The Hermosa Strand

Hermosa Beach has come a long way from the days when most of the City Council members were renters and Bikers ruled.  The local elementary schools are some of the best in the state and parents have a choice between Mira Costa and Redondo Union for  High School.  

Strand homes  in Hermosa are priced very competitively with  those in Manhattan Beach.   Charming Walk street homes  lure buyers looking for that  small town beach cottage  feeling rather then the more sophiscated homes found in Manhattan Beach.   Hermosa has grown up and  well qualified  buyers with cash are  taking the place of  renters as old rental units are torn down and replaced with owner occupied homes.

There were 49 homes sold during the period from October 1-March 9, 2010.  During that time frame  7  sales were all cash, 22 buyers put down 25% or less down and 20 buyers put down 30% or more.


Hermosa Beach: Down payment % for single family homes:

 

There is good news and bad news for South Bay-Beach Cities home buyers.....

Looks as if the Home Buyer Tax Credit extension  is almost official as the House, on a vote of 403 to 12,  passed  the extension of the home buyer tax credit.  The only thing it needs to be law is  President Obama's signature on Friday. The  new version of the tax credit has been expanded and extended. 

The tax credit bill will be extended through April 30, 2010, with a 60-day extension if a  contract is in place prior to the deadline. so technically you have to be in escrow no later then April 30, 2010 to take advantage of the credit.  First-time home buyers are eligible for a tax credit of up to $8,000.  An addition to the law allows existing homeowners  who purchase a new  primary residence ( not a second  or vacation home)will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years.

  The good news for our South Bay-Beach Cities real estate market is that income requirements have been expanded to $150,000 for single buyers and $225,000 for joint filers.  The bad news is that the  qualifying purchase price of the home is capped at $800,000.

Additional provisions  in the bill  allow taxpayers to claim the credit on purchases completed in 2010 on their 2009 income tax returns.  In order to keep investors from using the credit the legislation states that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase. However if they sell in less then 36 months the credit must be repaid to the government.   This requirement is waived for active duty military personnel who move due to a military order.

 Manhattan Beach and Hermosa Beach will  probably not see a lot of buyers use the provision because of the cap on the price of a home.  However other South Bay Cities may well see an increase in sales from folks who have been undecided about whether to purchase a home now or wait until later next year.

 I don't know if the new version of the law is retroactive for people who didn't qualify under the old income requirements but  would qualify under the amended law.  It might be a good idea if you purchased a home under $800,000 in the last 4 months and meet the new income requirements to check with you tax adviser.

If you are thinking about buying an REO or tackling a short sale then this video is for you! 

The video may be a bit  over the top but  it does reflect the frustrations of many buyers who are trying to work with banks on short sales and REO's.    I have a client who submitted an offer on an REO almost 6 weeks ago.  His first offer was over the listed price and  was not accepted.  He  resubmitted a new offer that is  higher then his previous offer.  In the meantime the price has been lowered but the listing agent says that the bank hasn't made a decision about  accepting any offers even though his offer is now 10% above the  current asking price.  Needless to say he is very frustrated.

 At least the listing agent on the above property will communicate with me.  In many instances listing agents will not give out any information and only put a fax number on the listing.  They will not answer questions or speak with other agents about the status of offers.  It is not unusual for a lender to take 60 days before giving a reply on an REO and even longer on a short sale.  Often by the time the lender finally responds the initial buyer has found another property and is no longer interested.


 Last week a home sold as a short sale in the Tree section of Manhattan Beach at a price that was the same as the price on an offer my clients made over 9 months ago.  Had the lender accepted the offer from my clients back in February they would have closed escrow in  40 days and been done by April 2009.  Instead they  horsed around  and ultimately wound up losing an even larger chunk of cash by waiting another 6 months to take the same offer they could have received in the Spring.


And just to make things more interesting on properties with conforming loans backed by Fannie Mae and Freddie Mac some new rules are about to be implemented across the country under the Making Homes Affordable Program.  As of September 23, 2009 over 60 lenders  have signed on to be part of the program.  Basically it means if you can't make the payments or sell your home for more then you owe,  you can't just decide to offer your home as a short sale.  You must talk with the bank about modifying the loan first and if that doesn't work then the bank will make the decision about offering the home as a short sale to the general public not the owner.  We live in interesting times...






****A big thanks to Laurie Manny at Long Beach Real Estate for finding this gem!

Have you ever wondered what happened to the inside of some of the smaller homes that have sold  in the last few years and were not torn down... well here's your chance to find out.  

A little over a year ago I sold a little tree section fixer at 3612 Poinsettia, Manhattan Beach. In prior years this house would have been torn down the day escrow closed as it was only two bedrooms, less then 900 square feet with a single car garage and needed work. In fact it had been sold to a builder who backed out just before closing as he had a lot of inventory that hadn't sold.


3612 Poinsettia was a probate sale. I listed Poinsettia around Thanksgiving in 2007 with a starting price of $929,000 which was actually lower then the value given by the appraiser for the state of California. After a few adjustments the price was reduced to $849,000 in March of 2008. Along the way there were many comments about the price and condition. In May 2008 this little home found its place in the market and after receiving multiple offers (7 of them) entered escrow and closed in mid July 2008 at $849,000 with a small credit to the buyer.



Since escrow closed I have driven by and noticed a number of changes. Last weekend I was able to see what the new owners had done to the inside as well as the outside... what a difference a year makes. This was always a sweet house... but now it is charming. They did a number of things I would have done and others I didn't consider. French doors were added to both bedrooms which really opened up those rooms. The new kitchen is stunning and the living room is warm and inviting.



I thought it would be fun for those of you who followed the story of this listing to see the before and after views of this lovely home. If you are considering buying a small "fixer" you will find some great ideas. The exterior was repainted and flower boxes added. They tore out the old kitchen cabinets, etc and redid everything while staying within the same footprint. They made few structural changes other then widening the doorway into the kitchen and closing off the back door by the garage. They scraped the ceilings and revamped the fireplace. Most of the flooring is the original, sanded and stained a darker color. The kitchen flooring was added and is a perfect match to the existing floor. They tore out the old tub and vanity in the bath and put in a double sink and a claw footed tub/shower. French doors were added to both bedrooms. New moldings around the doors and new doors for the closets finished off the project. The backyard and patio area are their next project.


3612 Poinsettia, Manhattan Beach: Before and After....


Before....



After......




All it takes is a little imagination.....and a bit of help from some friends to make a fixer into something special. In the last two years a number of homes that would have been lost to the bulldozer a few years ago are being bought and updated. I think this is great. Many of these older and smaller homes have good bones but need a little fixin' to show off their charm. For awhile there it seemed as if we were becoming a Stepford community of McMansions. It's nice to see a mix of homes around town... this is what adds character and charm to our City by the Sea. .



The new owners are willing to share information about the folks who helped them transform the house. Email me off line if you would like the information.

I've always said that real estate values in Manhattan Beach and the Beach Cities would hold up better then in other parts of Southern California ... and so far this has been true. I also said that all bets were off if we hit a recession. There is no question that we are in a very bad recession... with no end in sight. Today the stock market went where no one wanted to see it go. Unemployment in California jumped to 10.5% and we are going to see hikes in both Federal and state taxes. The South Bay may still be a bit better off then other parts of the state, but the outlook isn't pretty.

I thought we might squeeze by with another 10%-12% decline in home values this year but after hearing about the Administration's plans to increase revenue over the next few years coupled with the massive tax hikes in CA, and a complete lack of confidence in the market... it looks as if I was wrong. Yep... that's right... I was Wrong and I admit it.

I don't know how far prices will drop, and neither does anyone else, but the handwriting is on the wall that prices are moving lower and much faster then expected. A number of builders are in serious trouble. There are still new homes that have been on the market since 2007 without finding a buyer. Other projects didn't get off the ground until well into the market decline and are facing stiff competition for buyers. A number of homes that were rented may be hitting the market again as investors want to get their money out of the projects. You are going to see more short sales and REO's pop up on new construction. As prices on new construction float down that will put pressure on older homes.

In addition, if the recession continues much longer, a lot folks may be facing some real financial hardship over the coming year. As more people lose their jobs or have their income reduced many will opt to sell their homes in order to relocate to another area or state in search of employment. As inventory increases and buyers have more choices prices are going to fall... supply and demand on the other end of the spectrum.

A third factor in the Beach Cities might be because of the planned increase in the capital gain tax that the President wants. If I had owned a large home for a long time and planned to move to a smaller home or even out of the area I would definitely put my property on the market. There is a big difference between a 15% tax on gain and a 20% tax if you saw some major appreciation in the value of your property.

I've talked to a number of buyers in the last month or so who just don't know what they want to do. Some are dropping out of the market for a few months or a year. Others are still ready to buy but are very cautious about price. Today's low rates are enticing for those who plan to own for a long time. If you are in a quandary the best thing to do is pull out a pencil and see what the difference in your payment would be if you bought today at a low fixed rate vs if you wait and prices drop another 15% but rates move up 1%-2%.

All of these issues will put increased pressure on the South Bay-Beach Cities housing market. When you add tougher lending underwriting and down payment requirements, the pool of truly qualified buyers gets smaller. Homes are selling but at lower prices as buyers maneuver through a dicey market. Buyers are in the drivers seat for this ride and they are going to make payback rough for sellers.