Labels: Real Estate Bottoming?

Several months ago the SoCal MLS required agents to specify whether a listing was a short sale or not. It took a while for all listings to be updated, but now this is working well.

There are currently 1140 SFR homes for sale in Long Beach, 302 are designated as short sales, 838 are designated as NOT short sales. 302 + 838 = 1140. So all listings are are present and accounted for.

But how important are short sales in the the Long Beach marketplace? 302 of the 1140 total active listings is 26% of the market. But is it really that high, when we talk about closed sales? I don't think so.

Two factors will make short sales appear more important that they are.

1) Short sales sit on the market longer. If a good salable listing comes on the market and sells in 10 days but a short sale sits on the market for 100 days awaiting lender approval, it might appear that there are 10 times as many short sales compared to conventional listings, based on exposure. While it may not be 10:1, short sales certainly take more time to sell, if they sell at all. Which leads to the next point.

2) If they don't sell, then the listing is just noise, not actual market activity. Anecdotally, I hear that only about one in five short sales goes through.

So an estimate that short sales are less than 10% of the SFR market here in Long Beach, is just that, an estimate, but it may actually be less.

Once the accuracy of the Short Sale data starts working its way through to Closed Sales, we will really see how important they are.

My point is to focus on real activity. There is such hype about short sale this, short sale that. When in fact they just distract buyers and agents from acheiving their goals.

They appear important because some seem to be great deals and many are clog up the MLS, when in fact short sales may be just a mirage.

Labels: inventory, long beach, Short sales

I am not a fan of short sales. (http://www.lbre.com/pages/news/2008/why_buyers_should_avoid_short_sales.html) . But I am a big fan of analogies. And I finally figured out the most appropriate analogy.
A short sale is like dating a married guy, when what you are looking for is a commitment.
Certainly a married guy may leave his wife. If COULD and DOES happen. But odds are against it, and what about all of the other great guys (other homes) you will miss out on because you are waiting for an unlikely dream.
I am not saying that you shouldn't write an offer on a short sale. But why patiently wait around committed to a seller that can't commit to you. Your smartest move is to stay a free agent and keep looking at all available properties until the time that the real decision maker (the lender) approves the short sale at the price that you wanted.

Labels: short pays, Short sales

Having just written my last post, I am reminded of how today's correction compares to the Real Estate downturn of the 90's. And more importantly why the worst may be over.

When buyers just walk away from the table prices fall. Buyer disappear for various reasons. Maybe buyers leave the state to look for work, maybe they loose their job and decide not to buy a home. Whatever the reason may be, when buyers leave the marketplace prices drop. This happened for 4 years in the early 90's.

What took 4 years in the early 90's appears to have occured in only 4 months in late 2007. The last 4 months of 07 were very quiet, there were very few sales and very few buyers.

This is not the case right now. There are actually a lot of buyers looking, not necessarily a lot buyers buying, but a lot looking. When the price is right, they pounce. Multiple offers are not rare for well priced homes or bank repo's.

So maybe it is possible that the correction that took 4 years in the early 90's has been compressed into 4 months, and that the worst is over.

I wouldn't look for prices to shoot up, but I hope that price stability is on the horizon.

During the early 90's buyers were few and far between. Today there are lots of buyers out there making lots of "Low Ball" offers. As a listing agent this has actually made determining price a little easier.

With a greater number of agents and buyers showing my listings, there are people to interview for opinions. The low ball offers also provide valuable feedback.

This has made my job easier as a listing agent , because in provides my sellers with a framework for determining current values. A framework that was not available in the early 90's, when we had much less activity.

Labels: real estate activity strong

Prices may have bottomed because most very well priced listings these days are getting multiple offers. This could just be a temporary blip, only time will tell. I spoke to an agent today that wrote offers for 4 separate buyers last week, multiple offers piled up on 3 of the 4 properties.

I also am getting multiple offers on several of my listings at this point, confirming the activity.

In defense of the bears..... These offers have not been full price, so prices aren't on the rise, that is why I titled this blog, "Are prices bottoming?"

Multiple offers are an indication of un met demand. Buyers that get out bid are an indication of future demand which will support prices.

What do you think?

Labels: Real Estate Bottoming?

Homes are usually price based on Comparable Property Sales. This method, while the industry standard, can be subject to the "Greater Fool Theory".

It is wise to use additional methods of valuation. Two other methods would be comparing the payment to rental income, taking into consideration tax breaks. And replacement cost.

As an example: I will use a property that is an excellent value. 6029 Loynes in Long Beach, CA. See Our Listings to the left for further details.

Here is why this property is an excellent value.

1) The property would rent for around $2,800 - $3,000 per month. The list price is $569,000. With 10% down the loan payment would be around $3,500 - $3,800 per month, but with the tax breaks the effective payment would be around $2,500-$2,800. In otherword, the property costs less to buy (with tax breaks) than to rent.

2) Replacement cost - The property is 2,159sf. Currently construction costs run around $200 per square foot. The structure alone would cost $430,000 to build and that means you get a golf course adjacent, Belmont Shore location for only $150,000 for the dirt. You simply could not build this property including the land for as cheap as it is selling.

This is just one property, but it makes the point that Real Estate values have VERY QUICKLY returned to a fair market value.

This property would have been around $725,000 at the peak. Breaking out my handy dandy calculator. That gives me a 24% drop (if the property sells for $550,000).

That is just about the drop we had from 1990-1995.

What do you think?