When it comes to flipping a 10,000-square-foot mansion on a prime piece of Santa Monica real estate, a simple open house with hors d’oeuvres and soothing background music has apparently become blase.
In what city staff calls “a new kind of commercial activity for Santa Monica,” the designer who purchased a golf-course adjacent property has re-purposed it for parties and formed the House of Rock LLC to help market the estate.
Since hundreds of guests started streaming in and out of the home in September, residents on affluent La Mesa Drive have complained about everything from noise and lights, to traffic congestion and safety — and even naked partygoers sleeping off a long night in their cars.
On Tuesday, the City Council will decide whether to pass an emergency ordinance that could bar such festivities.
“These are the kinds of events that take place in a hotel ballroom, not in a single-family home,” said Christopher Harding, a Santa Monica attorney representing two neighbors. “The disruption factor has been pretty extraordinary. This is a commercial-events venue that is operating on a quiet neighborhood street.”
A new survey of realtors was released today (see below). Here are my answers:
1. Is Now a Good Time to Buy or Sell in Your Area?
A. It is a great time to sell, as long as you can live with today’s prices. Sure, potential sellers can believe that it’s better to wait until prices go significantly higher, but that may not happen when you want it or need it, and it may never happen.
B. It is a terrible time to be a casual buyer. Only those who buckle down and commit to seeing every new listing within the first day or two, and are willing to pay all the money for the quality buys will succeed. Another big challenge is finding an agent who can win bidding wars.
2. Do You Expect Prices to Generally Rise or Fall in the Next Year?
A. I expect that general pricing will rise 5% statistically, and be hampered by inventory shortages, arrogant listing agents, and short-sale fraud. All three are contributing to a pricing limitations, and only the first has a chance of changing. If a surge of well-priced quality homes were to hit the open market, they would be gobbled up quickly – and the resulting momentum could take prices significantly higher if the flow of new listings continued.
3. What are the Most Common Challenges for Buyers in Your Market?
A. Having a clean shot to purchase a property. The time is ripe to convert to an open auction-type format to sell properties, so buyers can at least see with their own eyes what is happening. The games being played by listing agents are impeding open bidding and market-value pricing.
4. What are the Most Common Challenges for Sellers in Your Market?
A. Shopping for listing agents based on who will quote you the highest price, and ignoring how educated the buyers are about market values.
5. Are Buyers and Sellers are Getting More Confident and Aggressive?
A. Absolutely, and they are more aggressive than the agents, who, as a result, are being left behind.
6. The Real Estate “Profession” Over the Next Five Years?
A. The agent population should decline significantly, but there will always be licensees sitting around with business cards and a facebook account hoping that something will fall in their lap. We are way overdue for a significant game-changer to shake up the industry (public-MLS), and it should set off a commission war.
Wrap-up: Those who play nice will undoubtly feel better next year, as long as rates stay ultra-low, but nicey-nice agents only get the leftovers. For those who are on the streets battling it out every day, the fight will be more competitive than ever.
See now as a good time to buy a home more often than a good time to sell one: 75% of agents surveyed described now as “a good time to buy,” while only 54% described it as “a good time to sell.”
Mostly expect price gains to be modest: Only 11% of agents expect home prices to “rise a lot” in the next year. The vast majority—76%—expect prices to “rise a little.”
Are feeling the pinch of low inventory and multiple offers: 90% of agents indicated that low inventory was one of the most common challenges facing buyers, and 91% pointed to multiple offers.
Are seeing both buyers and sellers gaining confidence in the market: 85% of agents agreed that buyers are becoming more confident about the market, and 84% agreed that sellers are becoming more confident.
Have hope for future of the real estate profession: 59% of agents believe that the real estate profession will grow in size in the next five years, 30% believe it will remain the same, and just 11% see more declines in the future.
The picture painted by the agents is one of cautious optimism. Most agents we surveyed expect modest price gains, improvements for buyers as well as sellers, and moderate growth in the real estate industry. The results line up nicely with recent gains in overall consumer confidence, which has been rising steadily through the year. No V-shaped recovery appears imminent, but rather a slow and steady trend back toward something resembling a normal market.
“That agents believe both buyers and sellers are becoming increasingly confident bodes well for sales volume in 2013,” said Redfin CEO Glenn Kelman. “Over the past five years, eager sellers have been unable to find a buyer, or more commonly in 2012, eager buyers have been unable to find a seller. But going into 2013, we expect that a jittery market will settle down, and buyers and sellers will more easily come to terms. After years of irrational exuberance, crashes, foreclosure fire-sales, inventory shocks and saw-toothed trends, the cautious, broad-based optimism we’re seeing now is the best kind of recovery we could hope for.”
Since springtime, the number of NSDCC detached-home sales have been stronger than the last couple of years, and the average cost-per-sf statistically has been range-bound, even though it feels like prices have been going up slightly. Here are the stats from the last two fourth quarters, for comparison:
# of Sales
Let’s take a guess at the number of 4Q12 sales:
There have already been 168 sales closed this month (at an average of $410/sf!).
There were 229 closings in 2011 that were marked pending between October 22nd and December 31st. Sales this year have been generally better but the inventory is so low we might not has enough gas in the tank to match last year. Let’s say 180 more will go pending after today, and close before year-end.
168 + 180 = 348
There are 147 listings marked contingent, and even if the banks rally for a year-end close-out, we can’t rely on those too heavily – bankers take their share of days off, and delaying additional losses to 2013 won’t be a bad idea for them. Let’s say 50 more contingents close in 2012.
There are 422 listings marked pending, and of those, 292 went pending before October 5th, so their contingency period is complete. Let’s guess that 250 of those will close. Of the 130 that are in their 17-day contingency period, only half, 65, end up closing, either with this buyer or a new one.
50 + 250 + 65 = 365 Grand total = 348 + 365 = 713
If we hit 713, it would be a 23% increase in sales over 4Q11.
This graph shows how this year’s monthly sales of detached-homes (in green) have fared:
Yet we may not see much change to the bouncing pattern we’ve had statistically for pricing. With higher sales counts we can say that the general market conditions are improving, but pricing remains a very localized event:
Let’s look forward to future closings – how do the active, contingent, and pending listings stack up?
San Diego County All-Residential MLS listings:
% of Mkt
% of Mkt
% of Mkt
Close to half of the closed sales between April 1st and September 30th were distressed sales, but now they make up only 12% of the active inventory! While we have become dependent on the distressed sales, they get snapped up quickly. No wonder it feels dry as a bone!
What about the detached-home listings in our North SD County Coastal region?
NSDCC Detached-Home MLS listings:
% of Mkt
% of Mkt
% of Mkt
If you are looking for a “bank deal”, the NSDCC region looks like the Mohave Desert! The foreclosures and REO listings are really thinning out – look forward to next year being the battle between short-sales and regular equity sellers.
It is impressive how many regular sellers have been able to compete with the distressed sales – 84% of the closings in the last six months have been non-distrssed! Buyers want quality, and the distressed sales tend to be the inferior properties – the non-distressed sales averaged $389/sf, and distressed sales were $283/sf.
It looks like the 50/50 split of short sales vs. non-SS will likely prevail throughout the county for the next year or two, but it’s been quieter around NSDCC. Will more owners of over-encumbered quality properties decide to give up next year, especially if Congress only extends the debt-tax relief for 12 months? What if it doesn’t get extended?
We have been told that banks and servicers are now using short-sales, instead of foreclosures, as their primary defaulter-disposal method.
It appears that the conversion is well underway in San Diego County – here are the number of residential distressed-sales and average pricing for the six months between April 1st and Sept. 30th:
San Diego Co.
REO Sales, #
REO Avg. $/sf
Short Sales, #
SS Avg. $/sf
Yes, the conversion from foreclosures to short sales is happening, though it doesn’t look good for the pricing trend. You could call +/- 3% just statistical noise, but for those who believe that the lenders save big money by short-selling vs foreclosure should think again.
The fraud seems to be getting more outrageous too – did you see the one yesterday that if the realtor would have listed it at market value, the seller would have made money? Instead, he listed it at $100,000 below the loan amount, and called it a short sale – at least for the usual five seconds before he withdrew the listing!
(withdrawing a SS listing is common when the listing agent has his own buyer and doesn’t want competition – he shows the bank a copy of the listing taken during the five seconds that it was active)
County Treasurer-Tax Collector Dan McAllister has mailed the 2012-2013 Secured Property Tax Bill. This year, 980,654 San Diego County Property Taxpayers can expect to receive their new bill. This represents an all time record high number in tax bills being mailed to taxpayers.
The year’s secured property tax billing is expected to generate $4,571,199,196 from the collection of these bills. This is an increase of $30 million over last year.
“Our numbers in San Diego County continue to rise,” stated McAllister. “More tax bills, more revenue and the collection rate from our taxpayers are at an all-time high at 98%. Our taxpayers know the importance of paying on time and avoiding hefty late fees. I’m proud to represent our taxpayers and look forward to a productive tax collection year.”
McAllister also announced that with the addition of American Express, his office now accepts all major credit cards (American Express, MasterCard, Visa and Discover) when paying online and by phone. He reminded taxpayers that cash will not be accepted at any of the branch offices, only in the main office located in downtown San Diego. He reinforced, “Save Time, Pay Online.” Due to the Waterfront Park construction at the County Administration Center in downtown San Diego, the south parking lot is currently closed. An echeck payment through the tax collector’s website currently has no convenience fee charge.
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