How I read the market

This market is very interesting. What I am seeing is an active market for properly priced properties that are well located with good floor plans that  show well, but that properties that have some problems, such as a strange lay-out, deferred maintenance, poorly designed remodel, or that are significantly over-priced are sitting on the market. My last 2 listings sold within 3 days of being placed on the market, and both were in the mid $400,000 to $600,000 range. The most important factor which led to their quick sales was that the sellers agreed to let me help them “stage” their property. Because of this, both properties showed like a model home.

Most of the problem in the real estate markets are occuring in this price range where first time buyers got into financial problems when they financed their purchases with 100% variable rate financing and were unable to afford the increase in the monthly payments when short term interest rates bumped up. Interest in this price range by buyers is still strong, and many properties that are well located and show well are receiving multiple offers. I have one client who has recently placed full price offers on 2 properties in the mid $400,000 range in San Pedro and still lost out to other buyers.

Homes in the $1 million and over price range have faired fairly well in this market, particularly on the Palos Verdes Peninsula. There have been some recent decreases in the list prices of homes, but most of this has been a result of overly aggressive initial pricing by the listing agents. Homes prices generally are still above year ago levels. One property was recently listed for sale in lower Lunada Bay in Palos Verdes Estates, and they received several offers in excess of the list price. This home was in a very desireable area and demonstrates that demand for well located propeties is still strong.

Interest Rates Hold Firm

Excerpts from HSH Associates newsletter for the week ending June 29, 2007:

Economic crosscurrents continue to provide a less-than-clear direction for the road ahead, and mortgage rates remain at elevated levels, according to the nation’s widest sampling of mortgage prices. The average 30-year fixed-rate mortgage (FRM) edged one basis point lower, landing at 6.80%, while 5/1 Hybrid ARMs dumped four basis points to close the week at an average 6.47%.

The housing market is dragging growth downward, but perhaps the rate of decline is slowing, if nothing else. Existing Home sales for May rang in at a 5.99 million (annualized) rate of sale, down just 0.3% for the month. However, that lumbering sales pace leaves an inventory overhang of nearly nine months of unsold homes available, which may produce downward pressure on home prices. May’s median home price of $221,600 was unchanged from April.

The Fed isn’t likely to lower interest rates anytime soon even if measures of core inflation start to fall into their comfort zone, believed to be about an annualized 2% mark for “core” measures of inflation.

Mortgage rates meandered this week, closing on a slight downward note. Next week brings an Independence Day holiday right in the middle, but there are potential market-moving reports . . .  so traders can’t easily skip out before or after the holiday. If we’re right . . . , mortgage rates could back off by a few more basis points, perhaps as much as four or five. At worst, we’d expect no change.

                                                         Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.45%	6.80%	6.63%	6.07%	6.39%
CA/Statewide	6.53%	6.84%	6.70%	6.39%	6.45%

Interest Rates Surge

The following are excerpts from HSH Associates newsletter for the week ending June 8, 2007:

Home mortgage rates continued their weeks-long rise this week; the average 30-year fixed-rate mortgage (FRM) surged by 14 basis points (0.14%) to close the nation’s leading poll of mortgage prices at 6.65% (up almost 30 basis points (.3%) in the last month). Hybrid 5/1 ARMs followed suit, rising to 6.46%, a spurt of 15 basis points. These increases were largely due to a surprise hike in foreign interest rates.

A light economic calendar, a stock market which seems to have topped out for the moment, and a late-week selloff in the Treasury market — which pushed 10-year Treasury yields to five-year highs before falling back by week’s end — all contributed to the increase in mortgage rates, particularly this week. As has been the case over the last couple of weeks, economic news has been mixed, but flashes of stronger growth have become clearly evident.  Inflation concerns are evident around the world; the European Central Bank raised rates a quarter percentage point this week, setting their key interest rate at 4%. Opportunities in other bond markets are drawing off investor dollars, adding more firmness to U.S. interest rates.

Mortgage rates took quite a hit this week, but this was due largely to the Treasury selloff caused by a surprise rate hike by New Zealand’s Reserve Bank; this spurred fears that other countries’ central banks might follow suit. Even without this scare, the general runup in rates over the past few weeks isn’t wholly unexpected given the reports of stronger economic data and a revival of economic growth from a truly anemic 0.6% in the first quarter of this year. Investors have given up on a rate cut by the Fed this year.

                                                            Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.36%	6.65%	6.51%	6.01%	6.37%
CA/Statewide	6.46%	6.72%	6.60%	6.19%	6.45%

Interest Rate Update from HSH Associates

Excerpts from HSH Associates newsletter for the week ending May 18, 2007:

Mortgage rates ticked a little higher this week, with the average 30-year fixed-rate mortgage rising by three basis points (.03%) to 6.38%. Hybrid 5/1 ARMs rose by six basis points, finishing the weekly survey at 6.20%. The subprime mortgage market fallout has raised concerns that tighter underwriting standards — and possibly tougher regulation overall — might squeeze certain borrowers, preventing some marginally-creditworthy individuals from getting loans.

It’s clear that fringe borrowers, particularly those without money for a down payment, those with poor credit, or those unwilling to document their financial lives will either need to conform to more mainstream standards or wait to buy a home until they have built the requisite credit profile. That said, tighter lending standards are not an unhealthy thing, and overall, credit still seems to be plentiful for the vast majority of borrowers who want to obtain a mortgage. It seems unlikely that standards will tighten further for ‘prime’ borrowers, but the non-traditional and subprime issues have yet to fully run their course.

As was the case last week, there’s been no single event to push mortgage rates in one direction or another. However, strong stock markets, rising interest rates around the world and currency manipulations by China are exerting some influence, and a little bit of an upward trend has emerged. This week’s 6.38% matches the highest average rate since early February, and as we think rates may add four or five basis points next week, we might be close to challenging the 2007 high (6.45%) before long.

                                                       Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.09%	6.38%	6.24%	5.94%	6.16%
CA/Statewide	6.13%	6.43%	6.29%	6.09%	6.19%

1st Quarter Real Estate Market Summary

Are you trying to figure out the direction of the real estate market? In the Palos Verdes and South Bay real estate market we are in a transition. But to what?  Here´s what’s happening:

1. Home sales activity for the Palos Verdes Peninsula and theSouth Bay actually increased compared to the prior year. On the Palos Verdes Peninsula, 117 condos, townhomes and single family residences were sold, compared to 87 for the first quarter of 2006 ( a 35% increase), however sales volume for the first quarter of 2007 decreased approx. 6% compared to the fourth quarter of 2006..  Although the length of time to sell a home has increased over the last 6 months, it is important to note that the sales inventory of homes, condos and townhomes as of 4/15/07, has actually decreased 8% from this time last year on the Palos Verdes Peninsula. There are strong indications that the market is “bottoming out”.

For the Beach Cities ….Manhattan Beach and Redondo Beach also had similar increases in sales for the 1st Quarter of 2007, compared to the comparable quarter in 2006, with 12% and 21% increases in sales volumes for the quarter, respectively.

2.  Home Prices (average price per sq. ft. ) in Palos Verdes,  sold during the 1st Quarter of 2007 showed a decrease compared to the prior year,  decreasing  2.1% over the comparable period of 2006 (to an average price per sq. ft. of $571). Prices in other cities of the South Bay showed greater decreases over the comparable period last year, with decreases of 24% (Redondo Beach) to 4% (Manhattan/Hermosa Beach). Prices per sq. ft. for smaller properties have been relatively stable, and have actually increased for medium sized homes (1,500 - 2,500 sq.ft.), but have declined for larger properties. Detailed market reports for the Palos Verdes Peninsula and each city in the South Bay can be viewed at my website http://www.maureenmegowan.com

3. Discounting?  The discounting from asking prices that homes are actually selling at has increased slightly, averaging 2.5% to 3% below list prices, with lower priced homes having less discounting. Property is taking longer to sell, with the average days on the market for properties to sell, averaging approx. 80 days, compared to 20 to 30 days during 2005.

4. Interest rates have risen slightly recently, but remain at very attractive levels. Homeowners are beginning to refinance again due to the huge number of variable rate loans out there coming to expiration. The Federal Reserve Bank has stopped their increases to short term interest rates, therefore mortgage rates have been relatively stabile. Lenders are tightening their lending requirements, making it more difficult for buyers to secure such aggressive loans as 100% financing. Flexibility on loan terms, such as interest only payments, or fixed low payments with negative amortization are still available.

5. The market does appear to be stabilizing. Basically, the market has returned to a more “normal” real estate housing market, with general equilibrium between buyers and sellers. Certainly, compared to the super-heated market of 2005, things have cooled down considerably, however this market is not a bubble bursting or a market of plunging prices which some media reports would lead you to believe.  As noted above, the market data simply does not support such reports, and most housing studies conducted by reputable sources, have reached the same conclusion.

Considering making a move?  If you are thinking of selling, remember that the low interest rates attract buyers and they are cautiously returning to the market. We have a tremendous internet presence both locally and across the country. Don´t miss this very important sales tool.  Most buyers begin there search on the internet today.  I can also help you maximize your home´s best attributes for an optimal selling price and fewer days on the market.   My website is filled with ideas to get your home ready, or it can be professionally staged.  Now may be the best time for the foreseeable future to put your house on the market while rates are low and buyers are re-entering the market. In the future, interest rates may increase, possible tax reform measures are passed, or the market continues to cool. Want To Buy A Home or Investment Property?  For buyers, this is an excellent time to be in the market. Sellers are more willing to negotiate price and interest rates have remained low. Reasonable offers are receiving serious consideration by sellers, and the competition to buy the home of your dreams is back to a more normal market.

Are You Waiting For The Market To Cool?  Any advantage obtained by waiting for hopefully for prices to decrease longer than a few months may be offset by increasing interest rates, which are once again near historically low levels

Interest Rate News from HSH Associates

The following is an excerpt from the HSH Associates newsletter for the week ending April 13, 2007:

The general drift upward in mortgage rates continued this week, according to the nation’s leading survey of mortgage prices. Thirty-year fixed-rate mortgages (FRM) rose by six basis points (.06%), ending the weekly survey at 6.38%, setting a fresh two-month high. Hybrid 5/1 ARMs continue to rise a bit faster than fixed rates, adding eight basis point to land at 6.22%.

While there weren’t a lot of diverse economic data to review this week, some indicators, plus the minutes of the last Fed meeting, only seemed to add to the general sense of unease about the balance between growth and inflation.

After hitting a 2007 peak of 6.45%, fixed mortgage rates declined for six weeks, with a nadir of 6.26%. Since then, we’ve largely retraced those downward steps and are within a stone’s throw of matching those 2007 highs. However, the subprime ‘flight-to-quality’ buy of Treasuries is behind us for the moment, and inflation concerns are putting some upward pressure on mortgage rates again. It may surprise you to know that fixed rate mortgages are about a quarter-percent less than last year at this time, when it was still thought that the Fed was falling behind the curve in terms of raising short-term rates to combat inflation.We think that the run-up in rates is due for a pause.

                                         Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.08%	6.38%	6.24%	5.91%	6.17%
CA/Statewide	6.09%	6.38%	6.25%	6.09%	6.19%

Interest Rate News from HSH Associates

The following is an excerpt from the newsletter from HSH associates for the week ending March 15, 2007:

Concerns about the availability of financing for impaired-credit borrowers continued to roil the subprime mortgage markets this week. We’re also seeing expanding worries about wider-ranging fallout from the combination of tighter mortgage credit and rising foreclosures and delinquencies. Pricing for good-credit quality applicants remains comfortable, though, and the average 30-year fixed rate mortgage (FRM) eased a single basis point this week, closing the nation’s deepest survey of mortgage rates and terms at an average 6.26%. Hybrid five-one ARMs rose by three basis points to 6.03% for the week in the HSH survey.

While the issues in subprime are significant and undoubtedly have the potential to cause trouble in better-credit loans, we think that any effect will likely be limited. Estimates peg approximately 80% of the mortgage market as “A” credit, leaving about 20% of the market as “subprime” of all types and terms. Of that 20% slice, the Mortgage Bankers Association reported this week that some 13% of those loans were in some stage of delinquency, a number which has steadily risen over recent quarters. While discomfiting, the flip side is that some 87% of subprime loans are performing fine (at least so far), but that number does seem likely to deteriorate some more as 2007 rolls along. For “A” paper, the delinquency rate is in a comfortable 2.5% range.

The troubles in credit markets, slow economic growth, and soft housing markets, have renewed expectations that the Fed would soon be cutting rates. While there can be no doubt that collectively things are slow, there is very little chance that the Fed will slash rates until inflation cools further — perhaps much further — irrespective of what happens to economic growth. A period of subpar growth is what’s needed to correct imbalances in prices; since we still have those, the Fed will watch from the sidelines. The next Fed meeting is next week, and the latest measurements of prices are such that the Fed would probably be more likely to consider raising rates rather than lowering them.

                                                          Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	5.98%	6.26%	6.13%	5.87%	6.05%
CA/Statewide	6.06%	6.31%	6.20%	6.03%	6.08%

These interest rate levels are very similar to those of mid-January 2007, and are down from increases which had occured in mid-February.

Terranea Resort Breaks Ground in Rancho Palos Verdes

On March 7, 2007, a historic ground-breaking ceremony took place at the former site of Marineland in Rancho Palos Verdes to begin the construction of the 582 room, $450 million resort by Lowe Enterprises of Brentwood. Construction completion is scheduled for Spring 2009. Elements of the new resort include:

A 360 Room hotel, along with 20 two-bedroom bungalows, 50 three-bedroom casitas and 32 two and three-bedroom villas. In December 2005, 36 ocean casitas and 15 ocean vills were reserved for purchase for more than $120 million.

A 25,000 square foot ocean-front spa with 24 tretment rooms, a 5,000 square foot gym and three ocean-view swimming pools

Three restaurants and six other bars and snack bars, all with ocean views, including a cliff-side bar

A main ballroom and 31 meeting rooms totaling 141,000 square feet

An executive 9 hole golf course

RHE Planning Commission Approves new condo project

On March 7, 2007 the planning commission of the City of Rolling Hills Estates recommended that the city council approve a proposal for a new 16 unit condominium complex in the city’s downtown area.

Craig Knickerbocker’s mixed-use project joins three already approved condo projects in the downtown core along Deep Valley Drive from The Avenue of the Peninsula shopping center to Silver Spur. The units are planned to be one bedroom, one bathroom, and a den ranging from 1,150 to 1,250 square feet, and are planned to appeal to young buyers, or to empty nester retirees wanting to maintain a small residence on the Hill. The developer will renovate an existing medical office building while building the new condo residences.

“Home Prices Remain Steady” - Los Angeles Times

Excerpts from an aticle published 2/15/07 in the Business Section of the Los Angeles Times with the headline “Home Prices Remain Steady - The Southland median in January is $485,000, defying expectations that it would be lower”:

“Southern California housing prices held steady in January while sales declines slowed, according to data released (by Lo Jolla based research firm DataQuick Information Systems) Wednesday, prompting some experts to suggest that the local real estate downturn may be nearing a bottom.” “Meanwhile, the sales decline of 17% from a year earlier was the smallest since May. . . the volume was about average for the last two decades.”

“The market is showing much more resilience than we or anybody thought, said John Karevoll, DataQuick’s chief analyust. ” . . .  since mid-2006, median prices regionwide have leveled off and the supply of homes for sale had thinned. “We may have botttomed out and are on the way up”, said G.U. Krueger, an economist for real estate advisory firm IHP Capital Partners in Irvine”

“Last month, Los Angeles County continued to show the most strength of any local county. Its median price rose 6.1% above a year ago.”