Time Running Out For First-Time Homebuyers
Wednesday, 14 October 2009
By Chris Levister –
The clock is ticking for first-time home buyers scrambling to take advantage of an $8,000 tax credit set to expire November 30 – unless Congress decides to extend it.
This week, the White House said its economic team is evaluating the credit’s impact on home sales and will make a recommendation to President Barack Obama.
The National Association of Realtors and the National Association of Home Builders have launched marketing campaigns touting the credit and have pushed Congress to keep it going. But some lawmakers are balking at the cost, which may hit $15 billion – more than double the amount projected in February’s economic stimulus bill.
Unlike the home buyer tax credit Congress enacted in July of 2008, this allowance does not have to be repaid.
The federal tax credit covers up to 10 percent of the home price, or up to $8,000, for first-time buyers. Combined with low mortgage rates and falling prices the incentive is drawing first-time buyers like Alisha Baeza 30, and George Gonzalez 29 of San Bernardino.
In June Baeza used the tax credit to buy a 3-bedroom 2-and-a half bath home with a pool for $248,000. She enlisted veteran Spellacy Associates realtor Alice Wilson, and a San Bernardino program aimed at first-time home buyers. City staffers helped Baeza save money, lower her debt and arrange for a down payment.
“I started thinking about buying a home almost 2 years ago and at the time I couldn’t afford it,” recalls Baeza, a dietary manager at Saint Bernardine Hospital. Alice kept encouraging me - ‘you need to be a home owner’. Then she told me about the city program. It worked out great because they advanced the 20% down payment.
Baeza admits qualifying for a loan in the midst of a recession-caused credit crunch and wading through the mounds of required paperwork was no fun. “It was grueling – but worth it. I say to young people - go do it.” Her boyfriend George Gonzales an anesthesia equipment technician also saw his fortunes change after recently qualifying for a home loan. This weekend the couple went house hunting.
“Five years ago I couldn’t afforded a home. My credit wasn’t that good and home prices were outrageous. I figured I’d never own property,” said Gonzalez.
“When I got approved I jumped for joy, called Alisha and said come on let’s go celebrate. Now I tell people go fix your credit, save some money and see what you qualify for.”
Housing experts say first-time homebuyers snapped up three out of 10 homes sold in July. That’s about 10 percent below the average for the previous six years, according to the National Association of Realtors.
Alice Wilson says it’s a new era in home buying and home sales will struggle to rebound without a tax credit extension.
“Prices and home values are falling, banks are holding on to their wallets and there’s not a lot of housing inventory out there. That’s kept many would-be buyers on the sidelines,” she said.
She said with or without a tax break, consumers in this economy are looking for a bargain much like they are with retail sales and auto sales.
“Banks are being extra cautious, worried about the still-dire unemployment situation. The turn of the year isn’t likely to yield much good news on the job front so I don’t see a full-blown recovery on the horizon.”
Realtor Jeanine, Alice’s daughter, says while the tax credit has succeeded in energizing buyers and helping clear a glut of lower-priced homes, including foreclosed properties that are dragging down home values, buyers expecting to find a plentiful home inventory will be disappointed.
“For every decent home on the market – there are at least four or five people sometimes more bidding on it. A home can fall out of escrow and a week later its back in – with another buyer.” The problem is made worst said Jeanine because many banks are reluctant to put foreclosed properties back on the market. “Simply put, it’s very hard out there.”
The best approach is honesty said Alice.
“We tell prospective buyers with bad credit and or unstable employment. It’s just not going to happen.”
“The good ole days are behind us. Get your house in order before you dip your toes into the market,” added Jeanine, “Its bitter medicine. We’re just praying people don’t get discouraged.”
Couldn't have said it better....
Showing posts with label house hunting. Show all posts
Showing posts with label house hunting. Show all posts
Thursday, October 15, 2009
Wednesday, September 23, 2009
This is good News!!
Nearly 40 percent of first-time home buyers report federal tax credit played critical role in decision to purchase a home
LOS ANGELES (Sept. 18) – Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2009 First-time Home Buyers Tax Credit Survey.” Understanding the significance of the federal tax credit to the housing market’s recovery, C.A.R. surveyed 200 California first-time home buyers to gauge the impact it had on their purchase decisions.
“It is clear that the federal tax credit for first-time home buyers is working, as evidenced by the spike in home sales in recent months,” said C.A.R. President James Liptak. “This tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the housing market.
“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers,” he said.
Nearly 70 percent of those surveyed said that the federal tax credit was either “very important” or “most important” in their decision to purchase a home. When ranking the importance of the tax credit, those who planned to use the tax credit gave it a 4.5 on a scale of one to five, with five being “most important.” That rank was tied with low home prices.
In California home prices have declined 59 percent from the peak to the current low in this cycle—contrasting with the national picture where the prices have declined by 28 percent.
“While affordability has improved in California over the past two years, it is still lower than affordability nationally. As a result, the tax credit is an even bigger factor in California compared with elsewhere in the country,” added Liptak. “Going forward, the credit will be even more important to the housing recovery.”
Income levels played a role in the decision of first-time buyers to apply for the federal tax credit. Ninety-four percent of respondents who earn an annual income of less than $100,000 planned to apply for the credit, while only 51 percent of first-timers earning $100,000 or more planned to apply for it.
Other key findings from C.A.R.’s “2009 First-time Home Buyers Tax Credit Survey” include:
· Ninety-four percent were aware of the federal first-time buyer tax credit.
· Eighty-two percent listed the ability to obtain financing as “very important” or “most important.”
· Ninety-one percent reported low home prices as “very important” or “most important.”
..............ok already....
So having the right price point is very, very important..having a tax credit does help but affordablity trumps all other factors in the case of home buying...so here's the call..
LOS ANGELES (Sept. 18) – Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2009 First-time Home Buyers Tax Credit Survey.” Understanding the significance of the federal tax credit to the housing market’s recovery, C.A.R. surveyed 200 California first-time home buyers to gauge the impact it had on their purchase decisions.
“It is clear that the federal tax credit for first-time home buyers is working, as evidenced by the spike in home sales in recent months,” said C.A.R. President James Liptak. “This tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the housing market.
“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers,” he said.
Nearly 70 percent of those surveyed said that the federal tax credit was either “very important” or “most important” in their decision to purchase a home. When ranking the importance of the tax credit, those who planned to use the tax credit gave it a 4.5 on a scale of one to five, with five being “most important.” That rank was tied with low home prices.
In California home prices have declined 59 percent from the peak to the current low in this cycle—contrasting with the national picture where the prices have declined by 28 percent.
“While affordability has improved in California over the past two years, it is still lower than affordability nationally. As a result, the tax credit is an even bigger factor in California compared with elsewhere in the country,” added Liptak. “Going forward, the credit will be even more important to the housing recovery.”
Income levels played a role in the decision of first-time buyers to apply for the federal tax credit. Ninety-four percent of respondents who earn an annual income of less than $100,000 planned to apply for the credit, while only 51 percent of first-timers earning $100,000 or more planned to apply for it.
Other key findings from C.A.R.’s “2009 First-time Home Buyers Tax Credit Survey” include:
· Ninety-four percent were aware of the federal first-time buyer tax credit.
· Eighty-two percent listed the ability to obtain financing as “very important” or “most important.”
· Ninety-one percent reported low home prices as “very important” or “most important.”
..............ok already....
So having the right price point is very, very important..having a tax credit does help but affordablity trumps all other factors in the case of home buying...so here's the call..
Wednesday, August 26, 2009
Tips for First Time Home Buyers
So you’re thinking about buying your first piece of real estate? Before you even begin looking at a potential property, you need to make sure you can qualify for a mortgage. The following are some useful “tips for first time home buyers
.”
The first thing any potential homeowner should do is obtain a free credit report, either from Annualcreditreport.com or via a free trial website.
Once you’ve got your credit report at your fingertips, analyze it and determine what your monthly expenditures are. You will see a monthly payment next to each liability on the credit report. Add up all those payments and jot it down somewhere. These are your total monthly liabilities and will be important when determining how much you can afford.
Also scan the credit report for derogatory accounts and clean them up as best you can. If you’ve got delinquent accounts, resolve them. If you see collections, call the companies the disputes are with and do your best to make a deal. If everything looks good, you can move on. If not, you may want to repair your credit to a mid-score above 680 or higher before beginning your property search.
*One important note: Do NOT open any new credit accounts or make any large purchases using your credit cards within a few months before applying for a mortgage. This includes buying that plasma screen on a Best Buy card for your new crib. It can drive your credit score down needlessly which will result in a much higher interest-rate.
Now that you’ve got your credit in order, it’s time to figure out how much you can afford. Most banks and lenders allow borrowers to have a debt-to-income ratio up to 45%. Read more about debt-to-income ratios.
By taking your total liabilities and adding it to a monthly housing payment, and dividing that number by your monthly gross income you’ll come up with your DTI.
Let’s look at an example:
$10,000 monthly gross income
$1,500 total monthly liabilities
We know from the above example that your total monthly payments can’t exceed $4,500, or 45% DTI based on your $10,000 gross monthly income.
So if you already have $1,500 in total monthly liabilities, you can add a housing payment of $3,000 a month. This doesn’t leave much room in this market.
Let’s look at the same example with a housing payment, including taxes and insurance based on California rates:
$550,000 purchase price
$440,000 loan amount
6.25% interest rate
$2291.66 monthly interest-only payment
$572.92 monthly taxes
$128.33 monthly insurance
$2,992.91 total monthly housing cost
In the above scenario, a potential homeowner making $10,000 gross income a month can barely afford a $440,000 loan paying the interest-only payment. What does this tell us?
It tells us that there are a ton of homeowners out there living paycheck to paycheck and overstating income to qualify for homes they simply can’t afford. At least not in the eyes of banks and lenders that require borrowers to keep their DTI below 45%.
So now you’ve got an idea of what you’ll be able to afford. There are a number of mortgage calculators out there that will give you a better idea of what you can qualify for.
Now that you’ve got your credit profile in check and you know what you can afford, you’ll need to make sure you’ve got a verifiable housing history and seasoned assets.
Most lenders ask that you verify your last 12 months housing history. You can do this with cancelled checks or a VOR (Verification of Rent) from your landlord. This is important to determine the payment shock effect on the borrower.
Liquid assets are always helpful when applying for a loan, and are almost always a necessity for a first-time homebuyer. Make sure you have an account with at least two months PITI (Principal, interest, taxes and insurance) available. Also make the money in said account has been there for at least two consecutive months to ensure that it is seasoned. Banks and mortgage lenders don’t give much weight to unseasoned assets, as any friend, relative, or even a broker or loan officer can easily dump assets into your account before you apply for a mortgage to boost your net worth.
Now that you’re prepared, it’s time to be vigilant and proactive. Avoid predatory lenders and do your interest rate homework. Check out a rate sheet from the bank or lender that you’re being quoted from. Ask what the rate adjustments are. Ask if the loan carries a prepayment penalty and for how long? Get all the facts before you sign anything. And once you like it, lock it!
With all this preparation behind you, the loan flow will be a comfortable process with few surprises. It might not be perfect, but if you follow these rules you will definitely save money and reduce stress!
Let’s review the tips for first time home buyers in a condensed format:
- Order a free credit report
- Review your credit and clear up any derogatory accounts
- Do NOT open any new credit accounts or make any large purchases
- Calculate your total monthly liabilities
- Figure out your DTI and what you can afford
- Make sure you have a 12-month verifiable housing history
- Make sure you have a seasoned asset account with at least 2 months PITI
- Do your interest rate homework
- Lock your interest rate
Need some loan advice..call Angelica
310 665 8688
want an agent to help
call me..818 422 2040
.”
The first thing any potential homeowner should do is obtain a free credit report, either from Annualcreditreport.com or via a free trial website.
Once you’ve got your credit report at your fingertips, analyze it and determine what your monthly expenditures are. You will see a monthly payment next to each liability on the credit report. Add up all those payments and jot it down somewhere. These are your total monthly liabilities and will be important when determining how much you can afford.
Also scan the credit report for derogatory accounts and clean them up as best you can. If you’ve got delinquent accounts, resolve them. If you see collections, call the companies the disputes are with and do your best to make a deal. If everything looks good, you can move on. If not, you may want to repair your credit to a mid-score above 680 or higher before beginning your property search.
*One important note: Do NOT open any new credit accounts or make any large purchases using your credit cards within a few months before applying for a mortgage. This includes buying that plasma screen on a Best Buy card for your new crib. It can drive your credit score down needlessly which will result in a much higher interest-rate.
Now that you’ve got your credit in order, it’s time to figure out how much you can afford. Most banks and lenders allow borrowers to have a debt-to-income ratio up to 45%. Read more about debt-to-income ratios.
By taking your total liabilities and adding it to a monthly housing payment, and dividing that number by your monthly gross income you’ll come up with your DTI.
Let’s look at an example:
$10,000 monthly gross income
$1,500 total monthly liabilities
We know from the above example that your total monthly payments can’t exceed $4,500, or 45% DTI based on your $10,000 gross monthly income.
So if you already have $1,500 in total monthly liabilities, you can add a housing payment of $3,000 a month. This doesn’t leave much room in this market.
Let’s look at the same example with a housing payment, including taxes and insurance based on California rates:
$550,000 purchase price
$440,000 loan amount
6.25% interest rate
$2291.66 monthly interest-only payment
$572.92 monthly taxes
$128.33 monthly insurance
$2,992.91 total monthly housing cost
In the above scenario, a potential homeowner making $10,000 gross income a month can barely afford a $440,000 loan paying the interest-only payment. What does this tell us?
It tells us that there are a ton of homeowners out there living paycheck to paycheck and overstating income to qualify for homes they simply can’t afford. At least not in the eyes of banks and lenders that require borrowers to keep their DTI below 45%.
So now you’ve got an idea of what you’ll be able to afford. There are a number of mortgage calculators out there that will give you a better idea of what you can qualify for.
Now that you’ve got your credit profile in check and you know what you can afford, you’ll need to make sure you’ve got a verifiable housing history and seasoned assets.
Most lenders ask that you verify your last 12 months housing history. You can do this with cancelled checks or a VOR (Verification of Rent) from your landlord. This is important to determine the payment shock effect on the borrower.
Liquid assets are always helpful when applying for a loan, and are almost always a necessity for a first-time homebuyer. Make sure you have an account with at least two months PITI (Principal, interest, taxes and insurance) available. Also make the money in said account has been there for at least two consecutive months to ensure that it is seasoned. Banks and mortgage lenders don’t give much weight to unseasoned assets, as any friend, relative, or even a broker or loan officer can easily dump assets into your account before you apply for a mortgage to boost your net worth.
Now that you’re prepared, it’s time to be vigilant and proactive. Avoid predatory lenders and do your interest rate homework. Check out a rate sheet from the bank or lender that you’re being quoted from. Ask what the rate adjustments are. Ask if the loan carries a prepayment penalty and for how long? Get all the facts before you sign anything. And once you like it, lock it!
With all this preparation behind you, the loan flow will be a comfortable process with few surprises. It might not be perfect, but if you follow these rules you will definitely save money and reduce stress!
Let’s review the tips for first time home buyers in a condensed format:
- Order a free credit report
- Review your credit and clear up any derogatory accounts
- Do NOT open any new credit accounts or make any large purchases
- Calculate your total monthly liabilities
- Figure out your DTI and what you can afford
- Make sure you have a 12-month verifiable housing history
- Make sure you have a seasoned asset account with at least 2 months PITI
- Do your interest rate homework
- Lock your interest rate
Need some loan advice..call Angelica
310 665 8688
want an agent to help
call me..818 422 2040
Sunday, May 24, 2009
I didn't write this but it's relevance is paramount...
http://www.latimes.com/classified/realestate/news/la-fi-cover3-2009may03,0,7623052.story
House hunting? It's not a buyer's market everywhere
Potential buyers visit a home in Eagle Rock. In desirable areas, bidding wars are common. “The biggest problem,” says real estate agent Phyllis Harb, “is that people are overreacting to housing statistics, thinking they can come in and make an offer 20% below price.”
The median price in Southern California may have plummeted, but in more desirable neighborhoods, home buyers are still engaging in bidding wars.
By Chip Jacobs 6:15 PM PDT, May 2, 2009
The confident smile Sam Rivero wore as he hunted for his first house had a lot to do with the buzz thumping in his ears. Ever since home values began sinking, pundits have touted the juicy opportunities for aspiring buyers priced out of the market before, and the young business-development executive heard that cue like a sonic boom.Out he ventured into Mount Washington, Glassell Park, Eagle Rock, Montecito Heights and other desirable middle-class communities northeast of downtown Los Angeles, searching for a bargain in the $400,000 range. Candidates came and went, and Rivero, who is getting married, was upbeat. Considering the pulverized housing values, with the median price of a Southland home today -- $250,000 -- at half of its 2007 level, the properties should come gift-wrapped, right?
As the Glendale resident and his fiancee, a makeup artist for the television show "Entourage," discovered, the supposedly wondrous buyers' market seems more consumer myth than easy pickings.They bid $50,000 over asking price for a "great" four-bedroom contemporary in Valley Village, only to lose out to one of the 16 other offers tendered, Rivero, 33, said. A North Hollywood house he had been eager to see attracted so many people walking around with sales fliers that he couldn't find parking and drove off from the "vultures" who got there first."Every open house I've been to has been a zoo," said Rivero, who has examined 35 properties during the last three months. "If you follow what the [general] media say, you'd think sellers are desperate to sell a house, but when you get there it's totally the opposite."So what's going on?Real estate brokers and investors say would-be buyers misunderstand how the drop in housing prices has affected desirable neighborhoods. Just because an abandoned house in a troubled part of San Bernardino County might be going for $200,000, it doesn't mean you can get a nice place in Sherman Oaks for that amount -- or even twice that amount.House hunters are trying to pounce on deals from sellers they expected to be frantic -- if not curled in the fetal position. What they're finding instead are bidding wars as low interest rates and pent-up demand in traditionally stable or chic areas have kept prices up -- not as high as the market's peak, but not nearly as low as they had hoped."The biggest problem," said agent Phyllis Harb, "is that people are overreacting to housing statistics, thinking they can come in and make an offer 20% below price."As sales figures and home buyers' anecdotes are underscoring, when the residential real estate bubble burst, it set off several distinct sprays that created false hopes and confusion.Though nearly 20,000 homes in Southern California sold in March, a 52% jump from a year earlier, a sizable number of those transactions occurred in Riverside and San Bernardino counties, where foreclosures exploded. In the region overall, foreclosure sales accounted for 55% of March's deals.Bank-owned or not, the cheaper properties are dominating the sellers' block in the notoriously expensive L.A. County real estate market. In March, 2,871 homes under $300,000 were sold compared with only 734 a year earlier, according to real estate information firm MDA DataQuick.At the higher end, just 202 homes priced above $1.2 million changed hands last month, compared with 354 in March 2008.Houses priced from $400,000 to $800,000 represented less than a quarter of the market in March, down from about 45%, meaning fewer offerings for would-be buyers in that mid-market or pickier sellers, according to DataQuick.Mark down Nicky and Bunny DeMarinis as frustrated. They offered about $1 million for a 3,300-square-foot traditional in the Los Feliz area. Though it boasted a magnificent view, the house was an ode to passe, with cheesy frescoes, gold trimming and 1970s-era kitchen appliances, they said. For all the updating it required, the owner came down only a fraction from his $1.7-million asking price and passed on the DeMarinises.The couple, who own Nicky D's Wood-Fired Pizza in Silver Lake, have seen about 50 houses so far. They don't know where to vent their anger: lenders demanding higher down payments and less-favorable terms, talking heads distorting the market with oversimplifications or listing agents itching for bidding wars."You get out there and think you can grab something at a fantastic price, but that's not the case," Bunny DeMarinis said. "Each time we look at a house and see these inflated prices and our offer is rejected, we feel rejected too. We had an unrealistic portrait of what was really happening. It's disillusioning."It's becoming a populist theme among potential local buyers and a contentious topic on websites devoted to the post-bubble market.Real estate investor Burt Slusher said home shoppers should disregard the broad trends and focus instead on nuances and inventory in finely drawn areas.Take the 40% jump in L.A. County home sales in March compared with a year earlier. In studying the data, Slusher said, he found that a large batch of those deals transpired in Palmdale, Compton, Inglewood and other communities that suffered as a result of "treacherous subprime mortgages."People interested in properties in coveted niche markets such as Pasadena, Culver City and Santa Monica have read or heard too much about frenzied activity in the bottom of the market, he said, without comprehending that it held little relevance for them.Slusher's advice is to muster patience, because he believes there's still an over-inventory of mid- and upper-priced properties that will drive overall prices down into 2011."Buyers hear about foreclosures and bank sales and a bad economy and think they can offer a beer price for a wine home," Slusher said. "But the market is not a homogenous place, where everything is the same."In classic economics, buyers should have a decided advantage in neighborhoods in which supply dwarfs demand. Where there's typically a six-month inventory of houses for sale in coveted Beverly Hills, Pacific Palisades and West Hollywood, for instance, there's a year to two years' worth today, agent Christopher Hain said.Hain has a theory about why all that supply hasn't translated into blocks full of delirious new homeowners. He calls it the "sucker syndrome," in which buyers are nervous about overbidding when nobody truly knows whether Southland home values have reached their bottom.Said Slusher, "Nobody wants to be the sucker who paid too much, so they combat that fear by offering unrealistically low amounts. But if you're trying to time the bottom, you're going to end up with junk. It's always the best houses and cheapest houses that sell first."More should be known about the market for more-expensive properties when "jumbo" loans -- ones exceeding $417,000 -- become available this summer, according to DataQuick. In a sign of how locked-up conditions are, jumbo loans represented 40% of all Southern California purchases in 2007. In March they accounted for 10% of the activity.On a recent Sunday, an open house for a vintage 3,159-square-foot Craftsman near Occidental College in Eagle Rock drew 105 people in the first hour despite sweltering temperatures, a Lakers playoff game and a list price of $699,000. Never mind the hilly curb appeal or the aroma of freshly baked cookies that listing agent Tracy King baked. There was plenty of head-shaking among would-be buyers about the absence of bargains.Jose Mares, 38, a Huntington Park police officer, said he'd been searching for eight years for a house. To him, the dark-shingled house needed too much renovation to justify the tab. He thinks he knows why it's priced where it is: There's not a glut of quality competition close by, and the owner and listing agent know their edge."Some want to charge $550,000 for a starter house," Mares said.King, the agent, said she'd heard earfuls about that, and noted that this was not your father's housing crash. Today, everyone is savvier, able to analyze properties with a few keystrokes or see a street view using Google.Instant information, though, also means fiercer competition and fewer hidden gems. As an example, King cited a 1,625-square-foot, midcentury-style fixer-upper in La Crescenta priced at $299,000. Forty people were standing on the front lawn within an hour of its listing, she said. Ultimately, there were 80 bids, 15 of them exceeding $400,000. The winning bid was $480,000."What I'm seeing is that perceived bargains are going in multiple offers for more than the asking, and buyers are very disappointed," King said. "Real estate is hyperlocal, so a [regional] $250,000 median price is meaningless here."Predicting where values are headed is hardly a science either, no matter what the cable-TV experts or the galaxy of websites with every imaginable statistic say. For one thing, people selling costlier homes tend to have deep pockets buffering them from needing a fire sale to stay afloat. If they don't like the bids, they can pull their property off the market.Banks are an even bigger X factor, and not just because of their stricter lending requirements and bailout havoc. USC real estate professor Tracey Seslen said she'd heard that lenders were carefully timing the release of homes they'd repossessed to avoid further flooding the market and driving prices down more. Those institutions also know that a fresh avalanche of foreclosures from people with resetting loans may be looming."So the banks are playing this game too," Seslen said. "They're keeping prices artificially high."Rivero, the soon-to-be-married business-development exec, wishes that weren't so, and hopes his tenacity pays off."We've learned not to get our hopes up because it sets us up for heartbreak," he said. "What's driving me is that I actually want a house."
MY 2Cents
this is not the bottom line...the fact is "you can't beat the house...I mean bank"
House hunting? It's not a buyer's market everywhere
Potential buyers visit a home in Eagle Rock. In desirable areas, bidding wars are common. “The biggest problem,” says real estate agent Phyllis Harb, “is that people are overreacting to housing statistics, thinking they can come in and make an offer 20% below price.”
The median price in Southern California may have plummeted, but in more desirable neighborhoods, home buyers are still engaging in bidding wars.
By Chip Jacobs 6:15 PM PDT, May 2, 2009
The confident smile Sam Rivero wore as he hunted for his first house had a lot to do with the buzz thumping in his ears. Ever since home values began sinking, pundits have touted the juicy opportunities for aspiring buyers priced out of the market before, and the young business-development executive heard that cue like a sonic boom.Out he ventured into Mount Washington, Glassell Park, Eagle Rock, Montecito Heights and other desirable middle-class communities northeast of downtown Los Angeles, searching for a bargain in the $400,000 range. Candidates came and went, and Rivero, who is getting married, was upbeat. Considering the pulverized housing values, with the median price of a Southland home today -- $250,000 -- at half of its 2007 level, the properties should come gift-wrapped, right?
As the Glendale resident and his fiancee, a makeup artist for the television show "Entourage," discovered, the supposedly wondrous buyers' market seems more consumer myth than easy pickings.They bid $50,000 over asking price for a "great" four-bedroom contemporary in Valley Village, only to lose out to one of the 16 other offers tendered, Rivero, 33, said. A North Hollywood house he had been eager to see attracted so many people walking around with sales fliers that he couldn't find parking and drove off from the "vultures" who got there first."Every open house I've been to has been a zoo," said Rivero, who has examined 35 properties during the last three months. "If you follow what the [general] media say, you'd think sellers are desperate to sell a house, but when you get there it's totally the opposite."So what's going on?Real estate brokers and investors say would-be buyers misunderstand how the drop in housing prices has affected desirable neighborhoods. Just because an abandoned house in a troubled part of San Bernardino County might be going for $200,000, it doesn't mean you can get a nice place in Sherman Oaks for that amount -- or even twice that amount.House hunters are trying to pounce on deals from sellers they expected to be frantic -- if not curled in the fetal position. What they're finding instead are bidding wars as low interest rates and pent-up demand in traditionally stable or chic areas have kept prices up -- not as high as the market's peak, but not nearly as low as they had hoped."The biggest problem," said agent Phyllis Harb, "is that people are overreacting to housing statistics, thinking they can come in and make an offer 20% below price."As sales figures and home buyers' anecdotes are underscoring, when the residential real estate bubble burst, it set off several distinct sprays that created false hopes and confusion.Though nearly 20,000 homes in Southern California sold in March, a 52% jump from a year earlier, a sizable number of those transactions occurred in Riverside and San Bernardino counties, where foreclosures exploded. In the region overall, foreclosure sales accounted for 55% of March's deals.Bank-owned or not, the cheaper properties are dominating the sellers' block in the notoriously expensive L.A. County real estate market. In March, 2,871 homes under $300,000 were sold compared with only 734 a year earlier, according to real estate information firm MDA DataQuick.At the higher end, just 202 homes priced above $1.2 million changed hands last month, compared with 354 in March 2008.Houses priced from $400,000 to $800,000 represented less than a quarter of the market in March, down from about 45%, meaning fewer offerings for would-be buyers in that mid-market or pickier sellers, according to DataQuick.Mark down Nicky and Bunny DeMarinis as frustrated. They offered about $1 million for a 3,300-square-foot traditional in the Los Feliz area. Though it boasted a magnificent view, the house was an ode to passe, with cheesy frescoes, gold trimming and 1970s-era kitchen appliances, they said. For all the updating it required, the owner came down only a fraction from his $1.7-million asking price and passed on the DeMarinises.The couple, who own Nicky D's Wood-Fired Pizza in Silver Lake, have seen about 50 houses so far. They don't know where to vent their anger: lenders demanding higher down payments and less-favorable terms, talking heads distorting the market with oversimplifications or listing agents itching for bidding wars."You get out there and think you can grab something at a fantastic price, but that's not the case," Bunny DeMarinis said. "Each time we look at a house and see these inflated prices and our offer is rejected, we feel rejected too. We had an unrealistic portrait of what was really happening. It's disillusioning."It's becoming a populist theme among potential local buyers and a contentious topic on websites devoted to the post-bubble market.Real estate investor Burt Slusher said home shoppers should disregard the broad trends and focus instead on nuances and inventory in finely drawn areas.Take the 40% jump in L.A. County home sales in March compared with a year earlier. In studying the data, Slusher said, he found that a large batch of those deals transpired in Palmdale, Compton, Inglewood and other communities that suffered as a result of "treacherous subprime mortgages."People interested in properties in coveted niche markets such as Pasadena, Culver City and Santa Monica have read or heard too much about frenzied activity in the bottom of the market, he said, without comprehending that it held little relevance for them.Slusher's advice is to muster patience, because he believes there's still an over-inventory of mid- and upper-priced properties that will drive overall prices down into 2011."Buyers hear about foreclosures and bank sales and a bad economy and think they can offer a beer price for a wine home," Slusher said. "But the market is not a homogenous place, where everything is the same."In classic economics, buyers should have a decided advantage in neighborhoods in which supply dwarfs demand. Where there's typically a six-month inventory of houses for sale in coveted Beverly Hills, Pacific Palisades and West Hollywood, for instance, there's a year to two years' worth today, agent Christopher Hain said.Hain has a theory about why all that supply hasn't translated into blocks full of delirious new homeowners. He calls it the "sucker syndrome," in which buyers are nervous about overbidding when nobody truly knows whether Southland home values have reached their bottom.Said Slusher, "Nobody wants to be the sucker who paid too much, so they combat that fear by offering unrealistically low amounts. But if you're trying to time the bottom, you're going to end up with junk. It's always the best houses and cheapest houses that sell first."More should be known about the market for more-expensive properties when "jumbo" loans -- ones exceeding $417,000 -- become available this summer, according to DataQuick. In a sign of how locked-up conditions are, jumbo loans represented 40% of all Southern California purchases in 2007. In March they accounted for 10% of the activity.On a recent Sunday, an open house for a vintage 3,159-square-foot Craftsman near Occidental College in Eagle Rock drew 105 people in the first hour despite sweltering temperatures, a Lakers playoff game and a list price of $699,000. Never mind the hilly curb appeal or the aroma of freshly baked cookies that listing agent Tracy King baked. There was plenty of head-shaking among would-be buyers about the absence of bargains.Jose Mares, 38, a Huntington Park police officer, said he'd been searching for eight years for a house. To him, the dark-shingled house needed too much renovation to justify the tab. He thinks he knows why it's priced where it is: There's not a glut of quality competition close by, and the owner and listing agent know their edge."Some want to charge $550,000 for a starter house," Mares said.King, the agent, said she'd heard earfuls about that, and noted that this was not your father's housing crash. Today, everyone is savvier, able to analyze properties with a few keystrokes or see a street view using Google.Instant information, though, also means fiercer competition and fewer hidden gems. As an example, King cited a 1,625-square-foot, midcentury-style fixer-upper in La Crescenta priced at $299,000. Forty people were standing on the front lawn within an hour of its listing, she said. Ultimately, there were 80 bids, 15 of them exceeding $400,000. The winning bid was $480,000."What I'm seeing is that perceived bargains are going in multiple offers for more than the asking, and buyers are very disappointed," King said. "Real estate is hyperlocal, so a [regional] $250,000 median price is meaningless here."Predicting where values are headed is hardly a science either, no matter what the cable-TV experts or the galaxy of websites with every imaginable statistic say. For one thing, people selling costlier homes tend to have deep pockets buffering them from needing a fire sale to stay afloat. If they don't like the bids, they can pull their property off the market.Banks are an even bigger X factor, and not just because of their stricter lending requirements and bailout havoc. USC real estate professor Tracey Seslen said she'd heard that lenders were carefully timing the release of homes they'd repossessed to avoid further flooding the market and driving prices down more. Those institutions also know that a fresh avalanche of foreclosures from people with resetting loans may be looming."So the banks are playing this game too," Seslen said. "They're keeping prices artificially high."Rivero, the soon-to-be-married business-development exec, wishes that weren't so, and hopes his tenacity pays off."We've learned not to get our hopes up because it sets us up for heartbreak," he said. "What's driving me is that I actually want a house."
MY 2Cents
this is not the bottom line...the fact is "you can't beat the house...I mean bank"
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