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12
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2
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2009
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 the real estate climate was reported likethe weather, it might sound somethinglike the ollowing:“Expect the stormront in the South Bayreal estate market to continue with cold tem-peratures, scattered showers, and occasionalgale orce winds in the middle class areas,gradually giving way to partial clearing and awarming trend or rst-time buyers with theworst behind us or the high-end market.”One o the barometers o the real estate climate is the number o oreclosures being led in a city. While this really doesn’t paint thewhole picture since need to take into consideration the number o short sales (where the sellers owe more than the home is worth andthe bank agrees to take the loss and allow the homeowner to walkaway) and other distressed sales, it’s a pretty good indicator. As theood o distressed properties subsides, a more normal market willemerge with real live people as sellers rather than institutional salesdictating market values.Let’s look at the number o properties in oreclosure where thenotice o deault has been led and the clock is ticking, along withproperties recently oreclosed on and sold at a trustee sale. Remem-ber, i a property is in oreclosure, it doesn’t mean it will go to sale.Homeowners may redeem their home by paying the amount in ar-rears and thus cancel the oreclosure. As o this writing, the num-ber o homes either in the process o or recently oreclosed upon inthe South Bay looks like this: Manhattan Beach – 69, El Segundo– 27, Hermosa Beach – 56, South Redondo Beach – 84, PalosVerdes, Rolling Hills – 53, Rancho Palos Verdes – 105, San Pedro– 384, orrance – 624, Hawthorne – 513, Lawndale – 222, NorthRedondo – 112, Lomita – 81, Harbor City – 161 and Gardena– 605. As you can see, sellers are still weathering the storm.On the national real estate scene, the Mortgage Bankers Associa-tion reports that during the rst quarter o this year, 12 percent o all homeowners with a mortgage are behind in their payments. Andhal o those, or six percent, are borrowers with good credit andxed rate mortgages! Tis tells us that job losses are wreaking havocwith the well qualied borrowers as well. Tis is in stark contrast toalmost 46 percent o all subprime mortgages currently in deault.For buyers, however, and especially rst-time buyers, you couldnd yoursel in the eye o the storm with blue skies and warmweather. Te aordability index in the Western States has in-creased 40 percent rom a year ago and is at a 30-year high. Tis isdue to a combination o alling prices and historically low mortgagerates. I that doesn’t lit the gloom, there is a ederal tax credit o up
A REAL ESTATE PRO’S PERSPECTIVE
to $8,000 or rst-time buyers that earn $75,000 or less as singlelers, and $150,000 or less or those married ling jointly. (With joint income over $150K, there is a gradual phase-out o the creditgoing to zero at $170K combined). Tis is a tax
credit
that reducesthe amount o ederal income tax you pay dollar-or-dollar by upto $8,000, as calculated by taking 10 percent o the purchase price,not to exceed $8K. (For more inormation go to http://www.eder-alhousingtaxcredit.com/2009/home.html).Another silver lining in the cloudy orecast is a $10,000 state taxcredit or new construction purchases by rst-time
or existing 
ho-meowners between 3/1/09 and 03/01/10, with
no income restric-tions.
Break out the sunglasses, sunscreen and swimsuits! Tere is$100,000,000 allocated by the state or this on a rst-come, rst-serve basis. (For more inormation, go to http://www.tb.ca.gov/in-dividuals/New_Home_Credit.shtml).Many o us noticed that mortgage rates rose dramatically in therst week or so o June. Tis potential cold ront could develop intoanother major storm, causing the economy to stall and double dip.Te Fed knows the oundation o a sustained economic recovery isrooted in shoring up the real estate market. Te home value reeallneeds to cease, and jobs need to be created beore consumer con-dence and spending can return.Te mortgage rate spike occurred or several reasons. First, towardthe end o May, Bill Gross, the “Warren Buett o the bond world”who manages the PIMCO otal Return Bond Fund, came out andstated the possibility exists that the United States could lose itsAAA rating as a creditor by the rating agencies. Next, we got a ewickers o positive economic news. Not good news—just econom-ic data that disappointed less! But what really caused a mortgagebond sello and drove rates up is what some are calling “the Fed’sdilemma.”As we may recall, mortgage rates initially dropped at the end o last year. Te Fed made the announcement that it was going to buymortgage-backed securities rom Fannie Mae and Freddie Mac di-rectly, and committed $600 billion toward that end. Accordingly,rates dropped rom the 5.25-5.50 percent range to the 4.50-4.75percent range virtually overnight. Because the Fed became a buy-er, it decreased supply and increased investor demand, ultimatelypushing rates lower.Now, however, the Fed is issuing record amounts o treasurybonds to nance the corresponding record amount o spending.Tat is creating a glut o supply, weakening demand rom investorsand pushing rates up. So the Fed is buying mortgage bonds, try-ing to push mortgage rates lower, with money borrowed rom sell-
The Real Estate Weather Report
Keep Umbrellas Handy and Make Hay When the Sun Shines
of 00

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