Lakewood Real Estate News

Special Note: “How, What, When, & Where to Buy,” our special 2 hour Lakewood buyers’ seminar is coming to Lakewood’s Mayfair Park the second Saturday of October, 10/11, from 9 - 11 a.m.–to get you ready to take advantage of this cycle’s bottom!

We actually scheduled this class Lakewood’s Community Services Department several months ago. It’s open to everyone, not just Lakewood residents. It’s from 9 - 11 a.m. on Saturday, October11 at Lakewood’s Mayfair Park (Clark and South St.). We designed this to help buyers make the most of this fall and winter’s unusual buying opportunities. Class size is limited to allow interaction.

Special break-out sessions for first time buyers, investors, and move-up or move-down buyers.  Register  online or get details here. Only $5 per person, and we’re not selling cds or books! Blair and I are both former teachers, & we enjoy a chance to discuss real estate in a classroom setting.

Now back to our regularly scheduled market update post. . .

“ECONOMY HAS HEADS SPINNING” the newspaper screamed at me a few days back before I’d even picked it up off the driveway. Stocks tanking, huge firms failing or being bailed out, DataQuick medians show yet another home price drop, and now the “$700 trillion dollar Federal Bailout.”

And we decide now’s the time to tell you it’s a sellers’ market in Lakewood?

Sort of.

What’s going on now:

Actually I decided last night it was time to write a post that it’s become a sellers’ market at the low ends for detached single family homes in most neighborhoods in the Coastal Plane of Los Angeles and Orange Counties, and that includes most Lakewood homes, especially the lower priced, smaller fixers & bank repos.

What’s going on now:

You see, what we try to do here, as our masthead says, is give you “Lakewood real estate news and perspectives from the front lines.” What we and our colleagues see going on right now at open houses and with buyers and sellers in Lakewood.

So we’re 3 months ahead of DataQuick, whose monthly median closing price stats last reported August closings on sales that were negotiated mostly in June. We’re 5 - 6 months ahead of the Case-Schiller index, which averages 3 months of closings using their unique “matched pairs” approach and then delays a month to release.

So let me tell you what’s actually happening right now:

• Showings are up significantly at all of our listings priced below $500,000, and up modestly on our “move-up” inventory.
• That offer I made a few weeks ago on a Lakewood repo?   (See “Who should buy between now and Christmas?“): Outbid. Swamped with competing offers. My “all cash, close in 10 days, as is” offer didn’t even get a phone call back!
• Last week I surveyed several other agents I’ve known for years. Every one of them said buyer activity was up dramatically over the last few weeks.
• Even my partner, Blair, & his wife just made an offer.
• In Lakewood, all the lowest priced “bargain” homes are either sold or attracting multiple offers.
• Last weekend Blair had several local homes to show some buyers.  At every home there were other buyers looking at it while he was there with his clients.  That’s something we haven’t seen in over a year!

Why?

Pretty simple, actually. Summer just ended, prices have been coming down, and–oh, yeah–mortgage rates just plummeted:

• August is almost always one of the slowest months of the year, but things generally pick up in September and October before slowing again as the holidays approach.
• Foreclosures and pre-foreclosure “short sales” have been forcing prices down all year. Data Quick’s August median for OC was back to the level of November 2003! Vacation over, kids back in school, & buyers are noticing that neighborhood they couldn’t afford last year is now within their reach.
• When the U.S. Government (that’s you & me, in case you didn’t notice) basically took over Fannie Mae and Freddie Mac, confidence returned to the mortgage markets and rates dropped around a full point, with 30 year fixed loans at 5.5%! Rates have gone up since then, but once Congress passes the pending bail-out, hopefully this weekend, they should drop some.  In any case, they are still near record lows.
• The Federal mortgage bailout that’s been in the news so much this week is designed to attack what’s been housing’s biggest problem all year:  Home loans have gone from way too easy to get to way too hard.  Typically, the lending market overreacted, going from one extreme to the other.  Simply put, over the next month more and more buyers will be able to qualify.

What’s it mean?

Good question. Is it a seasonal blip or did we just pass the bottom, at least for starter homes in built-out areas? Well, part of it is seasonal, but that’s not the whole story. What happens next will largely be determined by the answer to five key questions:

1. What will the economy do?
2. What will interest rates do?
3. What will mortgage rates do?
4. Are foreclosures peaking?
5. Have prices corrected enough?

The first two will tend to counter-balance each other. If the economy continues it’s sharp declines, both the fed and investors will combine to drop interest rates, both short and long term.

As for mortgage rates, with the feds supporting the market, we know the margin, or mark-up, for mortgages will stay at the more normal levels we’ve seen over the past few weeks. One of the biggest challenges for housing has just been met. Federal intervention is having some positive results for home sellers and buyers, as we’ve been predicting all year.

Foreclosures may be the key here. In California it takes about 4 months to foreclose on a home from filing the initial Notice of Default through the Trustee’s Sale. Longer if the owner files bankruptcy. It takes another 1 -3 months to get the occupant out and the home on the market. We know that the banks have been taking back record numbers of homes, assuring a continued influx of foreclosed homes hitting the market through year’s end.

We can also check on homes entering the foreclosure process (click on the “Lakewood preforeclosures link under “Useful Links” in the column to the right).  A month ago, it looked like homes entering foreclosure were peaking, but recently released August stats are up a bit for Lakewood.  Government relief for foreclosures is about to kick in next month, and the shakiest borrowers have already lost their homes. On the other hand, a sinking economy combined with coming payment “resets” (increases) on many adjustables may put more homeowners in jeopardy. This one may be “too close to call,” but I think by mid spring of 2008 the worst of the foreclosure market will be behind us.

Which brings us to question # 5. You’ll get plenty of debate on this, but the multiple bids on properly priced REOs make it pretty obvious to me that some prices have, indeed corrected enough, provided interest rates don’t rise dramatically & the economy doesn’t tank.

What prices have corrected enough? The prices that bring competitive bids: The fire-sale prices the lenders are now offering on starter single family homes in built-out markets, like Lakewood. Pretty much what we said three weeks ago, except it’s happening now, not early next year.

Is this the bottom?

For starter SFRs in the coastal plane of OC & L.A. Counties, quite possibly.  If not now, probably sometime over the next several months.   It largely depends on the economy, interest rates, and when foreclosures peak.

Note: You don’t know it’s a bottom until it’s passed; DataQuick medians won’t show it until 4 months after it’s passed! We’re defining the bottom based on prices of homes going into escrow–what we’re seeing in the Lakewood market.  The media only gets the data after a home closes escrow 30 - 60 days later, and it takes another month and a half to compile the data.   So a December bottom in the market itself won’t show up in DataQuick monthly medians until February.  But you don’t know it was a bottom or a blip until you’ve had at least two up months after it.  So DQ stats won’t show it’s a bottom until several months later, when the prices are up for at least two months in a row.  And even then there will be some debate as to if it’s a real bottom or just a spring surge.

Bottom line: If you’re not going to be moving any time soon and you can find and negotiate your dream home at a price you can afford with a 30 year fixed loan, go for it.  That’s what Blair and Beth just did, so we’re putting our money where our mouth is on this one.  Stay tuned, & we’ll keep you posted on what we’re seeing here on the front lines of Lakewood Real Estate.

We’ll be going into detail on all aspects of home buying for two hours on Saturday morning, October 11th, at our city-sponsored buyers’ seminar at Lakewood’s Mayfair Park.  Blair and I just planned the schedule yesterday, and we’re hitting all the key high points, including REOs, short sale, lending, moving up, moving down, investment property and the foreclosure process.  We’ve also got a lender who’ll bring you up to the minute on the new lending standards.  It’s all only $5, due to the city sponsorship!  If you know someone who should be thinking about buying, you’ll do them a favor by encouraging them to attend.  More details and a link to register are below.

Our 2-hour, $5 October Buyer Seminar:

We actually scheduled a two hour buyers seminar with the city of Lakewood’s Community Services Department several months ago. It’s open to everyone, not just Lakewood residents. It’s from 9 - 11 a.m. on Saturday, October11 at Lakewood’s Mayfair Park (Clark and South St.). We designed this to help buyers make the most of this fall and winter’s unusual buying opportunites. Class size is limited to allow interaction. Sponsored by Lakewood’s Community Services Department. Details here. No, we’re not selling tapes, cds, books, or DVDs! We’re both former teachers, & we enjoy a chance to discuss real estate in a “classroom” setting.