CALL JONATHAN HARRIS WITH RE/MAX AT 424-704-3355

If you are like most people, you are wondering whether prices are going up or down in most Los Angeles neighborhoods.  Chances are, if you are in L.A. County, prices in  your area are holding steady.  Unlike many other areas of California, L.A. continues to see strong demand for housing at affordable levels as the local ECONOMY remains strong.  We have not seen the levels of job creation we need to see to get to a robust recovery in housing.  Will things change in 2012? I think many people are waiting to see who the presidential contenders will be.  One thing is true, neither side seems to have plans that can make an immediate impact.

Rental units – We are seeing a strong demand for rental property where rents are $1500 and less.  Many properties are selling with multiple offers as cash-rich investors try to scoop up good cash flow properties that can produce rates about record low market CD and earning rates.  There is a huge demand for duplexes, 4-plexes, 8-unit buildings and larger sized buildings as well.  The rental market will remain strong and rents are rising approx 3% this year.

REOs and Short Sales – REO and bank owned are very hot, but only if purchased for a low enough price.  Investors not willing to take a risk with anything less than a 15% profit.  Flipping and rehab is very hot as home flippers buy up property in South Los Angeles, San Fernando Valley and parts of Orange County.

Demand remains strong in Premium areas – If the vacancy rate can paint a picture, then most areas west of downtown L.A. continue to see low vacancy rates, with over 98% occupancy for rentals and single family homes in Santa Monica,  West L.A., Beverly Hills,  Culver City and Southbay areas.  Bottom priced homes in these areas sell within days.  Part of Central L.A. and Riverside remain soft due to high numbers of foreclosures in these areas.

Cash is King – Many choice properties in high demand areas are selling with multiple offers.   It goes to the saying that real estate is all about location.    To be prepared to buy a home, it is important to have the right strategy or you will be outbid by other buyers paying all cash.   Writing an offer the right way is critical!

Be Prepared to Wait – The truth is no one wants to sell right now unless they have to.  Sellers don’t want to compete with all the foreclosures and REO properties driving home values down.  That means that you are happy to stay put if you are a seller with equity that has no traditional reason to move.  The result is, there is a lower quality of homes for sale due to the fact that these are mostly distressed homes and sellers that must sell.  It may take longer to find the perfectly cared for gem home in the neighborhood you desire.

It’s no secret that 2012 is going to be an interesting and exciting year for real estate!  If you are looking in the Los Angeles area for a property that makes sense, and get it for the best possible price and terms – call Jonathan Harris with Re/Max Star Realty – 424-704-3355

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The Obama Administration has implemented a number of programs to assist homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments. The majority of these programs are administered through the U.S. Treasury Department and HUD. This page provides a summary of these various programs. Please continue reading in order to determine which program can best assist you.

Distressed homeowners are encouraged to contact their lenders and loan servicers directly to inquire about foreclosure prevention options that are available. If you are experiencing difficulty communicating with your mortgage lender or servicer about your need for mortgage relief, click here for information about organizations that can help contact lenders and servicers on your behalf.

Making Home Affordable

The Making Home Affordable © (MHA) Program is a critical part of the Obama Administration’s broad strategy to help homeowners avoid foreclosure, stabilize the country’s housing market, and improve the nation’s economy.

Homeowners can lower their monthly mortgage payments and get into more stable loans at today’s low rates. And for those homeowners for whom homeownership is no longer affordable or desirable, the program can provide a way out which avoids foreclosure. Additionally, in an effort to be responsive to the needs of today’s homeowners, there are also options for unemployed homeowners and homeowners who owe more than their homes are worth. Please read the following program summaries to determine which program options may be best suited for your particular circumstances.

Modify or Refinance Your Loan for Lower Payments

• Home Affordable Modification Program (HAMP): HAMP lowers your monthly mortgage payment to 31 percent of your verified monthly gross (pre-tax) income to make your payments more affordable. The typical HAMP modification results in a 40 percent drop in a monthly mortgage payment. Eighteen percent of HAMP homeowners reduce their payments by $1,000 or more.Click Here for more information.
• Principal Reduction Alternative (PRA): PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home. Click Here for more information.
• Second Lien Modification Program (2MP): If your first mortgage was permanently modified under HAMP SM and you have a second mortgage on the same property, you may be eligible for a modification or principal reduction on your second mortgage under 2MP. Likewise, If you have a home equity loan, HELOC, or some other second lien that is making it difficult for you to keep up with your mortgage payments, learn more about this MHA program. Click Here for more information.
• Home Affordable Refinance Program (HARP): If you are current on your mortgage and have been unable to obtain a traditional refinance because the value of your home has declined, you may be eligible to refinance through HARP. HARP is designed to help you refinance into a new affordable, more stable mortgage. Click Here for more information.

“Underwater” Mortgages

In today’s housing market, many homeowners have experienced a decrease in their home’s value. Learn about these MHA programs to address this concern for homeowners.

• Home Affordable Refinance Program (HARP): If you are current on your mortgage and have been unable to obtain a traditional refinance because the value of your home has declined, you may be eligible to refinance through HARP. HARP is designed to help you refinance into a new affordable, more stable mortgage. Click Here for more information.
• Principal Reduction Alternative: PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home. Click Here for more information.
• Treasury/FHA Second Lien Program (FHA2LP): If you have a second mortgage and the mortgage servicer of your first mortgage agrees to participate in FHA Short Refinance, you may qualify to have your second mortgage on the same home reduced or eliminated through FHA2LP. If the servicer of your second mortgage agrees to participate, the total amount of your mortgage debt after the refinance cannot exceed 115% of your home’s current value. Click Here for more information.

Assistance for Unemployed Homeowners

• Home Affordable Unemployment Program (UP): If you are having a tough time making your mortgage payments because you are unemployed, you may be eligible for UP. UP provides a temporary reduction or suspension of mortgage payments for at least twelve months while you seek re-employment. Click Here for more information.
• Emergency Homeowners’ Loan Program (EHLP), Substantially Similar States: If you live inConnecticut, Delaware, Idaho, Maryland, or Pennsylvania, Click Here for more information about EHLP assistance provided in your state.
• FHA Forbearance for Unemployed Homeowners: Federal Housing Administration (FHA) requirements now require servicers to extend the forbearance period for unemployed homeowners to 12 months. The changes to FHA’s Special Forbearance Program announced in July 2011 require servicers to extend the forbearance period for FHA borrowers who qualify for the program from four months to 12 months and remove upfront hurdles to make it easier for unemployed borrowers to qualify. Click Here for more information.

Managed Exit for Borrowers

• Home Affordable Foreclosure Alternatives (HAFA): If your mortgage payment is unaffordable and you are interested in transitioning to more affordable housing, you may be eligible for a short sale or deed-in-lieu of foreclosure through HAFA SM. Click Here for more information.
• “Redemption”is a period after your home has already been sold at a foreclosure sale when you can still reclaim your home. You will need to pay the outstanding mortgage balance and all costs incurred during the foreclosure process. Click Here for more information.

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Everyone knows you’re supposed to be proactive and assertive when you take out a mortgage, carefully collecting and evaluating all sorts of information before you make the biggest deal of your life. But when the mortgage broker starts shooting sheaves of papers (OK, PDF documents) at you, it’s easy for your eyes to glaze over at the sight of so many zeroes, and tempting just to start signing whatever it takes to get that house!

Here are 5 questions every smart buyer (or refi-er) should add to the list of issues to cover with your mortgage professional:

1. Are you a bank, a broker, or both?  Generally speaking, mortgage lenders that are banks or have their own banking divisions (which many reputable brokerages do) have more control over the appraisal process, including the ability to submit your file to a pool of appraisers they know have some knowledge of your local neighborhood. Given the fact that non-local appraisers and the inability to communicate with appraisers under relatively new guidelines for brokerages are responsible for killing loads and loads of deals, working with a company that is or has a bank could be a deal-saving move, especially if the property is in an area that hasn’t had many recent sales or is otherwise challenging to appraise.

Also, some broker/banks that originate loans and sell them straight to Fannie Mae or Freddie Mac under the FHA loan programs offer the same benefits of an FHA loan – low down payment and moderate qualification guidelines – without the “overlays” imposed by some larger banks, which actually place a more restrictive set of guidelines on FHA loan programs. For example, FHA guidelines do not impose a minimum credit score, but many banks overlay their own 640 minimum FICO requirement. Broker/banks that sell straight to Fannie and Freddie often mirror the FHA minimum guidelines precisely.

Finally, brokerages with their own in-house bank and a large roster of lenders and programs provide the advantage of offering a wider range of fallback options than plain old banks or plain old brokerages – Plans A, B, C and D, if you will – which many borrowers need these days, in the (increasingly common) case your first choice bank or loan program doesn’t work out.

1. Will you explain my Good Faith Estimate to me? May I also have a fee sheet or estimate of funds to close? The current, national standard Good Faith Estimate (GFE) is pretty clear, clarifying all sorts of deal points, from the broker’s commissions to the costs associated with the loan, but as a point of customer service, you should ask your mortgage pro to explain it to you (if they don’t do so under their own initiative).

The one shortfall of the the latest edition of the GFE is that, while it clearly shows the costs associated with a particular loan scenario, it does not always show so clearly the actual amount of funds you’ll need to close the transaction (which might be more or less than those costs)! So, ask your mortgage representative to prepare a fee sheet or an estimate of funds to close as early in the transaction as possible.

1. How long will it take to close my loan? How much time will I need for loan and appraisal contingencies?  The time frames for closing your mortgage – which often drive the time frames for closing your home purchase – often vary widely depending on the type of loan and even the type of lender you work with.(Large bank loans originated by the bankers who sit inside the branch are notoriously slower to close, on average, than loans originated by brokers.) Similarly, the time it takes to get through the FHA loan appraisal and underwriting process might be much longer than it would take, all things being equal, to clear those hurdles and remove your loan and appraisal contingencies on a Conventional (i.e., non-FHA) mortgage.

When you first meet with your prospective mortgage pro, talk with them about these time frames, so they can help you set realistic expectations and insert realistic time frames into your offer when you make it, to minimize the drama of a contingency clock that ticks way faster than your mortgage process.

1. Are there any fees for the mortgage loan application/approval process? Some lenders charge for credit checks up front, and most require that you pay for your appraisal in advance (although the latter happens only after you find and get into contract on your property. One of the first questions you should ask, when you sit down with a new mortgage broker is how much cash you’ll have to come up with just for the privilege of having them run your application and take the first steps down the road to loan approval.

1. How long have you been originating loans? And how long have you been with your company? Mortgage pros who have been around for a long time have the knowledge of advance troubleshooting, workarounds and backup plans, and the current underwriting practices it takes to get a loan closed in this restrictive mortgage market. If you found them in some way other than a referral, you can even ask for references from a few clients. Most mortgage pros who have been in business for awhile will be able to give you names and numbers of clients they’ve worked with on multiple purchases and/or refis: that’s a very good sign. You’ll rest a lot easier if you know that your loan is in the hands of a seasoned pro who others like you trust with their largest asset – and largest financial obligation.

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ARE YOU THINKING ON BUYING DUPLEXES OR SMALL MULTI -FAMILY BUILDINGS IN THE LOS ANGELES AREA? CALL JONATHAN AT RE/MAX STAR REALTY AT 424-704-3355

UCLA forecasters have seen the future of California’s housing market, and it looks like this: more apartments near the coast, fewer McMansions in the desert.

That prediction is based on several factors, including expectations that rising fuel prices will encourage people to live closer to jobs along the Southland coast and in the San Francisco Bay Area.

The state’s population is also skewing younger, meaning there will be more demand for urban rental units and less demand for suburban cul-de-sacs, according to the quarterly economic forecast released Wednesday by UCLA’s Anderson School of Business.

“The incremental demand for housing is moving more into multifamily housing,” said Jerry Nickelsburg, senior economist with the forecast. “Many of the younger generation have been buffeted by the boom and bust in the housing market, and see value in living closer to work.”

That’s bad news for the state economy, however, for two reasons. One is that construction of multifamily homes requires less labor than construction of single-family homes. Second, areas such as the Inland Empire and Central Valley that were hit hardest by the housing bust won’t get a construction boom to help pull them out of the economic doldrums.

This means “there is an even larger structural unemployment problem in California than we originally thought,” Nickelsburg wrote in the forecast. “Not only do we have excess construction, real estate and support skills, but some of those that will be demanded will be in the wrong geography.”

California won’t start adding a significant number of building permits until 2013, forecasters say, which is one of the reasons the state’s unemployment rate will stay above 10% until the middle of that year. Nonfarm employment in the state won’t return to pre-recession levels until 2014, and construction employment won’t reach those levels until at least 2021.

“In a typical recovery, you get a bounce-back in housing and hiring of a lot of construction workers,” Nickelsburg said in an interview. “We’re not seeing that this time, which definitely slows the recovery, and slows economic growth.”

Changes in the state’s demographics are driving some of these shifts, forecasters say. Household formation has slowed in California as the unemployed have moved in with their family members to save money, leading to less demand for new homes.

In addition, California is one of the youngest states in the nation, according to census data, with a median age of 35.2, compared with 38.0 in New York. Although there are many Gen Xers of home-buying age in the state, many “bore the brunt of sub-prime mortgage and housing bubble crash,” Nickelsburg said, and now do not think a home is a safe investment.

The market is already responding to this trend, according to UCLA. Building permits for single-family homes have continued to decline while permits for multifamily complexes are starting to regain strength. Permits for multifamily homes are now at 40% of the peak number, comparatively stronger than permits for single-family homes, which are at 20% of their previous peak.

These housing issues, coupled with the financial pain experienced by state and local governments, will keep California’s unemployment rate at an average of 11.7% this year and 10.9% next year.

The picture is slightly rosier on the national level. Gross domestic product will grow at an annual rate of 3% through 2013, and the unemployment rate will decline slowly, reaching 7.8% by the end of that year. This year, the U.S. unemployment rate will average 8.9%.

The recovery will remain tepid because many jobs are gone for good, said Ed Leamer, director of the UCLA Anderson Forecast. Outsourcing and robots have replaced about 2.5 million manufacturing workers. About 2 million construction jobs are gone permanently because they had been created by artificial demand. Retail technology and Internet shopping, coupled with consumers’ spending fatigue, have led to the displacement of 1 million retail jobs.

Those 5.5 million workers are one reason the economy won’t grow as robustly as it has in past recoveries, Leamer said.

“We have been vigilant for signs of a real recovery,” Leamer wrote. “These have been hard to find.”

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More bad news for the housing market cropped up in data released this week, indicating that home prices have double dipped, dropping to new post-Recession lows in March. The disappointing figures scale back incremental gains made in the wake of the 2010 home buyer’s tax credit and reinforce the probability of a long, slow recovery for the housing market.

Standard & Poor’s Case-Shiller Home Price Index, a leading measure of U.S. home prices, fell 4.2 percent in the first quarter, 5.1 percent below its level this time last year. According to the report, prices are down more than 33 percent from their July 2006 peak, slumping to near mid-2002 levels.

Those figures essentially blot out nearly a decade of home price appreciation and jeopardize an already fragile economic recovery. “This month’s report is marked by the confirmation of a double dip in home prices across much of the nation,” said David M. Blitzer, chairman of the Index Committee at S&P Indices, in a press release. “Home prices continue on their downward spiral with no relief in sight.”

[See 6 Numbers Every Investor Should Follow.]

Experts blame stubbornly high unemployment, a surge in foreclosures, and distressed sales for the continued slump, which has discouraged the prospective home buyers needed to soak up the excess supply of available homes.

Despite nascent signs that the economy might be on the road to recovery, the share of homeowners dipped to 66.4 percent in the first quarter of 2011, according to the U.S. Census Bureau, down from its peak of 69.2 percent in late 2004. Homeownership rates are back to 1998 levels, and with a sputtering housing market, experts say that level could dip further.

“Housing is expected to experience little more than a dead-cat bounce in the months to come,” said Diane Swonk, chief economist at Chicago-based financial services firm Mesirow Financial. “We are still years, rather than months, from seeing any return to normalcy in this market.”

[See Do We Need Fannie and Freddie?]

While prices in 12 of the 20 metropolitan areas tracked by the report–including Minneapolis, Chicago, and New York–fell to new recession lows, the nation’s capital provided the only bright spot, with home prices up 1.1 percent in March and 4.3 percent over the past year.

The seat of the federal government and home to numerous universities, agencies, and nonprofits, D.C. has been fairly well insulated from the housing crash, says Mark Meyerdirk, principal broker at Washington, D.C.-based real estate firm Urban Broker LLC. “People in D.C. feel very comfortable with the market and are optimistic about the economy recovering,” he says. “Job growth has been great here the past 13 months, so with those promising numbers the consumer confidence here is maybe greater than in other markets.”

Seattle was the only other metro area to see a monthly increase–a modest 0.1 percent uptick–but prices in the Pacific Northwest city remained 7.5 percent off levels recorded a year ago.

Industry experts have noted that declines have become more regionalized over the past year, with the greatest price drops sinking markets in the Southeast and Southwest, as well as industrial Midwestern states such as Michigan and Ohio. But while areas swamped with foreclosures continue to grapple with the excess supply of homes for sale, areas less afflicted with distressed properties have seen bidding wars for turnkey properties, Swonk says.

[See Should You Consider Investing in Real Estate?]

“When the housing bust hit, there was really nowhere to hide,” Swonk says. “But as the housing market hits what some are calling a double dip, what we’re seeing is there are some places to hide. You are seeing pockets like Washington now doing OK.”

Although Washington may be the only metro area seeing a significant bump in home prices, many experts expect price declines to level off in the third quarter. When demand will pick up and reignite the fizzling housing market is another matter. “We feel we’re about 12 to 18 months away from price stability,” says Ken Shuman, head of communications at real estate information website Trulia. “The first sign of recovery would just be stability, not even price upswing.”

The backlog of foreclosure inventory currently in the system coupled with the two to three million more expected to flood the market in the coming months is the primary contributing factor to depressed home prices. The psychological effects of foreclosures have also taken their toll on would-be buyers as they contemplate purchasing a home in this market.

[See The Challenge of Investing in Foreclosures.]

“Thirty percent of people have known someone who’s either gone into foreclosure, was forced to do a short sale, or has applied for a loan modification,” Shuman says. “When you take a look around the room and 3 out of 10 people have done that, you tend to think twice about ‘Do I want to be a statistic?’”

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