South Bay-Beach Cities Home Sales: Will $15 K make a difference

The U.S. Senate in an effort to customize their version of the Bailout Bill and add a few more perks the House missed, voted to give home buyers a credit of 10% of the sale price or a maximum of $15,000 on a home purchase. Of course the bill is not actually a done deal... It has to go back to The House and then be signed by The President before it takes effect. Right now I'm guessing the bill will be changed along the way and won't be ready for consumers anytime soon... if ever.

Unlike the previous version of a $7500 tax credit that must be paid back..the new bill will not require buyers to reimburse the government...ie taxpayers... for the money. I understand the idea behind the bill but once again I think the folks in DC are off the mark.

Would a $15,000 credit stimulate sales in the South Bay-Beach Cities...yes and no. Certainly getting an extra $15K credit looks like a good deal for anyone buying but the problem is that while the credit is nice, it's pretty useless if banks are not making loans. And therein lies one of the major problems with many of the ideas about real estate and the housing market floating around Washington.

You can pass stimulus packages 'til the cows come home..but they are pretty useless if consumers can't use them. If the boys in DC are really serious about doing something about the housing crisis then I would suggest that the first step is putting a few conditions on the money they are passing around to lending instutions... namely if you want money from the government you have to make loans on homes.

South Bay-Beach Cities: Sold September 2008

Real Estate Information on Listings, Pending and Sold properties in the South Bay-Beach Cities September 2008.....



Hermosa Beach Strand...


After another wild ride in the stock market last week the weeek ended with the market up slightly by the close on Friday. The good news is that the credit markets actually seem to be loosening up a bit... the bad news is that the current economic malaise is the new concern as the R word is now an accepted reality. Consumers just can't seem to catch a break.

So far the South Bay economy has held up better the other parts of the County and State but there are no guarantees this will continue. If the credit markets do loosen up then we may see a milder recession locally... if they don't things could get bad for us as well. The problem with recession numbers is that you generally don't know how bad they are until after they are over. However we can count on a general slowdown in a number of areas including home sales while the economy sorts itself out.

Interest rates appear to be coming down slowly after rising last week. The LIBOR is showing declines as the global credit market seems to be settling. Declines in the Prime and LIBOR may mean lower rates for loans that will be resetting in the next 2-4 months. Overall I think we can expect to see rates begin to increase.

The days of the 5.5% fixed rate are over. I'm guessing rates for loans under $729,750** will remain around 6.3%-6.6% for the rest of the year. Jumbo fixed rates will continue to be high although they should drop from the 8.25% level. Jumbo 5/1 ARMS will be reasonable at 6.65%-7%. As I've noted before I'm not sure banks really want to make Jumbo 30 year fixed rate loans and will continue to keep rates on these loans high and encourage buyers to move into ARMS. Who wins the election and how the markets respond will determine where rates wind up next year.

September sales held up fairly well in all the Beach Cities compared to sales over the summer. However with what has been happening in the last two weeks we can expect to see October sales remain low. If the markets finally settle we might see a slight increase in sales by the end of the year.

South Bay-Beach Cities: Sold September 2008(click on graph to enlarge)










** NOTE: If you have been planning on making use of the $729,750 conforming loan ... banks will probably not fund these loans after December 1, 2008 as the loan limit goes down on January 1, 2009 to $625,000...


Dan Green from the Mortgage Reports offers information on what is and may be happening in the mortgage market over the short term. Lou Barnes also offers some insight into what has been happening in the market.



South Bay-Beach Cities: Sold August 2008

South Bay-Beach Cities: Sold July 2008

South Bay-Beach Cities: Sold June 2008

South Bay-Beach Cities: Sold May 2008

South Bay-Beach Cities: Sold April 2008

South Bay-Beach Cities: SOLD March 2008

South Bay-Beach Cities: Sold February 2008

South Bay-Beach Cities: Sold January 2008

South Bay-Beach Cities: Sold November 2007

South Bay-Beach Cities: October SOLD 2007

South Bay-Beach Cities: September SOLD 2007

South Bay-Beach Cities: August SOLD 2007

South Bay- Beach Cities: July Sold 2007

South Bay-Beach Cities: Sold June 2007

South Bay-Beach Cities: Sold May 2007

South Bay-Beach Cities: Sold April 2007

South Bay-Beach Cities: Sold March 2007

South Bay-Beach Cities: Sold February 2007

South Bay-Beach Cities: Sold January 2007

South Bay-Beach Cities: Sold July 2007

Manhattan Beach Walkstreet

What a difference a week can make. Had I posted Beach Cities: Sold July 2007 figures the first week in August I would have said that rates were low and the market was chugging along although at a slow rate. That was before August 4 and the collapse of American Home Mortgage and a number of other lenders.

Who would have thought Countrywide would possibly be on the verge of bankruptcy or that the FED might seriously be considering bailing them out. While I think Angelo Mozilo is a bit smarmy I also realize it would be a disaster if they went into bankruptcy at this time. They make 1 out of every 6 loans in the country so you can see what their demise would do to the fragile credit market. Brian Brady wrote an excellent post on The Bloodhound Blog about the problems with Countrywide going down in this market. It's worth a read.

At this time jumbo loans are hovering around 7%-8% depending on the lender and the amount of points. Lenders are dropping like flies as they succumb to the woes of the subprime market. It will be a few weeks before the dust clears and rates settle down after much hand wringing and blame tossed around by the major players.

Buyers with FICO scores over 720 with money for a downpayment who have jobs where they can document their incomes will be in high demand. While I suspect there will still be stated income loans the regulations on them will be significantly tighter. Sellers will need to pay a lot more attention to a buyer's qualifications when choosing the best offer to accept for their property.

North and South Redondo did better then the other beach cities in sales. They were close to June numbers. Inventory is also holding steady in both cities. Manhattan Beach had a surge in sales and closings toward the end of the month....however most of the sales were in the under $2 million range. Pendings since August 4, 2007 are definitely down in all cities but especially in Manhattan Beach. There were 44 properties that went into escrow since August 1, 2007 in all of the beach cities... 22 homes and 22 townhomes. El Segundo ..3 Manhattan Beach...7 Hermosa Beach.....3 North Redondo...... 14 and South Redondo...17

Beach Cities: Sold July 2007 (click on graph to enlarge)

South Bay-Beach Cities: Sold July 2006

South Bay-Beach Cities: Sold June 2007

South Bay-Beach Cities: Sold May 2007

South Bay-Beach Cities: Sold April 2007

South Bay-Beach Cities: Sold March 2007

South Bay-Beach Cities: Sold February 2007

SouthBay-Beach Cities: Sold January 2007

Manhattan Beach-Beach Cities Real Estate: Foreclosures...Big Trouble?

The problems in the financial markets have spurred speculation on the prices of Manhattan Beach real estate and real estate prices in the other Beach Cities... Hermosa, Redondo and El Segundo. Many are predicitng (hoping) that the entire South Bay real estate market and the Beach Cities in particular will crash dive. I don't think our market will escape unscathed but I don't see it going back to 1990 levels either.

In last Sunday's ( August 12, 2007) LA Times there was an article titled Foreclosures May Spur Price Drop... that has a cool tool labled Foreclosures: How Does your Zipcode Fare next to the article. If you put in a zipcode it tells you how many foreclosues are in that zipcode. Naturally I put in the zipcodes from the Beach Cities and wasn't surprised at the results.. namely there are very few bank owned properties in Manhattan Beach, Hermosa Beach, Redondo Beach or El Segundo. There are a total of 8 bank owned ( reo) properties in the Beach Cities. However if you go to inland cities you will see a much higher number and they are going to have some problems.

Here's how the numbers break out..

Manhattan Beach: 1

Hermosa Beach: 3

North Redondo : 2

South Redondo: 1

El Segundo: 1

Yes.. there will be more in the future... that's life. There will be people who get divorced and run into problems. There will be those who can't refinance and will have to sell or lose everything. Some will have health problems and huge medical bills. There will be people who lose their jobs and can't make their house payment. But these are problems that happen in all markets. We just got used to the fact that you could sell fairly quickly if you got in trouble and that option is not as viable.

Most homeowners in our area are in fairly decent financial shape and should weather this market relatively intact. Many who don't have to sell will simply take their homes off the market. Prime location property will likely continue to see big dollars as these properties are getting scarce. Marginal location property and homes in poor condition will not bring top dollar and will see discounted prices. Those who have to sell will need to be sure their property is in excellent condition in order to beat the competition. The will also need to be aware that prices may be fairly stagnate for a period of time as the market adjusts.

Buyers with cash and a good FICO (above 720) will be Kings in this market. Morgan Brown has a great three part series on credit.. Part III deals with improving credit scores. Whether you are a buyer or seller take the time to read this post. You might also want to check what Brian Brady has to say about the current financial market.

Manhattan Beach-Beach Cities:Real Estate..Are You a Bull or a Bear?

I 'm going to say this loud and in bold print... I like real estate.. and I think it will always be a good investment... I can't think of any other investment where you can buy an appreciating (long term) asset with so much leverage and over time..with a few exceptions... will always come out ahead on that investment.... and you have the added bonus of having a place to live. Google is a great stock but they won't let you move into the company headquarters.

The credit markets were whirling and twirling last week sending consumers into endless confusion. Much of the Los Angeles County market and our local South Bay-Beach Cities market is dependent on the jumbo loan(over $417,000) and that market is now deemed to be risky.

The reality is that most of the loans that will go into foreclosure are those with conforming loan limits($417,000-) that were made to people with poor credit who couldn't really qualify for them in the first place. Generally those buying in Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo with jumbo loans were able to afford the financing and are sound financially. The loans are considered risky because they are higher then the norm but our buyers are usually good credit risks. That said, we are in a segment of the market that is considered risky and we will pay a financial price.


One of the difficulties with cheap money is that too many people have used their homes as ATM machines.. not realizing that the cash they get is money they will have to pay back..and we certainly will have a few of those in the Beach Cities.. You can't fix dumb or bad judgment and there will always be a segment of the market that doesn't use good judgement.... whether it is consumers or the Wall Street credit markets.

We bailed out the banks in the 80's and they didn't learn from that fiasco which is why financial institutions are in trouble today.... it's about money and profits and as long as financial markets figure out ways to make money they will continue risky behavior believing the government will bail them out. They might be more prudent in the future if they had to live with their bad choices.

There was no need to stretch financial rules the way banks did in the last few years. Money was and still is incredibly cheap. I've been in real estate 28 years and with the exception of the last 8-10 years lending rates were in double digits. Guess what.. homes were bought and sold at 10%-12% and we thought it was a good market.

Yes we will see problems in the beach cities and if the rates for jumbo loans continue to be high we will see things slow because of the increased cost of money. People who have refinanced until they are out of equity will be in trouble. Does it make real estate a bad investment.. NO.... it means people make mistakes.. Real estate bought for the right reason and purchased within the financial means of the buyer historically is a good investment over the long run.

The key is long term.. real estate is not a short term investment.. it never has been and never will be. Many consumers forgot this in the frenzy to get rich quick. Sure there will be times when you can make a fast buck but historically real estate is a long term investment. In the giddy years of rising prices many lost sight of that fundamental aspect of the market and confused buying a home with playing the stock market...but then so did many of the professional hedge fund players.

California Real Estate: Median Home Prices 1970-2006

I've had requests for housing data on CA real estate markets going back from the 60's to the present. I can't go back any farther then 1995 using the MLS. I checked with CAR and they had some graphs that incorporate older data for CA homes.I was able to find some information on Los Angeles County real estate prices from 1982-1997 which may be of interest. I have printed figures for home prices for the South Bay Beach Cities from 1995 in other posts. The current median price of a home in Los Angeles County is $535,000.

Los Angeles: Median Home Prices 1982-1997

Median Home Prices: CA vs U.S 1970- 2006

Median Home Prices : CA 1986-2006

Delinquency and Foreclosure Rates: CA 1974-2006

Beach Cities: May 1995-1999

Beach Cities: May 2000-2007

Manhattan Beach : Home Prices 2000-2007

South Bay/Beach Cities: 360 at The South Bay

Grand Opening is July 28, 2007 from 10:00-5:00 pm

Entrance to 360 at South Bay

I've been seeing a lot of searches on my site for information on 360 at The South Bay so I thought I would provide a first look at what happening on the site.

The development is located on the old LA Air Force Station in El Segundo or SAMSO as it was called by most residents. In a complicated landswap deal the base was moved to new headquarters and the old base area was sold for housing to the William Lyon Company.

It looks as if 360 South Bay will be a very nice community although a bit more inland then many people may realize. Truthfully I don't know whether it will be considered El Segundo or Hawthorne because of the landswap that occurred. Technically it is in El Segundo but the school district will be Wiseburn not El Segundo.

I did notice that on the 360 site they are very careful not to mention a city. The same thing happened with Fusion which is in Hawthorne but across the street from Manhattan Beach.. it was also designated as Fusion South Bay rather then showing a Hawthorne address. The main reason is of course South Bay sounds like beach even though it is a few miles from the beach and definitely not in Manhattan Beach which is what a lot of people thought when they first hit the market.

The are building fast and furiously to get some models up and open sometime this summer. I don't know what the prices will be but am guessing there will be a fairly wide variety of prices with a few entry level units and others priced significantly higher. a lot of the units will be large.. over 1600 sqft which is nice for families or those who need more space.

There are 5 models that vary in design and size. The units will range from studios to 4 bedrooms and will be 957 sqft to 2729 sqft. I think they will be many similar elements found in Playa Vista in the Marina.

As I receive more information I will continue to post it here along with more pictures as the building moves forward

A Loan With No Closing Costs?

Lenders are definitely under the gun right now. With all the hoopla about sub prime loans and who did what to who... we will see some changes in how mainstream lenders are doing business as they try to regain the trust of the public.

No matter how silly Banks may appear to be they are not entirely stupid.. even in the wake of heavy foreclosure activity in many areas they are counting on people buying those properties.. and they are right. It would be suicide for them to offer loan products that are similar to the ones now being disparaged so there will be new twists in the game..

That said..Bank of America is offering a new loan to entice borrowers back.. A No Closing Cost Loan which they swear is not covered by higher interest rates. These loans will be held in-house.. meaning they will not package them to sell to the secondary market. Currently the loan is only available for purchase money loans ( buying a property) not for refinancing. They are stating that they hope to make up what they are losing in typical closing cost fees by increases in the volume of new loans. In addition to no closing costs they are also not going to require PMI or impound accounts and the loan ratios are 95% loan to value.

I'm guessing that the requirements will be fairly tough and will require full documentation and high credit scores... in other words limited to the bank's best customers.. and there is nothing wrong with that.. if you are financially sound there should be some perk.

Currently the whole closing cost structure is a joke with lots of garbage fees thrown in for no reason.. My favorite is document preparation.. Back in the old days someone really did have to type up each document but today they just throw a name into the computer and .. presto.. with the click of a mouse the entire doc is prepared.. I can see where a $50 service fee might be OK but $200-$500 seems a bit excessive.


What will be interesting is to see if the idea catches on with other major lenders. Even if the whole closing cost fee structure is not deleted it would be a good thing if it finally got regulated with standard fees that all lenders use so the consumer could really compare loans from lender to lender.

6:00 pm update:

I ran the No Cost Loan from Bank of America by one of the local Manhattan Beach lenders that I highly recommend..

Here are some thoughts from Tony Drockton of Branded Mortgage who is a direct lender.

Bank of America offers no fees... but they only refer to bank fees and the appraisal....

I think your blog is 'spot on' (pun intended) they are only really waiving about $1000 in fees of which as you state are mainly junk fees anyway. The misleading part is that people still have to pay all the larger fees of title, escrow and such...but they don't really do a good job of explaining that portion. When you listen to the advertisement, if you are not real estate savvy, it appears you will pay nothing at all to buy a home......

There is no free lunch with anything that is NO COST or FREE. I believe in avoiding costs for clients in many situations, but I always want them to understand that banks or brokers only get paid by either charging fees or getting a rebate from the loan. The higher the interest rate, the more rebate, the less costs the borrower needs to pay (if any) up front..i.e. closing costs. As long as the borrower understands this relationship, then it is acceptable to provide the no cost option to them.

It will be very interesting to see how this new loan actually works .. My suspicions are that Tony is right on the money.. there is no free lunch and I have never seen free money from a bank.

Why the Beach Cities are Going Up in Value

Marilyn Alva in an article Waterfront Homes Seen Weathering Housing Market Storm from Investors Business Daily on April 12, 2007 discusses the issues about why homes along the coasts seem to be doing so much better at holding their values then their inland counterparts. Her conclusion and that of Alan Hummel from Forsythe Appraisals is that ocean is king.. followed by inland waterways and lake front homes. Water rules.
Their conclusions follow what those of us who live in Manhattan, Hermosa , Redondo or El Segundo have known for years... people want to live at the beach and are willing to pay for the privilege.
Home prices will adjust in a slow market but it's why we don't see values drop 30-50% as predicted by many. It's why home prices in the coastal cities in Southern California continue to rise while inland towns of the state and country are seeing a different market.

In the article Lewis Goodkin of Goodkin Consulting notes that while many people have the resources to buy there are fewer ocean front properties available. He further notes that Southern California coastal cities are one of the areas resistant to price declines in a slowing market. He makes the same argument that I have always noted.. namely that most people who buy in our area are looking for a home and a community to raise their families. We are more about owner occupancy then speculation.

I highly recommmend you read the entire article.

Manhattan Beach and all Beach Cities Real Estate Snapshot

I'm still not sure what to make of the current real estate market. Inventory continues to stay down and there are not many new properties coming on the market. Buyers are re-entering the market and seem to be ready to buy once again. The homes, townhomes and condos in the Beach Cities that are selling are those that are in good shape and well priced. If a property is even slightly over market it is sitting. Some buyers appear ready to start making low offers on homes that have been For Sale over 60 days while others are waiting for sellers to lower prices before they will consider an offer. This trend looks to be true for all the beach cities and for much of California as well. It will be interesting to see what the next two weeks brings...