From New York Times: "It May Be Time to Think About Buying That House" - Dec 5th

Season's Greetings! Hope your Holiday Season is off to a great start. :) Here's a great article for FIRST TIME BUYERS that was published in the New York Times last Friday. Enjoy and Happy Holidays!

-Jerry

It May Be Time to Think About Buying a House
By RON LIEBER
Published: December 5, 2008
Direct Link

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.

That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas. This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.

Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms. When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450- square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”

The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord. Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors. While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.” For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.

Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”

One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.

Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.

“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”

LA Times Real Estate Update - Nov 16, 2008

As we're all winding down towards the holidays, just wanted to pass along the last 2 Single Family Homes Median Sales Charts for November 2008 that were released on the MLS and the Los Angeles Times the past 2 weekends, Nov. 9 and Nov. 16.

1) Market Trends - Newly listed Median Price and information for Singly Family Homes in LA (Released Nov 9)
2) Market Trends - Number of Accepted Offer, BOM listings and Price Changes for Single Family Homes in LA (Released Nov 16)

MLS Article November 2

MLS_Article_November_9

MLS Article November 16

Read this at your own leisure as I'm sure we're all focused on the Holidays this week! Hope you have a very Happy Thanksgiving, and thank you for the opportunity you've given me help you this year. Many Thanks from myself to you.

-Jerry
310-228-8856

"LA County Home Sales fall under $400k" - From LA Business Journal - Sept 2008

Here's an article from October 2008 discussing about how the median sales amount have come down in LA real estate for September...

Thought from perspective as a potential buyer, might be fairly interesting. Of course this covers all of LA County, so it includes all those areas like Palmdale, Lancaster, etc... Prime-heart of LA-westside that we've been looking is not a sub-400k area...but still gives some good perspective on the softening market.

-Jerry

Click here for Article

UNDER $400,000
By ALEXA HYLAND - 10/13/2008
Los Angeles Business Journal Staff

The median price of homes sold in Los Angeles County crashed through the $400,000 level in September and landed at $380,000, according to sale data supplied to the Business Journal. Home prices here have not been that low since early 2004 – about the time the dramatic run-up in home prices was gaining steam. The number surprised even some veteran real estate experts.

“I didn’t think that there was going to be a significant downturn in values, certainly not this quickly,” said Harvey Mark, a real estate agent with Long Beach brokerage Coldwell Banker Coastal Alliance.

By any measure, the drop in home prices was dramatic. The median price in September 2007 was $580,000. That means the price sunk $200,000, or 35 percent, in one year, according to data supplied by Hicksville, N.Y.-based HomeData Corp. The drop was sharp even from the previous month. In August, the median price was $404,000, which means the price dropped $24,000, or 6 percent, in one month. Experts said the cause of the dramatic slide was clear: a rising tide of distressed and cut-rate properties. Many of the bargains are being snatched up despite the credit crunch.

The buyers? They were said to be investors flush with cash, sometimes buying several homes at once, as well as first-time homeowners who qualify for federal programs aimed at propping up the housing market. “This morning, we had an office meeting and one of my agents told me that 30 percent of our inventory is in escrow,” said Chris Boumann, a broker owner at Red Carpet Heritage Realty in Downey. Indeed, the number of homes that changed hands went up sharply. There were 4,769 homes sold in the county in September. That was up 22 percent from August and up 18 percent compared with September 2007. By comparison, even during the height of the boom, volumes typically fell in September after the strong summer sales season.

(All comparisons are adjusted to reflect inconsistencies in HomeData’s monthly reporting period.)

Many of the sellers were banks, which are starting to slash prices on foreclosed properties they have sometimes held for months. The failed IndyMac Bank, taken over by the Federal Deposit Insurance Corp. in July, had 46 foreclosed homes for sale in L.A. city alone recently, according to the bank’s Web site. “We are seeing these low prices in the market because right now quite a few foreclosures are up for sale by the banks,” said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate. “People are buying the foreclosures, and many are investors who want vacation homes or see it as an investment to rent.” Investors continue to target foreclosed properties in some of the cheapest markets, including Lancaster and Palmdale, Conway said. Builders, too, are cutting deals to unload bloated inventory. KB Home has been offering zero-down deals with price protection. The protection guarantees homeowners will get the lowest possible price at the time of closing. In its second quarter results, the Los Angeles builder reported that it had reduced inventory and debt as a result of such incentives. But agents on the ground said not all home sales can be attributed to bottom-fishing investors. While the median prices in many ZIP codes dropped, the prices were not always low enough to attract investors. Instead, agents said they are seeing an increasing number of first-time buyers previously priced out of the market who are now purchasing single-family homes.

Jimmy Spathos, a real estate agent who has been selling homes in Downey for nine years, said more first-time buyers are bypassing banks to secure a loan and instead are getting funding from the Federal Housing Administration. Spathos said these first-time buyers are qualifying for FHA mortgages, which are insured by the government and require only a 3 percent down payment. As a result, the buyers are entering markets like Downey, where the median home price dropped to $354,000 in one ZIP code.

“The majority are first-time home buyers,” Spathos said. “They are buyers who are out and are serious buyers.”

Westside Blues

The price weakness was spread throughout the county in September as 101 of the 261 ZIP codes had a median price below $380,000. Meanwhile, there was a significant decline in the number of ZIP codes with median home prices at $1 million or above. There were just 25 such ZIP codes in September, down from 36 one year earlier. However, unlike middle- and working-class neighborhoods, where cash investors and FHA-backed loans were supercharging sales, nothing was propping up wealthy neighborhoods.

ZIP codes in Beverly Hills, Brentwood, Bel-Air and Santa Monica all saw the number of homes sales decline by at least 30 percent last month compared with a year ago. And it wasn’t just the credit crunch at work. Agents noted that many buyers were fearful that price declines weren’t close to an end, and even if they were, there was a general skittishness among would-be buyers about laying down big money in such a bad economy. “Rich people have savings, stock accounts and pension funds, but as everyone suffers, it starts to impact them, too,” said Mike Nourmand, president of Nourmand & Associates Realtors in Beverly Hills.

Last week, Nourmand said his firm had a $5.5 million deal in escrow, but the negative stock market scared the buyer. “They backed out of the deal. A month ago, it would have gone through.”

Indeed, the plunging stock market coupled with the takeovers and acquisitions of the country’s largest financial institutions are expected to continue to take a toll on wealthier residents. As these institutions work through the current economic crisis, they are likely to lay off executives in addition to their middle-income and lower-level employees. “With the mergers and consolidations – just look at Countrywide being acquired by Bank of America – we are going to be seeing layoffs due to consolidation,” said USC’s Conway. “We just don’t know how many and how far that is going to go. It could affect housing prices throughout the county.”

Condo Boost

Meanwhile, the condominium market, which had cooled a bit in August, also picked up in September in terms of deal-making. But despite a spike in transactions, the median price of a condo fell to $350,000; that’s off 22 percent from a year earlier and 8 percent from August.

September sales increased to 1,708 units, up an adjusted 33 percent from last year and an adjusted 17 percent from August. The sales increase surprised some experts.

Paul Habibi, a professor at the UCLA Anderson School of Management, said he wouldn’t have expected such a rise, but ventured that developers were likely offering deep price incentives in order to move their inventory quickly.

“Builders are squeezed right now,” Habibi said. “They have been offering incentives in price reductions.”

Habibi said condo sales also likely were boosted by residents who are downsizing from single-family homes as a result of a worsening economy.