If you are looking for a property in the $1 million plus range then you are going to need 25%-35% down along with high FICO scores and cash reserves in the bank. Imagine actually having to qualify and be qualified.. how will anyone ever buy a home? How could this happen… the entire Beach Cities market will be in shambles.. prices will drop 50%… the end is near! But wait.. something is wrong…people are buying homes. There are buyers who have.. gasp.. not just good credit but excellent credit. There are buyers who have enough money in the bank to have a 20% or more down payment and still have excess funds. There are buyers who are purchasing homes they can afford at payments that are not subject to some weird bank come-on. Yikes… there are people actually buying homes just like people did 10-15 years ago.

I am being a bit facetious for a reason. No… the market hasn’t begun an upswing. It looks as if home prices are going to remain soft to flat for the next few years. However there are some happenings that are pointing to a moderation of the current real estate market. There was an interesting article in last week’s WSJ about the housing market. The Daily Breeze had an article in the Business section about possible changes in the credit markets that may be good news for mortgages. Even the FED is seeing a little improvement although as Bernanke notes we are still not out of the woods. Lower rates by the FED have pushed down the prime rate. Many adjustable rate home loans are tied to the prime. Consumers who have one of these loans that is re-setting will be seeing rate increases that are significantly less then anticipated.

 None of these items taken individually mean much but if we continue to see more small signs of an improving market buyers need to be watching closely. Everyone wants to time the market. A lot of buyers are waiting for the bottom of the market before they buy a home. Most buyers never know when the market has reached the bottom until long after it has happened. The reason is that buyers think there will be a big headline that says… home prices have reached the bottom… buy now. It doesn’t happen that way. Investors know this and begin buying long before most consumers even have a clue. They see the bottom coming because they pay attention to the little signs that begin appearing in the market. Consumers want big signs, so they usually miss the small signs.

I think we have a bit longer to wait for the market to reach bottom but the little signs are beginning to appear. If I were thinking of buying I would pay attention to what the market is saying.. instead of what my friends say. I would also find a good lender and find out just what I should do to be ready to buy when the time is right.

Making a housing decision based on Doom and Gloom could wind up costing consumers who want to buy a home a lot of money.   Most people think they can time the market and buy at the bottom. A number of potential buyers are afraid that if they buy now the housing market will drop drastically and they will lose money. The fact is that a lot of buyers will wind up missing the point when the market begins to change. They will miss it because they are so caught up in bad news that they will not be able to tell when the market changes and take advantage of the change.

 I dont know when the market will reach bottom. I do know that once it reaches that point it will stay relatively flat for a time before cautiously moving upward. I know this because this is how the Manhattan Beach-Beach Cities and the general California real estate market has behaved for many years. I know that the flat time will be a good time to buy. I also know that bar a massive recession or other disaster we may see the market begin to level off within the next 6-8 months. A number of buyers will miss that period because they dont understand that a flat market after a down market is the bottom. Too many prospective purchasers keep waiting for the bottom long after the bottom has been reached and the market begins to move upward.

In a recent Daily Breeze article on California foreclosures the article noted that most of the foreclosures in the South Bay were in Carson and Gardena and other areas to the east. The article pointed out that the rate of foreclosures in the South Bay was half what it was last year¦ Hmmm¦now that would have been an interesting headline but it wasnt the one chosen by the paper. Nope the headline was about the large number of foreclosures in CA. Im betting a number of potential buyers caught the headlines and missed most of the report. Negativity sells newspapers. But negativity can also cost you money.  Most of the people who are trying to time the market will fail miserably. A number of those who are the most adamant about waiting for prices to drop are the same people who missed the late 90s and early 2000 market. They are going to miss this one too.

If you are thinking about buying a home then you need to find out what is really happening in the market where you want to buy. Do you want to know about the number of foreclosures in your zip code¦ check out Foreclosures: How Does your Zip code Fare . This tells you the number of foreclosed properties in your zip code. There are 2 in Manhattan Beach, 3 in Hermosa Beach, 7 in North Redondo, 9 in South Redondo and 1 in El Segundo. If you are waiting to buy a foreclosed property in the Beach Cities¦ it could be a long wait. Its tough for prospective buyers in this market. The media cries that the entire state of California is in foreclosure but most of the highly desirable local markets just dont seem to reflect that data. Buyers still dont understand that when the headlines talk about massive foreclosures they are in Palmdale and Lancaster not Manhattan, Hermosa or Redondo. Prices have gone down but they havent reached meltdown¦. and are not headed in that direction.

 Real estate agents get blamed for spinning if they dont talk about the terrible real estate market in the Beach Cities. The truth is the market isnt what it was four years ago but it isnt awful. Since April 1, 2008 20 homes and 6 townhomes have gone into escrow in Manhattan Beach. Thats a bit more then one per day. This is not a bad market.. not great¦ but definitely not bad. We need to stop comparing the current market to that of a few years ago. More homes sold in 2003, 2004, 2005 and 2006 then at any other time in the last 50 years. We won’t see those numbers again.

It’s time to look at the current market. If you are thinking of buying make your judgement on what you need to do personally and on what you see happening in this market… not the one in 2004. Buy something you can afford and plan to stay there for awhile… 5-7 years at a minimum. Understand that you are buying a place to live not a mutual fund. If you plan smart and buy a property that makes sense the chances are very good that you will have a nice place to live and maybe make a little money along the way.

Buying in a Buyers Market… How to Buy The Home You Really Want. 

 I can hear you now.. “It’s a buyers market and I’m a buyer…. what’s so difficult”?…. It may surprise you but buying in this market may be a little tougher then you think . A Buyers market can be a harder market to maneuver in then a Sellers Market. I know this sounds crazy but it’s true. In a Sellers real estate market everyone knows where the market and prices are going… upward. You know you need to make a quick decision on a home you want. You know there will be a lot of competition. You know there will not be much inventory in any price range. The key is to try and outbid the other offers yet not go too crazy. It’s all very nerve racking but everyone knows the rules of the game.

In a Buyers real estate market it isn’t quite so easy. For one thing the rules are not always clear. Advice on buying a home is everywhere…no one should buy a house for at least 5 years anywhere…..the market is crashing and anyone who buys now will regret it when prices drop further…… soon ocean front property will be at 1990 levels if you just wait. What you may not realize is that a lot of the advice is being given by people who either can’t afford to buy or who may never buy. You may be afraid that you might pay too much and wind up losing a lot of money or worse yet look foolish to your friends. Human nature tell us we want to talk about the deal we got on a house and how smart we were about the local real estate market. The problem is that while there are deals out there you may not recognize them immediately.

Another difficulty is that all real estate markets are local and some will fare better then others. In the current housing market there will be markets that go down, markets that go up and markets that go up and down and then are flat. Prices are softening and some areas are going to be in for a real blood bath but not everywhere. Home prices in Manhattan Beach may drop 10% while home prices in Palmdale will likely drop at least 50% because of the foreclosure problems in that area. They are not the same market and different rules will apply. One of the things I’ve noticed when reading consumer blogs is that a lot of the people commenting on the local market don’t live in the area.. some don’t even live in the same state. Many buyers think that because the market has changed from a strong Seller market to a Buyer market the world is theirs .. so to speak. The media has distorted a lot of information to a point that buyers believe all they need is a little cash and a decent credit score and they can pretty much offer what they want and sellers will be begging to take their offers. A lot of buyers are sadly disappointed.

Certainly some sellers are unrealistic when it comes to the value of their home. I can think of a number of properties in the Beach Cities priced well over market value. They have been on the market a long time and may continue to be on the market even longer if their asking prices don’t get more realistic. However there are also a number of homes that have come on the market priced at market value. These properties sold quickly.. often with multiple offers and sometimes over the list price. The difference is buyers perceived these properties to be at or slightly under market value.

Here are 3 tips for buying a home in a Buyers market:

1. Know Your Market: It doesn’t matter what the market is like where your brother-in-law lives.. you need to know what is happening in your market. There is a big difference between a home that has sat at $ 1.9 for 7 months and is worth $1.5 and a home that comes on the market at $1.7 and could easily sell for slightly more. A 1600 sqft 3 bedroom 2 bath completely remodeled home in the Trees on a great street priced under $1.4 million is probably going to sell in 20 minutes. If you offer $1.2 because you know prices are going to drop drastically.. you will not be the new owner. Who made the right decision.. you may have to wait 5 years to get the answer. The same is true in the North Redondo townhome market. Right now a 2 on a lot townhome in North Redondo with a private yard in good condition built prior to 2000 is not selling unless the price is below $790,000. Every property that has gone into escrow in the last 6 weeks has been $720,000-$785,000 because that is where the market finds value. Properties priced at that level are selling.. those over are sitting. If you only want to spend $675,000 and want a yard…look at the rear unit of a three on a lot. Know the market.

2. Be Realistic…Buy What You Can Afford: Wow.. this seems to make sense but it’s surprising how many people don’t do it. Too many buyers want to buy the home their parents finally ended up with rather then the one they started with. Buyers don’t understand that they may be better off buying a small condo in Hermosa or Redondo then a new house in a marginal location. Your first home doesn’t need to be 3000 sqft in the trees. Buy a starter home or townhome in North Redondo, Torrance or Holly Glen… build a little equity… then move up to a different home. It may take a few years to get to where you ultimately want to live but you won’t be in trouble along the way.

3. Get Pre-Approved for a loan: You really need to know what your credit profile looks like to a lender. You may get 40 offers of credit a week from Cards ‘r Us but that doesn’t mean you qualify for a prime interest rate on a home loan. Sometimes there are mistakes on your credit that can take time to fix. You should have at least 10% and ideally 20% plus closing costs for a down payment. There are still a number of different loans that are available to consumers but the guidelines have gotten tougher in the last three months. You need a current evaluation of your financial picture. You may have qualified for $XXX in June but today you may only qualify for $XX. Interview a few lenders. Ask questions about fees and rates. There isn’t a lot of difference in rates. If the market rate is 6.5% for the loan you need … no one is going to give you the same loan for 5.5%. If it’s too good to be true… it is too good to be true.

Finally… Find a Good Agent( you thought I would say something else?)….. Contrary to all the hype there are good agents out there. Part of your job is to find one. A good agent knows the market. A good agent will help you find the right house and will tell you the truth. You may not like what you hear but that’s another story.

As many of you know..I like Lou Barnes because he sees all sides of the picture¦ in a recent article he takes on both the bulls and the bears and shares his views about what is happening in the market. Most noteworthy is his take on Case-Shiller. The Case-Shiller Index has taken on a life of its own.. not for what it actually is but rather for what many people think it is. The fact that it is now called the S&P Case-Shiller Home Price Indices makes it more authorative for many consumers. Case-Shiller provides useful information about market trends using certain types of homes. Most people dont understand just what Case-Shiller actually tracks.. it tracks homes sales of the same home over time.. not the same address but the same home.

Case-Shiller uses a rather limited base for the index. Case-Shiller doesnt track new construction or townhomes/condos. Whoops.. thats a lot of our market¦ Nor does it track homes that sell to developers that are torn down and two townhomes built. That is a big part of the housing market in Redondo and the sand sections of Manhattan and Hermosa. It cant track a duplex in the sand section that was torn down and replaced with a single family home as it doesnt track residential income properties or new construction. The truth is that Case-Shiller doesnt track most of the housing that makes up our South Bay-Beach Cities real estate market. Depending on Case-Shiller in our little slice of heaven is probably not the best resource for a potential buyer. Case-Shiller tracks home sales in 20 Metro areas.

In our metro area the index tracks homes in the City of Los Angeles, Long Beach and Santa Ana. These areas have little in common with Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo. Long Beach has seen their entire market fall apart with large numbers of short sales and foreclosures¦ while the Beach Cities have not had a lot of foreclosures or even short sales when compared to other areas used by the index. Los Angeles is so large and has so many diverse areas in a state of flux that tracking same home sales is no easy matter. Santa Ana is just simply a different world. Yet if the Case-Shiller report says home prices will drop 30% in this metro area consumers automatically believe this will happen to home prices in Manhattan, Hermosa or Redondo.

The problem is that we really don’t conform to the guidelines of the index. Anyone who has been in the Beach Cities for 5 years or more knows the supply of homes continues to change making it harder and harder to find same home sales over a period of time. Small homes are torn down and replaced with large homes. We add on and up and reconfigure interiors with gourmet kitchens, baths and any other item we can think of to improve the home. We are the remodeling magazines dream locality. Much of the value in our area is based on location, lot size and view not on the actual physical structure. None of these categories plays a part in the index.

Trying to use Case-Shiller as the ultimate measure of value and pricing trends in the Beach Cities makes little sense. Case-Shiller is good for what it is.. and that is one of the tools a buyer or seller can use to help establish trends. But if you are depending on it to give you an accurate measure of value in Manhattan Beach and the Beach Cities you are going to be disappointed. Buyers and Sellers need to know what is happening overall in their local real estate markets. Buyers and Sellers need to be aware of the difference in pricing that can happen if you are on the north side compared to the south side of the street or the east side compared to the west side. Most of us know you cant compare home prices in Manhattan Beach with home prices in South Redondo. Physically they may be close but price wise they are very far apart. National trends are interesting but knowing what is happening in your local market is the best gage of value whether you are buying or selling.