Westside LA Pricing still has a long way to Come Down?

It seems that Los Angeles pricing for homes over a million mark may still have a ways to come down. I'm not sure if anyone has noticed, but prices in higher end areas like Beverly Hills and Brentwood simply haven't come down as much as you would expect, and in some areas, homes prices have actually increased over the last year!

My feeling is that it is a great time to buy if you are looking in the under 1 million dollar price range. The fact is foreclosures have already made an impact on those neighborhoods, where values have come down around 30% now. I am in escrow on a property for myself for right around $600,000. In that neighborhood, home prices have already come down about 30-35%.

However, if you are looking over 1 million and in the more prime areas of Los Angeles, I believe there will definitely be an impact with a second wave of foreclosures as well as jumbo loan related defaults.

One of my clients passed this article to me. While I do believe the blogger takes a pessimistic viewpoint, I think there are some good points made and worth the read. Check out this article from his blog, Westside Real Estate Meltdown: westsideremeltdown.blogspot.com

-Jerry
310-228-8856


Second Title Wave of Foreclosures to hit the Westside Later this Year

Notice of Defaults (NODs) in California hit an alarming 135,431 during the 1st quarter of 2009. An all time high. That's up 80% from 75,230 during the 4th quarter of 2008. This is primarily due to a foreclosure moratorium by banks, to keep their losses from snowballing. Now we are back to normal, with excess homes piled up in the foreclosure pipeline.

What is different now however, is the type of loans that will be heading toward foreclosure. Up through 2008 we saw the Subprime Wave hit the lower tier of housing . Mainly the outlying areas of Los Angeles were affected like Riverside, San Bernadino, Palmdale, and Lancaster, where lenders could prey on subprime buyers. The proverbial bottom of the Real Estate Food Chain. Many of those homes are now selling at a 50% discount or more . The next wave to hit will be concentrated in the Alt-A, Option ARM and Prime arenas. These loans are much larger in size and include mainly higher end properties. $300,000,000,000 alone are in California and begin resetting in the 3rd and 4th quarter of 2009. The peak of loan resets will be from December 2009 through August 2010. Even though the peak will last through next year, it will remain highly elevated until 2012. This is disaster waiting for the Westside. Many of the Westside loans made from 2004 and on, are Alt-A, Option ARM or Prime and begin resetting in 2009. Especially those 5/1 ARMs that became so popular. As prices have already sunk to 2005 and 2004 in some places, homeowners will already be underwater once their payments increase. If they bought with little or no down payment, walking away from a mortgage becomes a no-brainer.

In addition, we are now seeing accelerated layoffs and some will be forced to sell. With many Westside households requiring 2 incomes, the job loss threat is magnified. Sure, you will hear pundits, realtors, banks, economists preaching now is the time to buy while interest rates are 4-5%. And some will think, they want to get "in" before prices go back up. Don't make that mistake. It is better to buy when prices are lower and interest rates higher. Then you have a chance of rates coming down. Can you imagine trying to sell a property at bubble prices with higher interest rates?

The Westside is down about 20-25% and the downside risk of losing another 20-25% is increasing every day. Smart money is waiting for 40-50% declines before buying. If you read between the irresponsible headlines, you can see that. The bulk of the sales activity is distressed sales. They're few "organic" sales right now. With down payments of 10-25% required to purchase property, you stand a good chance of losing your entire down payment in a year or two.

Now is the time to clean up your finances, get familiar with areas you like and watch the Westside market change this summer. Take a look around during late summer, after the traditional selling season for signs of distress. Later this year should be a possible entry point for some properties on the Westside.

Above all, be patient. There is absolutely, no hurry now.