President Obama greets Arizona high school students after announcing his housing plan Wednesday

2/20/09 Details continue to emerge on the President’s newest plan directed at helping those in trouble with their mortgage. One of the better summaries I’ve seen so far was in an e-mail I received from James Liptack, President of the California Realtors’ Association:

This Wednesday President Obama unveiled the Homeowner Affordability and Stability Plan, which will offer assistance to as many as 9 million homeowners, while attempting to prevent the destructive impact of foreclosures on families and communities.

The plan contains three main components, and only applies to primary residences. The loans referenced in the plan cannot exceed Freddie Mac/Fannie Mae conforming loan limits. [Note from Dave: In California there are 2 "conforming loan" limits in 2009: The "normal" conforming loan limit of $417,000, and the "jumbo conforming" loan limit of $625,900. So far I haven't been able to figure out which limit is being referenced--if you have a reliable link or statement that clears this up, please let us know in the comment box below]

The first component is directed toward homeowners suffering from falling housing prices who still have equity in their homes, but no longer have the 20 percent equity needed to refinance. Under the plan, homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity left in the house. The U.S. Treasury Dept. estimates that about 5 million homeowners will be helped by this portion of the program.

The second component, known as the Homeowner Stability Initiative, is designed to assist homeowners who are “underwater” on their mortgages. The $75 billion initiative will bring together lenders, servicers, and the government so that all stakeholders share in the cost of the modification. Primary mortgages would be reduced to monthly payments that do not exceed a 38 percent debt-to-income ratio, with the costs of doing so borne by the lender. The government and lender then would split the costs of further reducing the monthly payments until they were at a 31 percent debt-to income ratio. An important aspect of the initiative is that homeowners do not have to be delinquent to participate.

The Homeowner Stability Initiative also will create incentives for servicers, mortgage holders, and homeowners. Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines are scheduled to be released by March 4. Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.

The final aspect of the Homeowner Stability Initiative is creating clear and consistent guidelines for loan modifications. The Obama Administration plans to work with federal agencies, banking and credit union regulators, and the private sector in order to develop loan modification guidelines that can be implemented across the entire mortgage market. While adoption of the guidelines will be voluntary for the private sector, all financial institutions receiving Financial Stability Plan assistance going forward will be required to implement the loan modification guidelines.

The government estimates that between 3 and 4 million homeowners will benefit from the Homeowner Stability Initiative component of the plan.

The third component of The Homeowner Affordability and Stability Plan is supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac. The Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac from its current $100 billion in both entities to $200 billion in each. The Treasury Dept. also will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace. Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac’s portfolios by $50 billion, for a total of $900 billion. The Obama Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving home buyers, such as CalHFA. Funding for this will not come from TARP money but from the Housing and Economic Recovery Act.

While some of the details still are being developed, such as the modification guidelines, the Obama Administration plans on using programs and funding already allocated for The Homeowner Affordability and Stability Plan and will need little legislative approval for programs under the plan.

More details will emerge over the weeks ahead. This is a controversial plan that would have done a lot more good a year ago before the foreclosure crisis spun out of control to the current economic debacle.

My mother would say it’s like “closing the barn door after the horses are already out.”

For borrowers having trouble making payments, it’s usually a good idea to start with a call to your lender to see what they can do.

You might also find the Chicago Tribune’s Q & A on Obama’s plan helpful.

As always, if you want to discuss your specific situation, especially in your property is in the Greater Long Beach or West Orange County area, feel free to give us a call at 562.430.0262.

(2/13/09) In a report released earlier this month, Moody’s “Economy.com” predicts a nationwide home price bottom in metropolitan areas in the 4th quarter of 2009.

While we think that may be possible, we think there are a number of red flags Moody’s may be neglecting. We’ll explain our own theory of when to buy or sell in the Lakewood, California area after we discuss Moody’s new report

Giving some evidence that there’s no recession among economists, you can buy the report for only $3,995 from economy.com, or you can read Moody’s summary and key findings below for free:

Housing in Crisis: When Will Metro Markets Recover?
Near-term prospects for housing markets in a recessionary environment

SUMMARY:

Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that housing is about to hit bottom. Housing in Crisis: When Will Metro Markets Recover?, a comprehensive new study, evaluates the near-term prospects for housing markets in a recessionary environment.

KEY FINDINGS

• House prices will stabilize by the end of this year.
• The national Case-Shiller house price index will decline by another 11% from the fourth quarter of last year for a total peak-to-trough decline of 36%.
• By the end of this unprecedented downturn, house prices will have declined by double digits peak to trough in nearly 62% of the nation’s 381 metro areas. In about 10% of metro areas, price declines will exceed 30%.

AUTHORS

• Mark Zandi, Chief Economist
• Celia Chen, Senior Director, Housing Economics
• Cristian deRitis, Director, Credit Analytics
• Andres Carbacho-Burgos, Economist

Dave here again. If you’re dying for more info from Moody’s but don’t have a spare $3,995 lying around, here’s the teaser Economy.com supplied for free on their website:

Executive Summary

The U.S. housing market downturn has gone from bad to worse, dragging the broader economy into what threatens to be the worst economic setback since the Great Depression. Policymakers have not yet been able to break the downward spiral that has developed among the sinking housing market, job losses, frozen credit markets, and rising foreclosures.

Almost three years into the housing downturn, most indicators of the market’s performance continue to worsen. By the end of 2008, construction had fallen to its slowest pace since the Census Bureau began collecting data in 1959, inventories of homes were at a record high, and house prices had plummeted. Home sales seemed to be stabilizing, but only because of a surge in sales of foreclosed properties. Rising job losses and mounting negative home equity, combined with lax mortgage underwriting standards earlier in the decade, have rapidly eroded mortgage credit quality, further depressing the market.

The housing bubble was inflated by numerous forces. The most important were the flawed process of mortgage securitization, a lack of regulatory oversight, and old-fashioned hubris. The bubble is now deflating with a vengeance. The boom began to recede in earnest in the spring 2006 selling season. The surge in prices during the first half of the decade, along with monetary tightening by the Federal Reserve, had made housing unaffordable, even with anything-goes mortgage lending. House prices have since fallen by 25%, bringing prices back to where they were at the beginning of 2004.

The erosion of credit quality fueled the financial market crisis, which further depressed the housing market. Financial institutions are taking hundreds of billions of dollars in losses from the bad mortgage-related investments they made during the boom. These losses fed the financial panic that hit a fever pitch at the end of last summer after the government took over Fannie Mae and Freddie Mac. Credit markets froze, hurting not only mortgage borrowers but also disrupting nearly all businesses. These forces sent a mildly contracting economy into a full-blown recession.

Not only is this housing downturn unprecedented in depth, but it reaches across the nation. House prices have fallen in about 70% of all metro areas over the past several years. Although prices in most metro areas declined modestly during this period, price depreciation from peak exceeded 5% in 116 metro areas and exceeded 20% in about 50 metro areas. Those metro areas with the most exposure to nonprime and investor lending, and that consequently experienced the greatest runup in prices during the boom, are suffering the greatest declines on the downside of the housing cycle. California and Florida prices, for example, have descended by 50% or more from peak, but no area of the country has been spared.

Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view…

For an additional summary of the report by Reuters, click here.

What do we think?

1. We will see multiple bottoms, not one nationwide bottom. In Southern California, we expect the bottom will come earlier for single family homes in  most communities in the coastal plain, including Lakewood.  The bottom will come later for condos and inland areas. (See “A Southern California Bottom?“)
2. A few months ago, before the bottom fell out of the whole economy, we thought there was a good chance of a bottom this winter. We now think that, although prices may move upward this spring in Los Angeles and Orange Counties, they may also decline again this summer and fall.
3. The Case Schiller index lags by about 6 months (click the link for details), so a turnaround this spring in prices going into escrow might not be reflected until the 4th quarter Case Schiller reports, which is about the most optimistic scenario possible.
4. Most economists now seem to be predicting a bottom in real estate prices sometime next winter. You might want to compare Moody’s report with a January interview of P.M.I.’s director of economic analysis LaVaughn Henry, who sees a bottom in Orange County home prices early in 2010. Click here for the interview, in Jon Lansner’s excellent OC Register real estate blog.
5. The current economic crises is unprecedented, and nobody can be certain how the current situation will unwind. (See our classic post from November 2007, “How low will prices go?”) Nobody knows for sure. We think there’s a chance that we’re passing the bottom right now, in terms of what’s going into escrow, but that bottom may still be a year away, or many years away. Just too many variables. What’s a buyer or seller to do?
6. In uncertain times, your personal situation should be primary. If you find a home that you love and can afford, and if your income is secure, why not take advantage of today’s extremely low prices and interest rates? (See our classic post on what to do in uncertain times.)
7. To discuss your specific situation, give Blair or myself a call at 562.822.SOLD. We’ve been selling Greater Long Beach and Orange County real estate since 1980, and know how to get the job done in any market. We’ve seen it all, but we’ve never seen anything like this!

The concept behind this particular class came from a casual remark about twenty years ago from my business partner at the time, Alan Schwendener. We were in the midst of a tough market for sellers at the time, discussing how to best support our clients who needed to sell. Alan’s observation made a lot of sense: “You know, Dave, if we get the home into escrow in 30 days, the seller’s happy.”

The more Alan and I thought about this, the more we realized there are several key reasons why things tend to work out best when a home is sold during its’ first 30 days on the market:

1. New listings attract the most attention from buyers.
2. Buyers are more willing to pay at or even above full price on a new listing, but the longer a home’s been on the market, the more aggressively buyers want to negotiate.
3. Keeping an occupied home properly staged and cooperating with showings and possible open houses requires a lot of effort from everyone involved. Most sellers and their families only have the stamina to keep an occupied home properly staged and ready to show for about 30 days. After that, cleanliness, cooperation, and attitudes tend to deteriorate.
4. In a market like today’s, with the future uncertain and prices currently trending down, the longer it takes to sell, the lower the sellers’ bottom line.
5. It’s easier to attract competing offers during the first two weekends a home is on the market. Not only do competing offers allow the seller to negotiate price more aggressively, they also allow the seller to select the more solid buyer in terms of qualifying and successfully closing the transaction. That’s extremely important in the current market, where qualifying for a loan is so difficult.

In the class we give an overview of seven keys to a fast, top-dollar sale. Strategies we’ve honed over 30 years in the business are reviewed and explained. We discuss topics from pricing to staging to negotiating to qualifying. We’ll also go into detail on current market trends and what to expect over the next several years.

Anyone considering selling a home in the Greater Lakewood/Long Beach area would be well served to attend.  It’s a summary of an approach to home selling that’s been amazingly successful in good markets and bad.  Perhaps the proof is our own track record over the past year:  No expired listings, and most listings put into escrow within about a month of hitting the market.

This year we’re again holding the class at the Pavilion meeting room at Lakewood’s Mayfair Park, on the corner of South Street and Lakewood Blvd.

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 buyers’ 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 an informal classroom setting.

If you know of someone who may be thinking about selling in the next year or two, this course would be an excellent opportunity to get lots of useful information and to benefit from our three decades of experience.

The main session runs from 9 - 11, but a bonus “early bird” session from 8:15 - 8:50 has additional tax, estate, and planning info for seniors.

The city charges a nominal facilities fee of $5.  To register, or for additional info, click this link to Lakewood’s Class Schedule.  Or you can call us directly at 562.822.SOLD.

Certainly there’s nothing like the miracle of birth–a miracle we’ve been blessed with four times in the last three years as our four amazing grandkids entered the world. God has blessed us with a wonderful family, which helps put some of the craziness of the current economy and Lakewood, California real estate in proper perspective.

The winter holidays help achieve the same thing, but in an even richer way.

Hanukkah: A celebration of light, freedom, and God’s power

Ben Weingart, the man who developed the Lakewood shopping pioner and one of the three men most responsible for the development of Lakewood, was Jewish himself, so Hanukkah has a direct role in the life of at least one prominent Lakewood pioneer.

Unfortunately, I’ve heard stories that minorities, including Jews were informally prevented from buying in Weingart’s massive “Lakewood Park” housing tract when it was originally developed.  It is sad to think that the man whose birth we celebrate today and his parents would have found “no room” in Lakewood Park 57 years ago.  During my years at Lakewood High from 1965 - 68 there was much buzz when the school hired it’s first African American faculty member!   Fortunately, religious and racial discrimination is increasingly a thing of the past in Lakewood today.

As Christians, Barb and I find inspiration in the story of Hannukkah, and spent some time trying to help our kids understand the significance of the event. In John 10:22 we find Jesus apparently celebrating Hannukah in the temple when his teachings sparked an effort to stone him. While Jesus’ opposition by the religious power structure of his day ultimately resulted in his crucifixion, his appreciation of Hanukkah should motivate Christians of today to at least respect and learn from the events that preceded Christ by about 200 years.

Here is a summary of Hanukkah, or Chanukah, from the orthodox Chabad website:

Chanukah — the eight-day festival of light that begins on the eve of Kislev 25 — celebrates the triumph of light over darkness, of purity over adulteration, of spirituality over materiality.

More than twenty-one centuries ago, the Holy Land was ruled by the Seleucids (Syrian-Greeks), who sought to forcefully Hellenize the people of Israel. Against all odds, a small band of faithful Jews defeated one of the mightiest armies on earth, drove the Greeks from the land, reclaimed the Holy Temple in Jerusalem and rededicated it to the service of G-d.

When they sought to light the Temple’s menorah, they found only a single cruse of olive oil that had escaped contamination by the Greeks; miraculously, the one-day supply burned for eight days, until new oil could be prepared under conditions of ritual purity.

To commemorate and publicize these miracles, the sages instituted the festival of Chanukah. At the heart of the festival is the nightly menorah lighting: a single flame on the first night, two on the second evening, and so on till the eighth night of Chanukah, when all eight lights are kindled.

On Chanukah we also recite Hallel and the Al HaNissim prayer to offer praise and thanksgiving to G-d for “delivering the strong into the hands of the weak, the many into the hands of the few… the wicked into the hands of the righteous.”

Chanukah customs include eating foods fried in oil — latkes (potato pancakes) and sufganiot (doughnuts); playing with the dreidel (a spinning top on which are inscribed the Hebrew letters nun, gimmel, hei and shin, an acronym for Nes Gadol Hayah Sham, “a great miracle happened there”); and the giving of Chanukah gelt, gifts of money, to children.

Click here for the complete story of Chanukah, and here for a comprehensive “How To” guide for the observances and customs of Chanukah.

Christmas: A celebration of joy, peace, and God’s love

About 170 years after the Maccabean victory celebrated by Hanukkah, Christians believe God again miraculously sent light and deliverance into the world, this time in the form of an infant who was son of both man and of God, the ultimate gift of love.

This time we’ll let first century physician and historian and Gospel writer Luke fill in the details of that first Christmas, roughly 20 centuries ago about 12 miles outside of modern Jerusalem:

The Birth of Jesus Christ

2:1 In those days a decree went out from Caesar Augustus that all the world should be registered. 2 This was the first registration when Quirinius was governor of Syria. 3 And all went to be registered, each to his own town. 4 And Joseph also went up from Galilee, from the town of Nazareth, to Judea, to the city of David, which is called Bethlehem, because he was of the house and lineage of David, 5 to be registered with Mary, his betrothed, who was with child. 6 And while they were there, the time came for her to give birth. 7 And she gave birth to her firstborn son and wrapped him in swaddling cloths and laid him in a manger, because there was no place for them in the inn.

The Shepherds and the Angels

8 And in the same region there were shepherds out in the field, keeping watch over their flock by night. 9 And an angel of the Lord appeared to them, and the glory of the Lord shone around them, and they were filled with fear. 10 And the angel said to them, “Fear not, for behold, I bring you good news of great joy that will be for all the people. 11 For unto you is born this day in the city of David a Savior, who is Christ the Lord. 12 And this will be a sign for you: you will find a baby wrapped in swaddling cloths and lying in a manger.” 13 And suddenly there was with the angel a multitude of the heavenly host praising God and saying,

14 “Glory to God in the highest,
and on earth peace among those with whom he is pleased!”

15 When the angels went away from them into heaven, the shepherds said to one another, “Let us go over to Bethlehem and see this thing that has happened, which the Lord has made known to us.” 16 And they went with haste and found Mary and Joseph, and the baby lying in a manger. 17 And when they saw it, they made known the saying that had been told them concerning this child. 18 And all who heard it wondered at what the shepherds told them. 19 But Mary treasured up all these things, pondering them in her heart. 20 And the shepherds returned, glorifying and praising God for all they had heard and seen, as it had been told them. (Luke 2:1 - 19, English Standard Version)

Barb and I hope your Holiday celebrations look beyond the food, sales, and stresses to the love, joy, peace, light, and power that G-d himself wants to give each of us as we trust in him. May your family’s holiday celebrations be blessed!

Over the 28 years that I’ve been a Realtor and real estate broker in Lakewood, Ca., I’ve consistently observed two distinct real estate cycles in Lakewood:

1. First is the cycle that repeats itself every year, the annual cycle.
2. The broader economic cycle, or business cycle, which usually lasts about 4 - 7 years, but is currently taking over twice that long in the Lakewood area.

This is basic stuff, but if you understand both cycles, you’ll be miles ahead of 90% of the population and 50% of the agents in trying to figure out what’s going to happen next.

Normally in both Lakewood real estate cycles prices and sales volume (number of homes sold) increase or decrease together for the most part.  For the past year, however, prices have been declining while sales volume  has been increasing.  That’s just one of many unique features of the current economic cycle, but let’s first take a more detailed look at both of those cycles.

1: The “Economic Cycle”

In any real estate market, there are at least two basic cycles. We’ll call the longer cycle the “real estate economic cycle” It roughly corresponds with the boom-bust-boom-bust business cycle we’re all too familiar with. 20 years ago I used to say these cycles generally take about 4 - 7 years. In other words, it usually takes 4 - 7 years to go from bottom through peak back to new bottom.

Well, the current So Cal real estate “economic cycle” last hit bottom around 1995, so it’s already gone about 13 years. But we were heading for a bottom before the Fed began their “life support” intervention after 9/11 in 2001 (see “How We Got into this Mess”). That would have been about an 8 - 9 year cycle, at least.

2: The Annual Cycle

We’re not going to insult your intelligence by telling you how long the annual cycle lasts, but we will say it’s much more predictable then the longer “economic cycle.”

All things being equal, the annual cycle has both prices and activity bottoming in December, then gathering steam through the winter, peaking in late spring, leveling off in summer, and heading down in fall.

In what we used to consider a “normal” market, prices only went down in the fall about half as much as they went up in the spring. As we near the peak of a booming economic cycle, prices go up year round, but they go up faster in the spring and slower in the fall. Outside events, like the Fed lowering rates on 9/12/01 or Bush I invading Iraq in 1989 impact both cycles.

By “activity” we’re talking about homes going into escrow, which is what the average Californian means when she says “Our house just sold!” (Not that the average Californian is saying that much right now. But she would if she’d read our post on “How to Sell Your So Cal Home for Top Dollar in 30 Days in Any Market.”)

DataSlow’s median pricing statistics report homes closing escrow, which is usually about 30 - 60 days after they opened escrow. And DataSlow reports those stats about a month after the median closing date, so it’s 2 - 3 month old “news” when you read it in the paper. So DataSlow’s charts would indicate that prices peak in the summer, but that’s just the homes that went into escrow in the spring closing in the summer.

Why . . .

do prices usually peak in the spring and drop in the fall here in Lakewood? 3 reasons:

1. Income taxes. Many buyers are brought into the market each year when they have their taxes done and realize they need more tax shelter, and that begins early in the year as those with simple returns file in January. For other’s, buying a home becomes a new year’s resolution.

2. Honey Do Lists. Many sellers also make a new year’s resolution to sell and move up or down. But all it takes for a buyer to “get on the market” (start looking) is to stop at an open house or get online (see “A Better Way to Search for Home Listings“). And first time buyers usually one to get into that home of their own by summer.

But it takes a lot of work for most sellers to get on the market! Work they’ve been putting off for years. And if it ain’t happened in the last decade, it ain’t gonna happen real fast now. For most sellers it takes 4 - 7 months to realize they’re not going to get everything done and call a Realtor for advice on what to do & who to hire. So must sellers are getting on board the real estate train right when most buyers have already gotten off. That affects supply and demand, which affects price.

3. School, Vacation, Weather & Holidays.

O K, that’s really 3 - 7, but we’ll lump them together. Buyers with school age kids want to get into their new home before school starts in the fall, and they want to have it in escrow before school gets out in June. That’s so they can get their kids signed up at the new school before the staff takes off.

Once summer hits, buyers have other things on their plate the rest of the year. Summer vacation, back to school, then Thanksgiving and Christmas. (Despite the weather, Christmas in Lakewood begins in September or October. As my pastor says, “When you see those Christmas decorations going up in the stores, you know Halloween is just around the corner.”)

So buyers are pretty much too busy to buy from when the kids get out of school on. Sellers, however, tend to be at least one generation older than their buyers. They’re less apt to have school age kids, they take their vacations off peak, & they’re often just getting their home ready to put on the market when summer hits, as we said.

Selling a home is frequently a less discretionary decision than buying. Divorce, death, foreclosure, and job transfers occur at a fairly consistent pace all year round.  In fact, just this week we received a call from two Lakewood homeowners who need to sell due to deaths in the family, while our buyer activity is almost non-existant and will be throught 12/25, although my business partner Blair Newman did just write an offer on a bank repo for one of his Lakewood area buyers.

Local Variations

The annual cycle varies by region somewhat. In areas with brutal winters (which to us is pretty much any place north of Fresno), things continue to drop until the snow starts melting. In resort areas, prices tend to peak during peak seasonl–winter in the desert & in ski areas, summer in most other vacation meccas.

How to Figure Out What’s Next

These two cycles are not synchronized, but they do influence each other. When the economic cycle is in a major downward move, prices may just level off in the spring, or even drop some. But if the downward cycle continues, they’ll drop even faster in the fall.

Our understanding of the annual cycle enabled us to predict the increase in activity that DataQuick and the Association of Realtors reported for February closings. It’s why we think closings will also be reported as up when March figures are released in about a week.

The question is, will the impact of the overall downward cycle overpower the normal seasonal uptick. Remember, it’s still early in the annual cycle: March closings mostly went into escrow in January and early February. Our best guess is that sales will be up but prices down for March closings, but by April or May prices may also be modestly up.

Part of the problem with prices is that DataQuick uses median prices, which can be skewed by differences in which price ranges of home are selling (see Jeff Collin’s summary of a detailed study that proves what we’ve been saying about this for years.)

Generally, the annual cycle impacts the longer ecoomic cycle so that major market bottoms tend to occur in the winter and peaks during the summer.  That’s why we think the current cycle will hit a price bottom either this winter or next.  In a day or two I’ll let you know our current breakdown on which winter we thiink it will be.  Or you can always call at 562.822.SOLD.

Well, now you’ve got one of the basics of predictions down. Give it a shot, & see if you can impress your friends. Or shoot us a comment or question, so we can explain it better or add whatever we may be missing.

Every now and then it hits me what a very special place I’m privileged to live in. Today’s one of those days. There are many things to love about Southern California in general and Lakewood in particular. Here are a few that hit me today:

1. The weather: December 6th, 2008. Forecast high in Lakewood in the mid 70s. Low in the fifties. Crystal clear, warm, sunny day. I took my shirt off when I went outside to jog a couple miles on the one mile course at Lakewood’s Rynerson Park, right next to the San Gabriel River bikeway and equestrian trail.   Last night I went with Blair’s family to a local Christmas parade in shirt sleeves.
2. The sunshine: Every year I tally in my journal the number of days I don’t see the sun. It averages about five. Somehow, it seems like we get most of the little rain we get at night. And almost never on the Rose Parade. I tell my friends that was the deal the Rose Association made with God about a hundred years ago. No Rose Parade on Sundays, so people can get to chuirch, and no rain on their parade! Maybe the NFL should try that one!
3. The geography: Lakewood’s about ten miles from the nearest beach.  Full of very nice parks. An hour from the San Gabriel Mountains, which include a peak over 10,000 feet high and two major ski resorts. To the east, the San Bernardino Mountains include a peak over 12,000 feet high, several alpine lakes, and three more major ski areas. I could see both mountain ranges clearly this morning, as well as Mt. San Jacinto, just South of Palm Springs. (Did I mention the deserts?) It’s not all that hard to snowboard (or ski) and surf (or boogie board) on the same day, but I would recommend a wet suit for the Pacific in winter.
4. The rivalry: Right now, I’m taking a break from the USC - UCLA game, where my Westwood alma mater is doing better than expected. . . so far. USC-UCLA is the only true cross-town rivalry among NCAA Division 1 schools in the country! Both schools are within the Los Angeles city limits, only about 12 miles apart.   USC’s less than a half hour from Lakewood when traffic’s light.  UCLA takes another 10 - 15 minutes.  Many USC students live in Westwood, by UCLA. When I went to UCLA, it wasn’t uncommon for athletes from the rival schools to room together. My best friend at Lakewood High School went to USC while I went to UCLA.

Rival banners are flying throughout my neighborhood. Three of the sixteen families on my cul-de-sac have UCLA alum, but we have SC season seat holders & alum anchoring the start of the street. My mother and I both graduated from UCLA, my son’s girlfriend hopes to go there. My boss is a USC alumn. Both are great schools with great traditions. And a great, but generally friendly rivalry. As a tribute to the Trojans, let me share the words to USC’s famous Fight Song, at least the way I learned them at UCLA (with apologies to my friends from “Figueroa Tech”):

Fight on! for USC.

You pay a fee; you get a degree!

You’ll be smarter than me, because I went to USC!

I went to USC! I went to USC!

Just kidding. I think they’re both great schools, one public, one private, two of several dozen outstanding colleges and Universities ranging from Cal Tech to the University of San Diego.

I could go on and on. Diversity. Opportunity. Culture. Great churches. Great museums. Great beaches. Great mountain biking. Over 100 languages spoken in local schools. Forward thinking.

Sure, we’ve got a lot of people, but locals figure out ways to deal with and even enjoy it.

For me. So Cal is a wonderful place to live year round, and Lakewood’s an affordable family-oriented communit right in the middle of it all.   If you live someplace else and want to move here, I just happen to know a couple good Lakewood Realtors.   Actually, Blair and I also cover West Orange County and Greater Long Beach,  but we seem to sell more homes in Lakewood every year than anywhere else.

Happy Holidays from Lakewood, California!

]]> http://www.lakewoodrealestatenews.com/i-love-lakewood/feed/ http://www.lakewoodrealestatenews.com/i-love-lakewood/ http://feedproxy.google.com/~r/LakewoodRealEstateNews/~3/vHns26oPHl0/ http://www.lakewoodrealestatenews.com/how-lakewood-started-out-real-estate-thats-still-hot/#comments Fri, 21 Nov 2008 22:54:15 +0000 Dave Emerson and Blair Newman http://www.lakewoodrealestatenews.com/?p=13 (by Dave Emerson) In the midst of all the current bad news, we found some good news for you!

One class of real property is up almost 9% from a year ago. The price increases are shutting out some new buyers! Can you guess what it is?

According to an article in Tuesday, November 18th’s Christian Science Monitor, it’s farmland.

In Iowa, farm land is up 18% from a year ago. In South Dakota it’s up 21%.

Several reasons are cited, but the primary one is an increase in profits from agriculture. A large part of that results from the big push for ethanol produced from corn. That drives up corn prices, which in turn drives up beef prices, among other things. It’s also driven up our cost of groceries. More unintended consequences from our beloved federal government!

Here in California, however, up until a few years ago farmland prices across the state were being driven up by contractors buying farms to build new homes. Obviously, the price of land for housing has dropped dramatically over the last few years.

So, if you’ve been hankering for a dairy farm outside of Victorville or to grow cotton outside of Fresno, you may be looking at your golden opportunity. In 20-30 years, you should be able to sell out to a developer & retire, or rebuy farmland further out of town.

That’s what dozens of Dutch dairy farmers have been doing as long as I’ve been alive. When I was growing up in Lakewood what’s now Cerritos was Dairy Valley. No valley, but lots of dairies. Those prudent Dutch farmers sold out & moved to Chino back in the late 1960s. 20-30 years later they repeated the process, moving even further out.

Before moving to Cerritos those dairy farmers were farming in Paramount & Bellflower.  Lakewood was pretty much all bean fields back then.

In the 1930s the “Lakewood Village” development began selling 60′ x 120′ buildable lots on farmland north of Carson.

As Douglas ramped up aircraft production during World War II, housing tracts began sprouting up on farmland.

After the war was won, thousands of Vets were lured to “Tomorrow’s City Today,” sprouting on the beanfields that are now Lakewood.  My Dad was one of them.  About $10,000 for a three bedroom Lakewood home that was worth $550,000 two years ago and is still worth well over $400,000 today.

Over the long haul, very few investors have lost money in real estate. It’s the short haul where folks get into trouble.  Especially if they buy homes they really can’t afford with crazy loans they don’t understand.

Political humorist Will Rogers had a lot of great sayings that relate to our current economic turmoil:

An economist’s guess is liable to be as good as anybody else’s.

Ancient Rome declined because it had a Senate, now what’s going to happen to us with both a House and a Senate?

I don’t make jokes. I just watch the government and report the facts.

We always want the best man to win an election. Unfortunately, he never runs.

If Stupidity got us into this mess, then why can’t it get us out?

But my favorite is Rogers’ oft-quoted mantra about investing:

Buy land, God ain’t making any more of it!

Just ask those corn farmers in South Dakota. Or those retired milionaire dairy farmers who started out in So Cal’s Dairy Valley years ago.

Trouble is, in the last few years fire season keeps getting longer.

I just flew back from a wet, chilly, but fall-foliage beautiful two days in Nashville on Thursday night. During the last half of my non-stop Southwest flight home the “Tea Fire” in Montecito ignited, spread, and burned several dorms and other buildings in my wife’s Alma Mater, Westmont College. I teased my son-in-law that he needed to keep I couldn’t leave the state for two days without Barb’s college burning down. Fortunately, injuries and loss of life was minimal, but hundreds of gorgeous acres and scores of expensive mansions were lost, along with the Tea Garden well known among Westmont students.

Fortunately, the winds died down on Friday, but when I got up this morning and saw the Santa Ana winds gusting through our neighborhood, I knew the fires would be back today. Before we even turned the TV on for the non-stop coverage I told Barb to expect at least 4 new fires and 500 homes destroyed. Sadly, it appears that I may have underestimated.

Most of our natural disasters aren’t really that widespread in their devastation. This week’s fires, for example, will probably devastate less than a hundredth of 1% the homes in Southern California. That’s still hundreds of homes and millions of dollars, but most of us aren’t severely impacted.  Lakewood homes are at virtually no risk from these wild fires, nor from flooding or mudslides.

The smoke and pollution will be felt by millions, lots of patios and cars will need to be washed off sometime early next week, but life essentially goes on.

Fire season is brought on by the infamous “Santana” winds, often mistakenly called “Santa Anas.” The word is probably a contraction of vientos de Satan, Spanish for “winds of Satan.” These are hot, dry offshore winds that descend from the Great Basin through the Mojave desert down into Southern California, primarily in spring and summer. While the threat of fire is generally greater in the fall, with recent dry winters fire season has extended to include spring and, now, late fall as well.

Los Angeles weather is the weather of catastrophe, of apocalypse, and, just as the reliably long and bitter winters of New England determine the way life is lived there, so the violence and the unpredictability of the Santa Ana affect the entire quality of life in Los Angeles, accentuate its impermanence, its unreliability. The wind shows us how close to the edge we are.

—Joan Didion, “Los Angeles Notebook”

Ultimately, additional restrictions will be imposed on construction and additional clearance and greenbelt requirements imposed in fire prone areas. Our wildfire challenges are actually easier to manage and less widespread than California’s earthquake risks.

To most Californians, our natural disasters are less ominous than those in so many other regions of the nation or the world. Most of us regard them as one trade off for 360 days of temperate sunshine a year and the many other benefits of living in a dynamic, diverse land of opportunity.

While our thoughts and prayers and help will be going out to our neighbors in these days of loss, while it’s annoying to curtain outdoor activity and deal with the smoke and ash, most Californians still consider this our Golden land of opportunity, and really wouldn’t want to live anywhere else.

(photos from L.A. Times’ Gallery

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.

We actually scheduled this class Lakewood’s Community Services Department several months ago. It’s open to everyone, not just Lakewood residents. It’s from 9 - 11 a.m. on Saturday, October11 at Lakewood’s Mayfair Park (Clark and South St.). We designed this to help buyers make the most of this fall and winter’s unusual buying opportunities. Class size is limited to allow interaction.

Special break-out sessions for first time buyers, investors, and move-up or move-down buyers.  Register  online or get details here. Only $5 per person, and we’re not selling cds or books! Blair and I are both former teachers, & we enjoy a chance to discuss real estate in a classroom setting.

Now back to our regularly scheduled market update post. . .

“ECONOMY HAS HEADS SPINNING” the newspaper screamed at me a few days back before I’d even picked it up off the driveway. Stocks tanking, huge firms failing or being bailed out, DataQuick medians show yet another home price drop, and now the “$700 trillion dollar Federal Bailout.”

And we decide now’s the time to tell you it’s a sellers’ market in Lakewood?

Sort of.

What’s going on now:

Actually I decided last night it was time to write a post that it’s become a sellers’ market at the low ends for detached single family homes in most neighborhoods in the Coastal Plane of Los Angeles and Orange Counties, and that includes most Lakewood homes, especially the lower priced, smaller fixers & bank repos.

What’s going on now:

You see, what we try to do here, as our masthead says, is give you “Lakewood real estate news and perspectives from the front lines.” What we and our colleagues see going on right now at open houses and with buyers and sellers in Lakewood.

So we’re 3 months ahead of DataQuick, whose monthly median closing price stats last reported August closings on sales that were negotiated mostly in June. We’re 5 - 6 months ahead of the Case-Schiller index, which averages 3 months of closings using their unique “matched pairs” approach and then delays a month to release.

So let me tell you what’s actually happening right now:

• Showings are up significantly at all of our listings priced below $500,000, and up modestly on our “move-up” inventory.
• That offer I made a few weeks ago on a Lakewood repo?   (See “Who should buy between now and Christmas?“): Outbid. Swamped with competing offers. My “all cash, close in 10 days, as is” offer didn’t even get a phone call back!
• Last week I surveyed several other agents I’ve known for years. Every one of them said buyer activity was up dramatically over the last few weeks.
• Even my partner, Blair, & his wife just made an offer.
• In Lakewood, all the lowest priced “bargain” homes are either sold or attracting multiple offers.
• Last weekend Blair had several local homes to show some buyers.  At every home there were other buyers looking at it while he was there with his clients.  That’s something we haven’t seen in over a year!

Why?

Pretty simple, actually. Summer just ended, prices have been coming down, and–oh, yeah–mortgage rates just plummeted:

• August is almost always one of the slowest months of the year, but things generally pick up in September and October before slowing again as the holidays approach.
• Foreclosures and pre-foreclosure “short sales” have been forcing prices down all year. Data Quick’s August median for OC was back to the level of November 2003! Vacation over, kids back in school, & buyers are noticing that neighborhood they couldn’t afford last year is now within their reach.
• When the U.S. Government (that’s you & me, in case you didn’t notice) basically took over Fannie Mae and Freddie Mac, confidence returned to the mortgage markets and rates dropped around a full point, with 30 year fixed loans at 5.5%! Rates have gone up since then, but once Congress passes the pending bail-out, hopefully this weekend, they should drop some.  In any case, they are still near record lows.
• The Federal mortgage bailout that’s been in the news so much this week is designed to attack what’s been housing’s biggest problem all year:  Home loans have gone from way too easy to get to way too hard.  Typically, the lending market overreacted, going from one extreme to the other.  Simply put, over the next month more and more buyers will be able to qualify.

What’s it mean?

Good question. Is it a seasonal blip or did we just pass the bottom, at least for starter homes in built-out areas? Well, part of it is seasonal, but that’s not the whole story. What happens next will largely be determined by the answer to five key questions:

1. What will the economy do?
2. What will interest rates do?
3. What will mortgage rates do?
4. Are foreclosures peaking?
5. Have prices corrected enough?

The first two will tend to counter-balance each other. If the economy continues it’s sharp declines, both the fed and investors will combine to drop interest rates, both short and long term.

As for mortgage rates, with the feds supporting the market, we know the margin, or mark-up, for mortgages will stay at the more normal levels we’ve seen over the past few weeks. One of the biggest challenges for housing has just been met. Federal intervention is having some positive results for home sellers and buyers, as we’ve been predicting all year.

Foreclosures may be the key here. In California it takes about 4 months to foreclose on a home from filing the initial Notice of Default through the Trustee’s Sale. Longer if the owner files bankruptcy. It takes another 1 -3 months to get the occupant out and the home on the market. We know that the banks have been taking back record numbers of homes, assuring a continued influx of foreclosed homes hitting the market through year’s end.

We can also check on homes entering the foreclosure process (click on the “Lakewood preforeclosures link under “Useful Links” in the column to the right).  A month ago, it looked like homes entering foreclosure were peaking, but recently released August stats are up a bit for Lakewood.  Government relief for foreclosures is about to kick in next month, and the shakiest borrowers have already lost their homes. On the other hand, a sinking economy combined with coming payment “resets” (increases) on many adjustables may put more homeowners in jeopardy. This one may be “too close to call,” but I think by mid spring of 2008 the worst of the foreclosure market will be behind us.

Which brings us to question # 5. You’ll get plenty of debate on this, but the multiple bids on properly priced REOs make it pretty obvious to me that some prices have, indeed corrected enough, provided interest rates don’t rise dramatically & the economy doesn’t tank.

What prices have corrected enough? The prices that bring competitive bids: The fire-sale prices the lenders are now offering on starter single family homes in built-out markets, like Lakewood. Pretty much what we said three weeks ago, except it’s happening now, not early next year.

Is this the bottom?

For starter SFRs in the coastal plane of OC & L.A. Counties, quite possibly.  If not now, probably sometime over the next several months.   It largely depends on the economy, interest rates, and when foreclosures peak.

Note: You don’t know it’s a bottom until it’s passed; DataQuick medians won’t show it until 4 months after it’s passed! We’re defining the bottom based on prices of homes going into escrow–what we’re seeing in the Lakewood market.  The media only gets the data after a home closes escrow 30 - 60 days later, and it takes another month and a half to compile the data.   So a December bottom in the market itself won’t show up in DataQuick monthly medians until February.  But you don’t know it was a bottom or a blip until you’ve had at least two up months after it.  So DQ stats won’t show it’s a bottom until several months later, when the prices are up for at least two months in a row.  And even then there will be some debate as to if it’s a real bottom or just a spring surge.

Bottom line: If you’re not going to be moving any time soon and you can find and negotiate your dream home at a price you can afford with a 30 year fixed loan, go for it.  That’s what Blair and Beth just did, so we’re putting our money where our mouth is on this one.  Stay tuned, & we’ll keep you posted on what we’re seeing here on the front lines of Lakewood Real Estate.

We’ll be going into detail on all aspects of home buying for two hours on Saturday morning, October 11th, at our city-sponsored buyers’ seminar at Lakewood’s Mayfair Park.  Blair and I just planned the schedule yesterday, and we’re hitting all the key high points, including REOs, short sale, lending, moving up, moving down, investment property and the foreclosure process.  We’ve also got a lender who’ll bring you up to the minute on the new lending standards.  It’s all only $5, due to the city sponsorship!  If you know someone who should be thinking about buying, you’ll do them a favor by encouraging them to attend.  More details and a link to register are below.

Our 2-hour, $5 October Buyer Seminar:

We actually scheduled a two hour buyers seminar with the city of Lakewood’s Community Services Department several months ago. It’s open to everyone, not just Lakewood residents. It’s from 9 - 11 a.m. on Saturday, October11 at Lakewood’s Mayfair Park (Clark and South St.). We designed this to help buyers make the most of this fall and winter’s unusual buying opportunites. Class size is limited to allow interaction. Sponsored by Lakewood’s Community Services Department. Details here. No, we’re not selling tapes, cds, books, or DVDs! We’re both former teachers, & we enjoy a chance to discuss real estate in a “classroom” setting.