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..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.

What is the Value of Real Estate Agent?

I belong to a real estate blogging community where we often pose questions about the market. One of these was on value. I thought I would share my comment about how I perceive the value I bring to my clients.

It seems to me that our value lies in our knowledge of the market. Whether the market is a fast or slow; agent knowledge is the key. Knowing your market and recognizing true value is the advantage a good agent brings to the mix. You have to know more then the numbers you have to know why one area is worth more or less than another.. and often a street or a block can be the difference. People buy for a lot of reasons and a good agent will listen to determine what a specific client wants. We can't protect them from a sudden move due to a job change or family difficulty but we can give them our best information on where the market has been in the past, where it is today and where it may go in the future based on XYZ factors.

In Manhattan, Hermosa, Redondo and El Segundo prices declined in some areas and increased slightly in others in 2006. At the moment prices seem flat but that can change if the market suddenly gets flooded with inventory or if inventory stays flat or declines. This is what I need to discuss with my clients. I can't predict what will happen but I can share my knowledge of what has happened. I can tell clients that the home they think is so adorable has a fundamental flaw that will drive them nuts in two years. I can point out that the street may see higher traffic in the future because there may be a new shopping center on the corner.

For investors I need to know what is happening in the rental market and the value of land. The biggest factor in our area isn't the value of the structure (unless it is fairly new) but the value of the land and what can be built on it. Are there zoning changes that may affect future value. Again this is market knowledge.

How do you get market knowledge.. experience is a big factor.. but so is paying attention to what is happening around your town. Find out what builders will pay for dirt, read about planned zoning changes and purposed new developments the city may be considering. Talk to other agents and get their take on what is happening.

My value is my knowledge.. the more knowledgeable I am.. the more I am worth to my clients..that's what we get paid for.