NSDCC Annual Sales

The biggest reason the market feels so hot is because sales are flying all over North San Diego County Coastal – especially towards the end of 2012.  But there have been enough inferior locations, dumpy old fixers, and fraudulent short-sales selling that the annual average pricing hasn’t moved much:

Annual Sales and Average $/sf – NSDCC North:

Category 2010 2011 2012 YOY %change
Sales 1,410 1,447 1,789
Avg $/sf $312 $300 $301

NSDCC-North Mo Sales

Annual Sales and Average $/sf – NSDCC South:

Category 2010 2011 2012 YOY %change
Sales 1,050 1,115 1,361
Avg $/sf $471 $472 $479

NSDCC-South Mo Sales

A strong finish of the year in both areas!

Yunnie Coming Around

Speed Up ForeclosuresAt the Washington Realtors’ legislative hill day this year we had an opportunity to hear from the National Association of Realtors’ chief economist, Dr. Lawrence Yun.  Dr. Yun spoke about the improving real estate market in Washington state and his optimistic outlook for our state’s housing prices to continue rising at a rate faster than the nation as a whole.

At the same time, he was concerned with the persistence of high levels of “shadow inventory” in Washington, even while those levels have been shrinking significantly across the nation as a whole.  Dr. Yun surmised that the legal system in Washington was one that provided more obstructions to the foreclosure process, and that was creating a huge backlog of foreclosures that should have already been back on the market.  The striking lack of inventory in our current market is holding back a large crop of eager buyers and stifling home sales in general.

The essence of Dr. Yun’s point was that we should speed up foreclosures.  On its face, that’s not an argument you’re likely to hear from real estate professionals.  Our organizations are constantly working for property owners’ protections and rights, and fighting fraudulent or predatory practices that force homeowners out of their homes.

This issue, however, is more complex than simply pitting banks against homeowners.  When we really examine the broken foreclosure process in our state, and nationally, we have to make clear distinctions between the protections that distressed homeowners already have in place, and the unacceptable extensions of the actual foreclosure timelines taking place in the market.

There are an increasing number of homeowners who have realized that, even though their home is underwater and they have no intention of keeping it long-term, they can live in the home without making a payments for years on end.  As long as the lender is inhibited from closing the actual foreclosure sale, the number of people living in homes for two and even three years, rent free, continues to build.  The homes are a drag on the community, as these long-term foreclosures deflate nearby housing prices, instead of being resold and fixed up by the new homeowners.  The homeowners can’t just abandon the property, because it is still legally in their name (see Zombie Titles).

The effort to shorten the timelines on these foreclosures would make no changes to the protections already built into the process for the truly distressed homeowner.  There are already a number of steps for that person to repay their debt, work out an adjusted payment schedule, or find another means to save their home.   These people usually have at least a year from the time they stop making payments until the foreclosure sale goes through, and those protections can and will continue to exist for them.

For those homeowners who have already been through the normal foreclosure process and are one, two, or even three years behind on payments, the process needs to be expedited.  These folks have accepted that the home will be foreclosed upon, and the only question is when.  It will be better for the neighborhood and, frankly, better for these former homeowners to move on with their lives and begin to rebuild their credit.  This artificial backlog of foreclosure inventory has an eager market of buyers ready to move in, and our communities could benefit from a healthy gain in home sales as we continue to recover.

So, should we speed up foreclosures?  If the current legal protections are preserved, but the unnecessary multi-year extensions can be avoided, then the answer is “Yes.”  Sometimes, facing up to reality and moving forward is the only way to begin correcting the difficult times we’ve been through.

Dr. Lawrence Yun on Real Estate: Speed Up Foreclosures?

Get Ready For Case-Shiller Tuesday

Are local home prices off to the races?

We are attracted to the sensational stories, where houses are selling for more than 10% over recent comps.  A solid $650,000 offer wasn’t enough to win the bidding war on this house, even though the last three model-match sales were $576,000, $591,000, and $605,000 in September-November of last year.

But statistically, the average price-per-sf looks much more mundane, and demonstrates how specific home buyers are about values, and how much they are willing to pay.

Here are the monthly cost-per-sf averages, splitting the NSDCC into two parts:

NSDCC North – Cardiff, Carlsbad, and Encinitas:

NSDCC-North Mo Avg $-sf

(The current averages for January, 2013 are tacked onto the end of the 2012 purple trend line)

Average prices look remarkably range-bound until recently (this month), and it will take a few more months to know if the pricing increase will stick.  It appears that Y-O-Y changes in sales may level off, or start dropping.  In the last two Januarys we’ve had 85 and 89 sales in NSDCC-North, and only 64 have closed this year with four days to go.

NSDCC South – La Jolla, RSF, Del Mar, Solana Beach, and Carmel Valley:

NSDCC-South Mo Avg $-sf

A big surge in November and December, but so far the average pricing of the 56 sales in January are right back in line with the range/trend (the last two Januarys had 64 and 66 sales).

November’s Case-Shiller Index will be released on Tuesday.  The local SD Case-Shiller Index has increased nine months in a row, with October’s reflecting a 6% increase year-over-year.  It was noted last month that Tuesday’s report should be eye-popping (as much as +10% increase Y-O-Y), and just in time to inflate seller expectations for the spring selling season.

Hopefully it will cause more sellers to list their home for sale.  In areas where there is a surge of listings, buyer expectations could soften unless the list prices are reasonable enough that they cause some sales momentum.

Yes, it’s true – your price causes the sale, and how your agent handles it determines if, and how much, it goes up or down from there.

I can spend $1,000,000 on advertising and do open house every day, but if the price isn’t right, it isn’t going to sell.

Temperature Gauge – Hot!

The lower-end looks like it is picking up speed, and those selling above $1,000,000 shouldn’t feel bad either.  Here are the active, contingent+pending, and sold listings for each area – the monthly sold count is the last six months of sales divided by 6.

Under-$1,000,000 Market

Town or Area Actives Cont+Pend Avg1Mo Sales Months’ of Inventory
Carmel Vly
Del Mar/SB
La Jolla

Over-$1,000,000 Market

Town or Area Actives Cont+Pend Avg1Mo Sales Months’ of Inventory
Carmel Vly
Del Mar/SB
La Jolla

The Over-$1,000,000 numbers are historically terrific, and sellers everywhere except in RSF should be jumping for joy.  The Under-$1,000,000 market, with only one-months’ worth of inventory and 1.67 times as many pendings as actives, is out of control and cooking!

When is the best time to sell?  When everyone else isn’t!

No Seasonal Slowdown

Tuesday’s Case-Shiller report is going to blow the roof off the market:

The housing market typically experiences a seasonal slowdown during the winter months, but this year seems to be different, according to the latest Campbell/Inside Mortgage Finance survey.

In fact, all three homebuyer groups — current, first-time and investors — recorded their most significant traffic gains of 2012 in December.

“According to our survey respondents, this is not a normal winter. Time on market for non-distressed properties is much lower, and we already see our homebuyer traffic indexes building toward a strong spring/summer buying season,” said Thomas Popik, research director for Campbell Surveys.

Not only did the 2012 winter numbers look strong, but the report showed signs of good things to come. Time on market, number of offers, closed transactions and sales prices were all improved at the end of 2012.

The “time on market” index, where a decline is actually a good thing, dropped from 42.4 in November to 40 in December.

The “number of offers” index rose from 57.3 to 61.5 between November and December. The survey considers an index value of 50 as reflective of no change or a flat market environment.

The “closed transactions” index from the survey rose from 51.2 to 54.4 during the same year-end period.

The “sales price” index not only jumped from 58.1 to 61.1 from November to December, but also peaked at its highest level ever recorded.

A majority of those surveyed stated that this winter was much busier than a typical winter, due largely to low inventories of homes for sale and strong homebuyer traffic.


Another Bubble?

Reader Matt questioned whether we are in another bubble:

2 years ago, homes were sitting at 600-650 range. Now, you can’t find a home for under 900k in Encinitas without a feeding frenzy. Bubble?

The media, and the soundbite society, has trained us to apply labels to everything we see.  After the latest real estate depression, the word “bubble” will always be linked to real estate, which implies an unsustainability.

Are we in another bubble?

Rather than discuss the label, let’s consider the underlying conditions and judge whether the current conditions are sustainable.

1.  People who have a down payment and can qualify are getting a mortgage payment that is similar to rents. And rents are going up fast enough that the first bump in mortgage rates shouldn’t stop this trend.

2.  Today’s buyers get a fixed-rate mortgage, so if/when rates rise, there won’t be a resulting payment shock to cause foreclosures.

3.  The current demand is deep when you see 5-10 buyers for every house.  It will take months or years to get everyone a home – if they stick with it.

4.  Investors should endure once they get their systems up and firing, and once established, they should sustain.  There will always be fixers and foreclosures to buy and flip or rent.

5.  If there is any hitch in the program, we know the government is there to bail us out – it is expected now.

6.  It is still an American tradition to own your home.  Family and friends will keep the pressure on.

People are buying for the right reasons, to raise a family and stay long term, or to flip or rent.  The investor business will come and go, but the long-term family buyer should provide solid demand.   There will be spurts of sales and rising prices, but until we hit liquidation mode by bankers or elderly, the tight inventory and low rates make this a sustainable package.

Here is the latest on this topic from Robert Shiller:


Now that the last real estate depression has subsided, I’ve wondered if a blog name-change would be in order.  But with the media’s insistence to quickly label any market movement as a bubble, I think we’ll keep it right here!

Adverse Possession

Andre Barbosa is squatting in style.

The 23-year-old has moved into an empty $2.5 million mansion in a posh Boca Raton neighborhood, using an obscure Florida real estate law to stake his claim on the foreclosed waterside property.

The police can’t move him. No one saw him breaking into the 5-bedroom house, so it’s a civil matter. And the real owner, Bank of America, isn’t responding to questions about the home.

It’s driving his wealthy neighbors crazy.

“This is a very upsetting thing,” said next door neighbor Lyn Houston. “Last week, I went to the Bank of America and asked to see the person in charge of mortgages. I told them, ‘I am prepared to buy this house.’ They haven’t even called me back.”

Bank of America didn’t respond to the Sun Sentinel’s inquiry. And neither did Barbosa, a Brazilian national who refers to himself as “Loki Boy,” after the Norse god of mischief.

Someone with his name has been boasting about his new home on Facebook, even calling it Templo de Kamisamar.

Barbosa also posted a notice in the front window naming him as a “living beneficiary to the Divine Estate being superior of commerce and usury.”

Sunrise real estate lawyer Gary Singer said Barbosa is invoking a state law called “adverse possession,” which allows someone to move into a property and claim the title — if they can stay there seven years.

A signed copy of that note is also posted in the home’s front window.

It’s the most valuable grab since the adverse possession law started being used in a handful of cases that have popped up in the Palm Beach County Property Appraiser’s Office over the past three years. Soon after Bank of America foreclosed on the property in July, Barbosa notified the Palm Beach County Property Appraiser’s Office that he was moving in.

Police were called the day after Christmas to the home at 580 Golden Harbour Drive, but did not remove him. He presented cops with the “adverse possession” paperwork, according to the police report.

Houston said that the home had been empty for about 18 months. Property records show it was sold to a family in 2005 for $3.1 million. The deed is currently valued at $2.5 million, according to county records. The county appraiser’s office lists the total market value of the 7,522-square-foot house at $2.1 million.

Real estate websites show canal views from sumptuous interiors including pillars, a curved staircase, marbled bath, second-floor balconies and a pool.

Singer says the adverse possession rule stems from the days when most people lived on farms. He said whoever tries to use the rule has to occupy the property in an “open and notorious manner.”

“They can’t be boarding up the windows and hiding in there,” he said.

After relatively few instances of the rule being invoked over the previous 10 years, 13 cases of adverse possession were filed in 2011, according to John Enck, a manager of ownership services at the appraiser’s office. It spiked even more in 2012: 19 cases, but so far, since Oct. 1, only six cases have been filed, he said.

Officials in Broward County did not respond to several requests for similar data.

In Palm Beach County, Enck said the cases have usually been in middle- to lower-class neighborhoods.

“I think a lot of the time, they were just looking for a place to live,” he said.

Singer said that few people manage to hang on — and maintain the taxes and liens — for the seven years required to take formal possession of a property, all the while keeping it maintained and improved.

Usually, the real owner files a lawsuit and an eviction action, Singer said.

“But hey, if you’re going to do this, you might as well go big,” he said.

Houston said she noticed the lights came on at the home right around Christmas. She knocked on the door recently and heard people rustling about, but no one came to the door, she said. At night, the front door’s carriage lights are on but nothing else can be seen.

It’s just aggravating, she said, considering how hard she worked to be able to afford a house in the neighborhood.

“We’re all going crazy, trying to figure out what to do,” she said. “It’s unbelievable that it can be done. Plus, if they’ve got the balls to break in the house, what’s to prevent them from coming over here?

“Is the whole neighborhood up for grabs?”


Adverse Possession is defined as “a method of gaining legal title to real property by the actual, open, hostile, and continuous possession of it to the exclusion of its true owner for the period prescribed by state law (seven years in the case of Florida). Personal Property may also be acquired by adverse possession.”

Hat tip to daytrip for sending this in!


Crowdfunding for Real Estate

From the pyramids to the Empire State Building, the world’s largest structures have typically been financed by the superrich. New York-based Prodigy Network, best known for marketing the Trump SoHo hotel condominium, is now trying a different model: It’s bringing crowdfunding to real estate, soliciting thousands of investors to buy slices of a skyscraper in exchange for a share of rents and property appreciation. “The big difference from traditional real estate is that instead of buying into a fund with a pool of assets, people invest in a single asset,” says Rodrigo Niño, Prodigy’s founder and chief executive officer. “It lets them control the risk.”

skyscraperProdigy has wanted to try crowdfunding almost since its founding seven years ago but didn’t get a chance until it stumbled on the derecho fiducario, a little-known financial instrument in Niño’s native Colombia that allows individual investment in isolated real estate projects. In Colombia, Prodigy has crowdfunded a building called BD Bacatá that will be the nation’s tallest. About 3,100 investors kicked in $171.8 million (COP308 billion) of the $239 million needed to build the 66-story skyscraper in downtown Bogotá. Investors can also buy and sell shares through a resale program, which functions like a secondary market.

Prodigy is currently under contract to buy 84 William Street in downtown Manhattan for $58 million. It plans to invest an additional $32 million. Prodigy says it intends to raise some $26 million in equity from individual investors in 11 countries. FTI Consulting, based in West Palm Beach, Fla., will ensure that Prodigy complies with the U.S. tax code, as well as anti-money-laundering laws, when accepting money from outside the country. “Instead of buying crappy condos in South Florida, this allows international investors to invest in real markets like New York and in assets that actually make sense,” says Niño, who was raised in Colombia and studied economics in Switzerland. Prodigy says William Street investors will see returns of 15 percent, compared with 21 percent for investors in BD Bacatá.

The company’s investors don’t yet include Americans because the U.S. allows only accredited investors—generally those who have assets of more than $1 million—to buy equity in private firms. That will soon change: The Jumpstart Our Business Startups Act, signed into law last April, allows anyone to invest as much as $2,000 or 5 percent of their income or net worth, whichever is greater, in closely held ventures. The Securities and Exchange Commission is still working on rules for investor safeguards required by the act.

SEC guarantees may not be enough for leery U.S. investors, says Dan Fasulo, a managing director at Real Capital Analytics. “It’s hard enough to develop a property down the block,” Fasulo says. “How are you going to do it sitting 3,000 miles away?”

Gustavo Gonzalez, a Colombian civil engineer who bought two shares of BD Bacatá in 2010 for 101 million pesos ($57,178), says the returns speak for themselves. Since his purchase, based on an advertisement he read in a local newspaper, the shares have appreciated by about 43 percent. “I like the idea that this is going to be the highest building in the country,” he says. Just as important, “I thought it was going to go up a lot, and that’s what happened.”

The bottom line: Once the SEC finalizes its safeguards, ordinary American investors will be able to buy a slice of individual properties.


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