Manhattan Beach-Beach Cities: Home Prices and Loans..

On Friday the FED lowered the discount rate and is widely expected to lower the funds rate at it's next meeting in September. The discount rate is the rate banks charge each other for short term loans and the funds rate deals with the cost of money or interest rates. The discount rate will help the credit market retain liquidity and the funds rate rate will have an effect on mortgage rates down line. It's a bit confusing as mortgage rates are actually determined by the bond market...but let's not get too technical.

The credit market is not out of the woods yet and Jumbo loans will continue high as long as the market sees them as risky. Lenders are going out of business as fast as they used to go into business. If you aren't familiar with Implode.com and it's Mortgage Lender Implode-0-Meter take a look. There are now 128 lenders that have officially shut down their lending programs. National City Mortgage which is a big player in the second market is also in trouble. When you get players like Countrywide, WAMU and National City looking shaky then you have big problems. This is not going to go away in a week or two with business returning to normal. To see how rate hikes on Jumbo loans affect our market read The Great Loan Blog post..

So what does it mean to us... well Manhattan Beach has only had 8 properties (homes and townhomes) go into escrow since August 1, 2007. North Redondo, our affordable property gage, has seen 15 pending sales(homes and townhomes).. and 8 of those were before August 4, 2007 when the market took the big dive. South Redondo is actually the big winner with 21 pending sales... El Segundo has 4 and Hermosa Beach only has 3 pending sales since August 1, 2007 .

New listings are not coming on the market and I'm beginning to see some larger price reductions in North and South Redondo. I expect to see home prices in Hermosa Beach and Manhattan Beach shift downward a little in those markets with large inventory over the $2 million mark.

If you have a home that has been on the market over 60 days and no one loves you it might be time to either take it off the market, rent it or think about a realistic price reduction. Otherwise you are going to be chasing a down market and in the end it will cost you more then a quick price reduction today. Trust me on this... the jumbo loan market isn't going to get significantly better even if the FED cuts rates in September. I don't see a major fall in prices (25%+) but I do believe our market is headed for some tougher times as the real estate market tries to adjust to the woes of the financial markets.

No one wants to believe that the South Bay-Beach Cities real estate market will be affected but it will... so be smart now. If you have to sell.. bite the bullet and price your home to sell in today's market not last year's market.

Manhattan Beach-Beach Cities: Where Oh Where Has My Loan Gone?

It's only Tuesday but a lot has happened since last Friday's death watch for American Home Mortgage. Today interest rates on home mortgages literally shot up from last week on jumbo loans ( amount over $417,000) which is pretty standard for homes mortgages in the Beach Cities.... I hope you are you sitting down.. the fixed rate with 20% down is 7.5%-8.5% depending on the lender... ouch! Wells Fargo called it first quoting 8.5% but you can expect others to follow at least for the short term. That's a full 2% over a quote I had for a client on Thursday.

On my Active Rain blog I posted Subprime Meltdown: Hey Guys... It's not Rocket Science where I posted some opinions from some sharp mortgage lenders about what might be happening in the market. Looking at today's fallout I think these guys were right and wrong in their opinions.

The jump in interest rates on non-conforming loans confirms Brian Brady's opinion that lenders want more money to cover all risks associated with these loans.... even from consumers with good credit and sizable down payments. However I disagree with Brian's stance that as long as lenders get their additional money things will continue to chug along. I think today may have proved that wrong.

In talking with my local lenders this afternoon a few things at least are clear. Conforming loans ($417,500) are doing just fine with fixed rates around 6.2% and may even see a drop depending on the bond market. The non-conforming market is another story. The credit market is changing on a day by day basis, Lenders are determining rates on their individual assessment of risk... which means that rates will vary depending on the lender... and no one knows what's happening.

Some lenders were encouraged by the uptick in Indymac stock... there were rumors this morning that they were going down... which would have been a major blow. Another rumor is that Countrywide may decide not to fund loans that they can't sell to Fannie Mae and Freddie Mac... that means all non-conforming loans.... those above $417,500 and perhaps no second loans. That could put a big damper on the jumbo loan market.... which is our Beach Cities real estate market. Another factor to consider is whether stated income jumbo loans (Alt-A) with less them 20% down are about to disappear. It is a huge possibility and many people who have large incomes are not salaried.

So what does it all mean... I don't have a clue right now and I doubt anyone else does either.. but I do know that if this jump in rates for jumbo loans continues over a prolonged period.... and buyers who need those loans are unable to do stated income and/or lenders begin requiring larger down payments.... our market is in big trouble as the buyer pool just shrunk. If I were a seller right now I would make darn sure that anyone buying my house was 100% rock solid with a FICO score of 780 or better and a lot of cash.

There is some speculation that the market will settle down next week and that maybe much of the panic in the streets is to push the FEDS to lower rates at their next meeting. I think the credit market is trying to correct the mistakes it made over the last few years as more and more homes are heading toward foreclosure and short sales. I think they may adjust their rates for exceptionally qualified customers who are able to do a fully documented loan but those who need a stated income loan and don't have pristine credit may have to postpone buying a home unless they have a lot of cash.

A little advice... if you are loan shopping check with a Mortgage Loan Broker rather then a direct lender.....as they have access to a number of different money sources.

South Bay-Beach Cities: On the 10 Most Expensive List

Pier Ave Hermosa Beach

Once again the South Bay-Beach Cities pop up on the list of the 10 most expensive cities in CA in June. Palos Verdes Estates was # 5 on the list..Inventory is very low in PVE at this time. In fact inventory is low all over the hill compared to last year.

Hermosa Beach is on the list once again. After a long dry spell Hermosa is beginning to see an increase in property sales in both homes and townhomes. Manhattan Beach is #9 and Hermosa Beach is # 10. Manhattan Beach home prices are still on the high side compared to Hermosa. You can really see this trend if you are looking for a townhome in the Sand section of either Manhattan Beach or Hermosa Beach.

If you want a Manhattan Beach townhome 1600+ sqft in the Sand section under $1,550,000 there are only two. However in the same price range you can find 15 townhomes in Hermosa Beach that meet that criteria.

Statewide, the 10 cities and communities with the highest median home prices in California during June 2007 were:

Laguna Beach: $1,700,000

Burlingame: $1,637,500

Los Altos: $1,635,000

Newport Beach: $1,615,000

Palos Verdes Estates: $1,542,000

Saratoga: $1,465,000

La Canada-Flintridge: $1,400,000

Mill Valley: $1,395,000

Manhattan Beach: $1,300,000

Hermosa Beach: $1,205,000.

Overall prices were lower then in the past which is both good news and bad news depending whether you are a buyer or seller.

Manhattan Beach: Market Snapshot July 18, 2007

Manhattan Village

Listings for homes in Manhattan Beach are holding steady and are about the same as last month at this time but up from the first and second quarter. Closed real estate salesin Manhattan Beach since July 1, 2007 are not looking great but pendings are doing well.

However as a side note almost all of the pendings this month are under $2,000,000. There are 49 pending home sales in Manhattan Beach and 38 of those are $2,000,000 or less. Currently out of 107 active listings 64 are priced over the $2,000,000 mark. This may be something sellers will need to view more closely as they consider where to price their homes.

Manhattan Beach Townhomes and condos are still doing pretty well but closed sales of townhomes are off there as well. The number of active listings is very low which makes the pending sales appear lower as the inventory decreases.

I think we may begin to see an effect from the tightening of lending rules on the overall mortgage market. Most buyers in our area are in good financial shape but they are still bound by lending regulations which are more stringent then in previous months.

Market Snapshot: Manhattan Beach ( click graph to enlarge)

Manhattan Beach: Market Snapshot June 25, 2007

Manhattan Beach: Market Snapshot June 2, 2007

Manhattan Beach: Market Snapshot May 6, 2007

Manhattan Beach: Market Snapshot April 23, 2007

Beach Cities: Sold April 2007

Hermosa Beach.... Pier Plaza

The South Bay/ Beach Cities home market seems to have leveled off. April saw fewer closings then March in most areas with the exception of Manhattan Beach. Pendings are fairly strong and we may see more volume in May.

Headlines in newspapers and sound bytes in the media push the increase in foreclosures in CA but so far we haven't had much impact in the Beach Cities. For the moment at least people are listing their homes and other people are buying those homes. However Buyers are picky and will not make offers on homes they deem over market value. They also want a home in great condition or priced low enough to compensate for being dated or in poor shape.

Overall in our market prices seem fairly stable moving up and down slightly. It's beginning to look a lot like a normal market which is something most people have not experienced. We will see some short sales and even some foreclosures but don't expect to find these homes priced under market value. I know of one coming up in East Manhattan that will have a pretty good price tag but will not be in great condition.As always the only sure thing about our Beach Cities market is that it is always changing!

Current market statistics for the Beach Cities April, 2007