There were 5 SFR ( single family residence) sales in October in the  West Hollywood area, with the YTD average at $605/sq. ft.- down 21% from the 2007 market peak of $760/sq. ft.  According to the MLS there are 72 active SFR listings, an average of 4.8 sales /month YTD which gives us an inventory of 15 months supply. REO, or bank-owned property in West Hollywood not listed with a broker is at 74 units, or an additional 15 months supply. As I have noted in previous market reports, a pipeline of 1-2 months supply of unlisted REO property is considered normal.

In the West Hollywood Condo Market, there were 27 sales in October, with the YTD average at $445/sq. ft.- down 18% from the 2007 market peak of $544/sq.ft. There are 299 active condo listings, an average of 24 sales/month YTD which  gives us an inventory of 12 months. REO numbers for Weho condos are at 37 units, or about 1.5 months supply.

The numbers pretty much speak for themselves, as inventory numbers threaten to expand considerably in the SFR market, the condo market inventory has come down since the beginning of the selling season. In order to get back to a more “normal “supply of 6-7 months, especially with Option ARM/Interest-Only resets coming for the next 2 years, it seems inevitable that prices, especially in the single family market here in West Hollywood are going to have to come down.

Title is the legal documentation that bestows ownership of real property. This is to be indicated in Part II of the 1003 Uniform Residential Loan Application as “manner in which title will be held.”

The decision of how the title will be held should not be put off until the last minute since it has a great impact on future tax planning, the financial future of the borrower(s) and their respective heirs, and the choice of the lender.

It is most important for the mortgage consultant to work hand-in-hand with the borrower’s financial planner or tax consultant to assist their mutual client in order to make decisions that work best for their particular scenario.

For example, most married couples would consider holding title with Joint Tenancy. But if one spouse has a good credit history while the other has damaged credit that may prevent funding of the loan, it would be advantageous to place title in the name of the spouse with the good credit rating.

Common ways to hold title are broken down into options that fall under the categories of sole ownership or co-ownership. Many states permit the holding of title in a living trust, but some lenders do not accept those terms. There are ways around this, but this is where the financial planner and the mortgage planner can make a tremendous difference by working together.

Courtesy Of

Arcstone Financial

As we all know, there is currently a 90 day moratorium on foreclosures here in California. Also worth noting, the Attorney General’s office has demanded all  foreclosure rescue and loan modification consultant firms register with the AG by July 1st and post a $100,000 bond. Keep in mind, attorneys are exempt from this action. So why is it that an attorney who did personal injury cases 3 months ago is suddenly more qualified for the task than a legitimate loss mitigation company? Is this the kind of person you want working on your file? What exactly does this measure accomplish? At this time, it is estimated that there will be roughly $500 Billion in mortgage resets in the Alt A, Prime and Option ARM arenas between the last quarter of 2009 through 2012. About 58% of those mortgages are here in California. You can read more about that here. There are a growing number of short sales, and yes, it is spreading to the Westside of Los Angeles. The question many people have is : can we qualify for a loan modification.? We have all heard the TV and radio spots for these companies- What most of these loan mod “consultants”, and even the attorneys will not tell you is that many people will not qualify. For instance, even if the lender is satisfied the homeowner has documented hardship and verified income, whomever is holding the note will ultimately take the action which is in their best interest, which in many cases is to let the property go into foreclosure. Furthermore, more than 50% of loan mods currently are re-defaulting, which just adds more to what is already a hot mess. The truth is, unless the homeowners qualify for a government backed loan mod program, in most cases the best case scenario is that the modification will be good for about 5 years. You can see for yourself who can qualify for Obama’s loan modification program here . Currently, most non-realtor opinions have home values on the westside declining for at least another year. This means even more homeowners will be eventually be underwater, along with more loan mod re-defaults, which inevitably increases housing inventory, which puts downward pressure on prices. In the present climate, with the aforementioned massive defaults looming, for a homeowner who owes more than what the property is worth, it makes more sense in this case to do a short sale and cut your losses. Why? because if you don’t you are potentially chasing bad money with more bad money, or in other words, investing in a non-performing asset, like buying stock in a declining market with no real basis for upside potential. I realize there are no easy solutions here to avoiding foreclosure, but for the homeowner who owes more than what the property is worth, a short sale is a much better alternative than waiting for a bailout, which in many cases is like Waiting For Godot.

Interesting piece from the Business Standard on how real estate stocks appreciated much more then real estate itself during the height of the market from Jan 2007 to Jan 2008 . In light of the past/current debacle we find ourselves in, it probably couldn’t hurt to pay more attention to this particular group of stocks to gain some kind of perspective and not get caught up in the frenzy often associated with market tops.  I’m surprised that real estate futures traded at the Chicago Mercantile Exchange are not more popular these days as these instruments can hedge portfolio risk, lock in home equity and otherwise offer a speculator way to take advantage of price trends in today’s real estate market.  For more info on real estate futures and options, please visit the CME page for real estate products here.

As if the last year was not tumultous enough. It’s Summer of 2009, with at least a few pundits who cover Wall Street  hinting that the worst of the recession is over, stocks are off recent lows, so we have reason for optimism, right? After all, we have weathered most of the subprime debacle, at least for the time being. But what about the prime mortgages that are currently defaulting  at a faster rate than the subprime loans did previously? Remember the 5-1 ARMs that were very popular  just a few years ago? well, there is going to be another wave of resets/recasts which could last until 2012. You can read more here 

Is this Option ARM-Ageddon?  more defaults, means more foreclosures, which increases an already bloated housing inventory we currently have on the Westside of Los Angeles. How much more can this market bear?

I’ve had loads of people ask me about Loan Modification lately, and like many other responsible licensees have done, I have contacted the CA Dept of Real Estate in order to determine what choices are available for homeowners who are having trouble making their mortgage payments, due to a rate reset, loss of income, etc. There are of course, mortgage brokers who went into the loan mod business, which some people are proclaiming “The New Subprime”, and then there are “attorney-based” Loan Mod shops as well. These days, In order for a broker to accept fees, they need to file an advance fee agreement with the DRE, and with that comes an audit. The headache I see coming however, is not with the brokers, but with the shops who claim to work with an attorney in order to justify taking a fee up-front, many times without even sending the client’s docs to the underwriters. This brings up many questions, such as: can an attorney hire another company, to collect fees for the law firm?, if so, should they be in the law offices?  do these “consultants” need to be licensed? It seems to me that many of these shops are asking for fees ranging from $3000-$5,000 without even seeing the client’s financials first, which can result in client “slammed”  into a loan mod for the sake of a quick commission, when the client who has good credit, steady employment, equity and so on might have qaulified for another option, such as  one of the new FHA programs, or a re-fi. There are no clear answers according to the DRE, who suggested I call the CA State Bar, who then told me to call the DRE. My feeling is that many of these attorney-based shops are going to be under as much scrutiny, if not more than the brokers doing loan mods. The new year should be a very interesting one indeed.

I would like to hear from those of you who have experience holding auctions, especially those of you in California. I am not talking about Foreclosure auctions, but rather the type where the homeowner still has equity in the house. With the current market climate of high inventory, auctions are beginning to look like a viable alternative to listing a property and waiting for it to sell.  What kind of fees can a Buyer and Seller expect in an auction situation? what are the requirements for both to participate? What about realtor referrals?  I am looking for someone to work with in The Los Angeles area, so if you or anyone you know may be interested,  I would like to hear from you.

If you have been following the Real Estate Market to any degree in the past 7 months, the sheer amount of information with headlines from “Mortgage Meltdown” to “168 Billion Economic Stimulus package” is positively mind-numbing. Moreover, when was the last time you heard a Realtor tell you it wasn’t a “good time to buy?” Specifically in California, where housing tends to cost a tad more than other areas, will raising conforming limits on loans help the market here ? maybe. The question I have is this: Since inventory here in Los Angeles County has basically doubled from last year’s levels, how long will it take to get levels down to more “normal” levels? At the moment, we have 12-18 months worth of unsold homes depending on your neighborhood. The reason I am asking is that I constantly hear radio commercials pronouncing “it’s a great time to buy” versus bubble-bloggers declaring the end of civilization as we know it. So am I really doing my job by telling my friends now is a good time to buy? of course. But do I also preface said statement by warning them prices could go lower? Definitely. It is true rates are the lowest in about 4 years, but with this proposed “Economic Stimulus Package” who really knows what will happen? Will the foreclosure situation get worse and add even more unsold property to the already ridiculous levels of inventory? or will it stabilize? Here is another question: As the stock market goes down after going up for the last six years, will that shift investment dollars into Real Estate?