Early design proposal for 10000 Santa Monica Blvd. Credit: 10000 SM

Investment Mogul Predicts Housing Recovery in 2011

Investment mogul Warren Buffett issued a biennial letter to investors and offered a prediction on when the housing market will see a recovery. He predicts recovery will begin within a year. He explained that this recovery is dependent upon common sense underwriting related to what mortgage borrowers can really afford to buy.

“But a house can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender—often protected by a government guarantee—facilitates his fantasy,” warned Buffett. “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

Buffett has many real estate related interests under his Berkshire Hathaway umbrella, including numerous real estate companies he has purchased around the country, a manufactured home producer and a mortgage company.

As the housing market gradually moves toward a recovery, Buffett believes home ownership still makes sense for a large number of Americans, especially with the current lower prices and interest rates. He says any future housing policy should be molded from the many lessons learned during this economic downturn.

American Government Holds 360,000 REOs

At the end of 2010, the Federal Housing Administration was holding 60,739 properties that it has essentially repossessed by foreclosure. This number was up a staggering 47% from 2009. When this number is combined with the REO holdings of Fannie Mae and Freddie Mac, the U.S government has approximately 360,000 REO properties on its books. With those kind of numbers, the American government has clearly gone into the real estate business (whether it wanted to or not). It may as well form a real estate company!

And that doesn’t include the inventory to be added in 2011 or any shadow inventory. According to Capital Economics, the FHA alone has nearly 600,000 mortgages in serious delinquency. No word on Fannie and Freddie estimates.

What this means is the government’s real estate holdings will clearly be increasing again in 2011.

Source: ShortSaleDailyNews

Toni Patillo & Associates
Broker Of Record l DRE#0313287
Keller Williams Realty Santa Monica
2701 Ocean Park Blvd., Ste. 140 • Santa Monica, CA 90405
Office (310) 482-2035 • Fax(424) 744-4148