Blog - Archive for March, 2011

Market Update from Catalyst Lending

March 27th, 2011

Keeping you updated on the market!
For the week of

March 28, 2011


MARKET RECAP

Bearish pundits – those chatterers who seek notoriety by accentuating the negative – had reason to strut this past week because the news on housing was, for the most part, to their liking.

Existing sales for February fell 10 percent to an annual rate of 4.88 million units. Supply could be a concern going forward. The inventory of existing homes for sale rose 3.5 percent to 3.48 million units, 8.6 months of supply at the current sales rate and a 14.6 percent increase over January’s 7.5 months.

Supply issues raise pricing issues. On that front, the median sales price of existing homes fell 1.1 percent in February to $156,100, while the average price dropped 1.4 percent to $203,000. Year-over-year, the decline for the median price is deepening, at minus 5.2 percent, but holding steady at minus 2.7 percent for the average price.

New home sales tumbled 16.9 percent in February to an annual rate of 250,000 units, which was a mild shock, considering the consensus estimate was expecting 295,000 units. Fewer sales mean more inventory. Supply rose to 8.9 months at the current sales rate. As for prices, the median price fell 13.9 percent to $202,100, a drop that sweeps the year-over-year rate into the negative column at minus 8.9 percent.

Following the off-putting news on home sales, it was only natural that a few analysts were willing to fan the pessimistic flames. MacroMarkets lead the charge, stating that a double-dip in housing could arrive this year. “Overall, the sentiment among our expert panel regarding the U.S. housing market outlook continues to deteriorate,” said Robert Shiller, co-founder of MacroMarkets. “Now they are expecting only a weak recovery, and even that is not until 2013.”

Now is as good a time as any to take a cynical shot at “expert” panels. Let’s not forget that the experts were wildly off the mark on new and existing home sales for February. Why did so few ignore the obvious – the weather? Sales were actually flat in the West and the South. Sales in the Northeast declined 57 percent and 27 percent in the Midwest – two regions hit particularly hard by cold and snow.

February’s data were a downer, but we expect to see improvement in March based on the developing upward trend in purchase applications. Lower mortgage rates, which have eased by 25 basis points over the past four weeks, have stimulated interest. And let’s not overlook an improving economy. Fewer Americans are claiming unemployment benefits. Since July, the four-week moving average has dropped from 500,000 to 380,000. This trend will boost expectations for accelerating payroll and economic growth. That’s good news for housing’s outlook.

 

Economic
Indicator
Release
Date and Time
Consensus
Estimate
Analysis
Personal Income & Outlays
(February)
Mon., March 28,
8:30 am, et

Income: 0.5% (Increase)
Outlays: 0.5% (Increase)

Moderately Important. Real income is growing, while spending is more reflective of price inflation.

Pending Home Sales Index
(February)

Mon., March 28,
10:00 am, et

2.0%
(Decrease)

Important. Inclement weather is expected to weigh on the index.
Case-Shiller Home Price Index
(January)
Tues., March 29,
9:00 am, et

0.4% (Decrease)

Moderately Important. A decrease in national prices is likely based on pricing data from other sources.

Consumer Confidence
(March)

Tues., March 29,
10:00 am, et
64.5 Index
Moderately Important. Confidence is expected to ease, but remains in a positive trend.
Mortgage Applications Wed., March 30,
7:00 am, et

None

Important. Month-to-month strength hints at more home buying heading into spring.
Employment Situation
(March)
Fri., April 1,
8:30 am, et
Unemployment Rate: 8.9%
Job Growth: 200,000
Very Important. The trend in unemployment claims suggest strong job growth for February.
Construction Spending
(February)
Fri., April 1,
10:00 am, et
0.9% (Increase)
Important. Nonresidential and public outlays are offsetting weakness in residential outlays.
Mortgage Rates or Home Prices?

It can be an incapacitating conundrum: weighing interest-rate movement rates against home-price movements. The trade-off can be difficult to analyze, especially for borrowers who mistakenly believe rates have always been low and will always remain so. Of course, many neophyte homebuyers are thinking along a similar line; that is, home prices are low and will stay low.

The analysis is actually straightforward, if placed in a historical context. Both mortgage rates and home prices are much closer to being at, or near, a bottom than a top when comparing today’s market to markets past. Of course, it is entirely possible that a buyer could sign a contract, lock in the loan rate, then go home and read that national home prices and mortgage rates have dropped.

Market tops and bottoms are impossible to predict. The best we can do is to estimate where we are based on long-term trends and similar past economic circumstances. From this perspective, there is really no trade off. Both home prices and mortgage rates are low, so there is no conundrum and there is no reason to put off buying a home for anyone staying put for at least five years.

 
 

Wilshire Grand Project to light up downtown

March 26th, 2011

Billion-dollar Wilshire Grand project could light up downtown Los Angeles with ads

City Council expected to approve a sign district for two skyscrapers with lighting from top to bottom, reigniting the debate about outdoor advertising.

Wilshire Grand proposalThe proposed complex would include ads on a 45-story hotel and a 65-story office tower. (Thomas Properties Group)
 
By David Zahniser, Los Angeles TimesMarch 26, 2011, 12:05 a.m.

A pair of new Los Angeles skyscrapers could dramatically alter the lights of downtown, reigniting the city’s long-running fight over outdoor advertising.

If developers of the proposed billion-dollar Wilshire Grand project have their way, such colorful images as stars, butterflies and waterfalls would fade in and out along the upper floors of both their planned 45-story hotel and their 65-floor office tower, thanks to thousands of tiny lights embedded in the buildings’ surface.

Both skyscrapers would see their lowest 10 floors emblazoned with an array of commercial images, from flashing digital signs to streaming “news ribbons.”

Supporters say the plan, modeled after similar technology on the Chanel building in Tokyo and the Cira Centre in Philadelphia, would bring energy and vibrancy to a stretch of downtown — the Figueroa Corridor — that already is being remade by the L.A. Live complex a few blocks to the south.

Opponents say the plan would reopen the way for turning high-rise towers into massive versions of the electronic billboards that have generated protests in many parts of the city.

The debate and lobbying at City Hall are scheduled to come to a key City Council vote Tuesday on allowing the lighted signage. On Friday, the council unanimously agreed to subsidize construction by waiving up to $79 million in hotel bed taxes.

Korean Air, which owns the project and is backed by business groups, unions and high-profile politicians, has the clear upper hand.

But allowing such a vast array of graphics has unsettled some officials, including Planning Commission President Bill Roschen, who has made a living designing buildings with billboards attached to them.

“It is on such a radically different scale than anything we’ve seen in the city,” he said. The vote is not just about a specific signage proposal, he said. “It’s about a city skyline.” The city shouldn’t allow light emitting diodes, or LEDs, on dozens of stories of any skyscraper until it has a plan for regulating such technology citywide, he added.

The debate also involves differing visions of how downtown Los Angeles will evolve. Nearby Grand Avenue, with its museums and concert halls, is being remade as L.A.’s cultural center. Figueroa Street has been steadily moving in the direction of the Las Vegas strip.

Once the council casts a series of votes on whether to create a new sign district around the Wilshire Grand, Korean Air has promised to spend $400,000 to study ways to extend the district south on Figueroa to L.A. Live, which already is emblazoned with spotlights and enormous animated digital signs.

That effort threatens to rekindle the long-running City Hall war over outdoor signs.

For years, as huge billboards proliferated across the city, many neighborhood leaders viewed local politicians as too willing to bend to the wishes of the outdoor advertising industry, which has spent hundreds of thousands of dollars to elect favored candidates.

Then, in 2009, newly elected City Atty. Carmen Trutanich began cracking down on illegal signs. Last year, he began tossing some building owners in jail, alleging that they had covered buildings with unpermitted supergraphics.

Since then, the billboard wars have been quiescent. The fight over Figueroa appears to be the first stirring of a new round.

The proposal put forward by Korean Air and its subsidiary company, Hanjin International Corp., would be visually dramatic. The lower floors of the hotel, planned to open in 2015, and the office tower that is scheduled to be finished two years later, would include an array of animated images, including digital signs that change as frequently as every eight seconds.

The upper 10% of each skyscraper would display digital signs that rotate the names of the project’s owner and major tenants. Covering multiple stories of the buildings between the 10th floor and the top would be graphics created with LEDs. The lights would be allowed on 18% of the upper-floor exteriors, according to the company’s representatives.

Those lights, spaced six inches apart, would be allowed only between windows, not directly over them. They also could not be used to form words or any kind of advertising logo, such as a Nike swoosh or a Coca-Cola bottle.
Ayahlushim Getachew, senior vice president for Thomas Properties Group, Korean Air’s partner on the project, said that type of lighting would be perfect for Figueroa Street, home not only to L.A. Live but also Staples Center, the Convention Center and possibly a new football stadium. Combined with various forms of digital advertising on the lower floors, the technology would lure pedestrians and make Figueroa Street a more vibrant tourist destination, she said.

Keller Williams Realty plans to go worldwide

March 18th, 2011
 
Mary Tennat hit it right on  – “It is such an honor to be a part of a company with such dedicated and driven people,” said Mary Tennant, president and COO of Keller Williams Realty. “Our associates are setting the pace in the industry. It is truly an exciting time to be in real estate and to be a part of the Keller Williams family.”
The L. A. Metro Home team is proud to be part of the Keller Williams family. We are dedicated to serving our clients with the highest level of customer service.  Paul Cruz
 
AUSTIN, TEXAS (March 8, 2011)—Keller Williams® Realty Inc., announcedKle that it is now the second-largest real estate franchise in the United States based on the total number of sales professionals, surpassing Century 21, according to research conducted by REAL Trends, a leading source of analysis and information in the residential real estate industry. The company claimed the number two spot with 77,672 U.S.-based associates at the end of 2010, just two years after claiming the number three spot from RE/MAX® International.
“Once again, this milestone achievement is a direct result of the dedication of our associates and the stability and profitability of the Keller Williams business models,” said Mark Willis, CEO of Keller Williams Realty, Inc. “It’s incredible to see the momentum that our associates and our offices have right now.”
This news comes one week after the announcement of positive growth by the company at their annual convention in Anaheim. Including its presence in Canada, Keller Williams closed the year with 79,315 associates and 701 market centers (offices). At the convention, Willis also shared that Keller Williams associate profit share was up 7.2 percent, with its agents receiving $34.6 million dollars back in 2010. Despite industry contraction, Keller Williams associates across North America also showed significant percentage gains in listings taken (+13%), contracts closed volume (+9%) and contracts closed units (+6%).
The company also formed Keller Williams Worldwide with Chris Heller as president, citing plans for global expansion, with plans to grow the division by an additional 75,000 associates in 10 years.
“Our goals are to expand the Keller Williams Realty model – with the focus on training and our sound business models,” said Chris Heller, president of KW Worldwide. “And, when looking for the right country and business partners in planning for expansion, we will not sacrifice the perfect fit with our mission, vision and the KW culture, those are absolutely necessary.”
Despite the sharp downturn in the real estate market, since 2005 Keller Williams Realty has grown 30 percent in agents, 40 percent in market centers, 21 percent in closed units and 11 percent in closed GCI.
Keller Williams Realty received many accolades in 2010 including:
·         Entrepreneur magazine, No. 1 ranked real estate franchise on the 31st Annual Franchise 500 list
·         J.D. Power and Associates, highest in overall satisfaction ratings from home buyers among the largest full-service real estate firms for the third year in a row
·         Inman News, Co-Founder and Chairman of the Board Gary Keller named one of the 100 Most Influential Leaders in Real Estate
·         Training Magazine, highest ranking real estate franchise on the annual Training Top 125, #47 Overall
“It is such an honor to be a part of a company with such dedicated and driven people,” said Mary Tennant, president and COO of Keller Williams Realty. “Our associates are setting the pace in the industry. It is truly an exciting time to be in real estate and to be a part of the Keller Williams family.”
###
 
About Keller Williams Realty, Inc.:
Founded in 1983, Keller Williams Realty Inc. is the second-largest real estate franchise operation in the United States, with 701 offices and almost 80,000 associates in the United States and Canada. The company, which began franchising in 1990, has an agent-centric culture that emphasizes access to leading-edge education and promotes an economic model that rewards associates as stakeholders and partners. The company also provides specialized agents in luxury homes and commercial real estate properties. For more information, or to search for homes for sale visit Keller Williams Realty online at (www.kw.com) Information about Keller Williams Realty’s international expansion can be found at (www.kwworldwide.com).

Mortgage rates skidding lower

March 17th, 2011
Click here to find out more!Money and Company
Tracking the market and economic trends that shape your finances.

Global woes send mortgage rates skidding lower

March 17, 2011 |  8:01 am

The travails of Japan and turmoil in the Middle East pushed mortgage rates south again, opening another window for anyone looking to lock in a 30-year loan in the mid-4% range.

Freddie Mac’s widely watched weekly survey of lender offering rates, out Thursday morning, showed the 30-year fixed rate dropping to 4.76% from 4.88% a week earlier, and mortgage pros were spotting even better deals for highly qualified borrowers.

Freddie Mac headquarters sign “Fixed rates are back down to 4.5%,” said Laguna Niguel mortgage broker Jeff Lazerson.

The 15-year fixed mortgage, popular with refinancers, dropped from 4.15% to 3.97%, the Freddie Mac survey showed — its lowest level since December.

Borrowers would have paid lenders an average of 0.7% of the loan amount to obtain the fixed rates, with the option to pay more to lower them further.

For those seeking an even lower rate — and not planning to stay too long in their homes — the 5-year hybrid offered an alternative. The typical start rate was 3.57% for the first five years on these loans before they become adjustable annually, according to the Freddie Mac survey.

Freddie Mac asks lenders what rates are available to people with solid credit and at least 20% down payments or 20% equity in their homes if they are refinancing. “Jumbo” mortgages too big to be sold to Freddie Mac and Fannie Mae, which vary by region but are those over $729,750 in Los Angeles and Orange counties, have been running about 0.6 of a percentage point higher.

Concern over fallout from the Japanese catastrophe, not to mention turmoil in the Middle East, has driven investors to the traditional safe haven of U.S. Treasury securities. That in turn drove down the yields, or effective interest rates, on the T-bonds.

Fixed mortgage rates tend to track the 10-year Treasury, whose yield fell from the 3.4% range before the quake, tsunami and nuclear disaster to the 3.2% range Wednesday. The yield on the 10-year note was edging higher again early Thursday as a new report showed U.S. inflation increasing, so the decline in home lending rates may not last.

Short sales, tall benefits

March 16th, 2011

Great information on the short sale process below. If you owe more on your home then it is worth and are about to default or have already missed payments there is an alternative to abandonment and foreclosure, contact L.A. Metro Home at www.lametrohome.com. Paul Cruz

Short sales, tall benefits

By Tara Nicholle-Nelson

Q: Would you let me know what the benefit of doing a short sale is?

A: Whether there are benefits to doing a short sale, and what they are, depends on a number of factors, including whether you are buying or selling, where you are located, and the specifics of your personal finances and situation.

For clarity’s sake, let’s start with a definition: A short sale is a home that is being sold for less than the payoff amounts owed at the time of sale to all outstanding mortgage holders and lien holders. More simply, to “short sale” a property is to sell a home for less than is owed on it, with the permission of all entities and persons who hold loans or liens that are secured by the property.

The way your question is phrased leads me to suspect that you are a seller, but I’m not 100 percent sure, so let’s talk quickly about benefits of buying a short sale as a buyer. There are really very few.

For a buyer, the primary motivation for buying a property that is a short sale is that the particular home desired has more loans and liens on it than will be paid off by the purchase price (and the sellers cannot or will not make up the difference).

It is not necessarily, or even usually, the case that short sales reflect a discount from the fair market value of the home to the buyer; the discount that gives rise to the “short” moniker is actually a discount to the seller from the amount they owe.

For buyers who are concerned that they may not receive absolutely clear title when they purchase a foreclosed home, due to bank problems with processing foreclosure documents, the short sale does offer the advantage of all parties — bank, buyer and seller — agreeing to the transfer of title, rather than the title being forcibly taken by the bank via foreclosure.

This is a small or illusory advantage, though; given the fact that short-sale approvals by banks can take anywhere from six weeks to eight months, with no certainty that they will actually close, the advantage to a buyer of doing a short sale arises almost entirely from the ability to secure a particular home the buyer wants very badly. Also, in some markets, many of the homes on the market are short sales, so there’s not much of a choice on the buyer’s part.

For sellers, though, there are many more factors at play. To begin with, usually a short sale is being considered only by a seller who owes more on the home than it is worth, who has come to the conclusion that he can no longer afford to keep the home for whatever reason, and is resigned to selecting between letting the home go back to the bank via foreclosure or selling the home via a short sale. So, let’s look at the pros and cons of short sales in the context of comparing them with foreclosures.

At the dawn of the housing crisis about four years ago, the conventional wisdom was that short sales were less injurious to the sellers’ credit scores than a foreclosure, and that’s why many sellers decided to go the short-sale route.

Since then, though, the FICO score algorithm has been revised and we’ve seen the credit effects of many more short sales AND foreclosures than we had before; the consensus among industry insiders is now that short sales and foreclosures cause roughly equivalent credit score damage — especially since banks have a tendency to mostly approve short sales on accounts that are in default, or behind on their mortgage payment.

As a result, most successful short sales incur credit damage not just from the short sale, but also from multiple late mortgage payments, similar to a foreclosure.

For purposes of income taxation, both foreclosures and short sales involve cancellation of debt income, which is normally taxable by the federal and most state governments. Currently, though, the Mortgage Debt Forgiveness Relief Act of 2007 exempts homeowners from incurring federal income tax when they divest of their homes through either foreclosure or short sales through 2012; most states have a similar rule, so there’s no advantage (or disadvantage) to a short sale there.

There are really two significant, possible advantages to selling your home via short sale vs. letting it go to foreclosure, as I see it. The first is that with some loan products, the post-short-sale waiting period before you can qualify to buy another home may be shorter than the post-foreclosure waiting period. There are lots of caveats and exceptions, but on an FHA loan, some short-sale sellers — namely those who are not behind on their loans at the time of sale, a small population indeed — may be eligible for a new loan immediately after their short sale closes.

For conventional (i.e., non-FHA) loans, one most common guideline requires a two-year waiting period following a short sale or deed-in-lieu of foreclosure (more on the deed-in-lieu in a moment), compared with a seven-year post-foreclosure waiting period for conventional loans.

To be clear, though, FHA loans only impose a three-year waiting period after a foreclosure, and FHA loans have a much lower minimum down payment requirement and similar interest rates (on today’s market) to conventional loans. As a result, the short sale effectively allows you to buy within one to three years sooner than you would if your home was lost to foreclosure, assuming that’s something in which you’d be interested.

The other advantage of a short sale over foreclosure is that in a short sale, sellers can sometimes eliminate their exposure to a later deficiency judgment or lawsuit by their second mortgage or home equity line lender.

In some states, a lender who forecloses on a home can later sue the homeowner for the difference between what they owed and what the lender was able to sell the home for; in a short sale, smart sellers (and their agents and attorneys) can negotiate for the lender to agree not to later come after the seller for any deficiency.

Similarly, it may be possible to get to waive later liability on the seller’s part as part of their agreement to accept less than they are owed in the course of a short sale. This can be a very big deal; even in non-deficiency-judgment states — these subordinate loans and lines of credit expose the former homeowner to liability for years following a foreclosure.

I like to think of these alternatives — short sale, deed-in-lieu and foreclosure — as stages in a single process. While it’s true that the post-short-sale waiting period is only two years on a conventional loan if the mortgage was current before the short sale, the reality is that most short-sellers find it nonsensical to pay the mortgage on a home they know they will be losing, one way or the other. Additionally, many banks simply don’t approve short sales on accounts with current payments. Also, I feel there’s no sense in agonizing over whether to sell your home via short sale when, ultimately, much of whether you’d be able to successfully do so is out of your control as a seller; without putting the place on the market, you don’t know whether you’ll get a buyer to bite or the bank(s) to sign off on a short sale.

As a result, for upside-down homeowners who are clear that they can’t keep their homes, one course of action some homeowners take is to stop making mortgage payments and immediately list their home for sale as a short sale. (The commissions and taxes on sale are paid out of the proceeds of the sale, if it goes through, FYI.)

If you get an offer and the bank approves the short sale, make sure to work with your broker and/or attorney to get all future liability for your loans and liens waived as part of the deal.

If you don’t get an offer, most banks will allow you to apply for a deed-in-lieu of foreclosure after you’ve had the property on the market for at least 90 days.

If the bank approves of that, you should still try to get all liability waived by the lender in first position and try to negotiate a cash-for-keys exchange to help defray your move-out expenses (note: you may still have to deal with subordinate lenders and Home Equity Lines Of Credit holders in the future). If the bank rejects your application for a deed-in-lieu, continued non-payment of the mortgage will eventually result in losing the home to foreclosure, in a time frame ranging anywhere from six to 20 months-plus following the first missed mortgage payment.

Whatever route you go, I would advise any seller considering a short sale to consult with a local real estate broker, mortgage professional, attorney and certified public accountant (yep, all of them) to get a personalized analysis of your situation and recommendations that take your whole financial and life picture into account.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.

The Historic Snowden House in Los Feliz

March 15th, 2011

The Sowden House, a Mayan Revival designed by Lloyd Wright, is back on the market after $2 million in restorations.

 Agave, flax and birds of paradise flank the steps leading up to the original copper gates, which have a water-and-leaf design. (Michael McNamara)

By Scott Marshutz

March 13, 2011

Nearly a decade after he purchased Lloyd Wright’s 1926 Sowden House and pumped more than $2 million into the historical property, designer Xorin Balbes has put the Mayan Revival on the market.

The thickly ornamented, steel-reinforced textile block structure backs up to the Los Feliz hills and is adjacent to Laughlin Park, a gated community that many film stars called home during the golden age of Hollywood.

Flanked by agave, flax and giant birds of paradise, steps lead up to the original copper gates, which have a water-and-leaf pattern.

The home has a rectangular design. Its rooms open to a long courtyard that once was an open-air theater where original owners John and Ruth Sowden hosted performances for their film-industry friends.

The first phase of the restoration is well chronicled: In roughly seven months the exterior stonework was restored, three rooms were combined into one to create a large modern kitchen, bathrooms were remodeled and a pool and spa were designed into the courtyard.

The towering concrete pylon fountains that once framed the studio-stage (now the master bedroom) were removed years ago. In roughly the same corners, local sculptor Pascal Giacomini created two 8-foot-tall gas torchieres fabricated from welded steel and chunks of colored cast resin.

A second round of updating commenced in 2008. The interior walls were covered in Venetian plaster, and the off-creme color was changed to bronze and silver metallics. “The metallic colors feel more masculine, which complements the heaviness of the concrete,” Balbes explained.

Kiln-dried oak replaced the existing wood floor, which had been sanded down so many times that cracks and nail heads were showing.

A stair-stepped, grid-patterned glass wall anchors the living room.

The vanity and backsplash in the entry powder room also feature a stepped design, inspired by a Mayan pyramid-styled roofline.

In the master bathroom, a brushed stainless steel tub appears to float over a pond with raindrops hitting the water and creating overlapping circles. “The floor design mimics the overlapping circles in the ceiling fixture, which was original to the house,” architect Paul Ashley said.

Sliding doors in the master bath lead to an outdoor area with a koi pond.

Most of the lighting was replaced and updated with vintage fixtures, and electronic controls were added throughout the main house. The pool was replastered and re-tiled.

Since he moved in, Balbes has held numerous parties and charitable events, including fundraisers for Project Angel Food, the Los Angeles Conservancy, the L.A. Youth Network and the L.A. Police Foundation. The house also has been rented out regularly for special events, including numerous photo shoots and television location work.

With his focus now on a project in Maui, Balbes is bittersweet about selling the home. “My heart and soul is wrapped up in the Sowden House, but I know it’s time to pass it on to someone very special,” he said.

The property was designated as a Los Angeles historic-cultural monument in 2003 and qualifies for property tax savings under the Mills Act.

Rehabilitate a property with FHA 203K

March 14th, 2011

First time buyers need not be discouraged by a home that needs some TLC. The FHA 203K is a viable solution to financing necessary repairs. Act know while the FHA loan limit is 729,250.00 but is set to drop to 625,500 Oct 1st, 2011 (limits applicable in expensive Real Estate markets such as Los Angeles.) Read below for details. Paul Cruz

Home improvements can be funded but options are limited

Planning a remodel? Homeowners can tap their savings, take out a personal loan or borrow against their equity. A viable alternative is a government-insured FHA 203(k) rehab mortgage.

By Lew SichelmanMarch 13, 2011
Reporting from Washington

The home-improvement sector, already benefiting from spending on rehabilitating foreclosed properties, can be expected to get an even larger boost in the coming months from owners who have deferred maintenance during the recession and newly minted empty nesters who want to turn Buffy’s bedroom into a home office.

But the question is, how are you going to pay for that new roof you needed two years ago or that kitchen remodel you’ve been yearning for since the kids left the roost?

Turns out there are still options available. There just aren’t as many of them, and with the exception of one tried-and-true alternative — a government-insured rehabilitation loan — the terms are somewhat more onerous than they were during the housing boom.

Of course, you can always rob your savings to pay for your home improvement. But that assumes you have enough cash socked away to cover the cost and still have some left over to pay for at least six months’ worth of living expenses in case you find yourself out of work or hit with a major illness.

If your credit is good enough and you have a strong, long-term relationship with your bank, you might want to consider a personal loan. Your signature, not the property, secures such loans, and the fees tend to be lower than other loan choices. But the rates are high, and the interest you pay is not tax deductible.

If you still have some equity in your place, you can borrow against that, either as a straight loan or as a line of credit that you can tap as the need arises. But even if you own your home free and clear without any encumbrances whatsoever or have a low-balance mortgage, you might be surprised how much less your home is worth than you realize.

According to the Federal Housing Finance Agency, owners lost more than half their equity from 2006, when the housing market began its free fall, to 2009. That’s when the economic recession ended, but not the housing recession. And according to some estimates, the bleeding hasn’t stopped yet, especially in markets where foreclosures and short sales still dominate.

Even if you have enough equity to borrow against, it’s going to be difficult to find a lender. It’s not as hard as it was, say, 12 months ago, but the home-equity business is far different from what it was during the go-go years when lenders often were glad to lend more than 100% of a home’s value.

One viable option, however, is the FHA 203(k) rehab mortgage.

This is the Federal Housing Administration’s rehabilitation mortgage. It has been a hot ticket for investors who are picking up distressed properties because it allows them to roll both the price of the house and the cost to make it habitable or marketable into a single loan. And some foreclosures are in woefully bad shape.

But regular buyers also can use the 203(k), especially if they want to do some work before moving in. And more important, current owners can use it as a refinancing tool to incorporate the cost of their home improvements into a brand-new first mortgage.

The FHA doesn’t make 203(k) loans directly. Rather, it insures loans made by primary lenders against the possibility that the borrower will not make his payments as promised. So you’ll have to search for a lender in your neck of the woods who is familiar with the product. But once you find one, you’ll discover that the guidelines are extremely liberal.

For example, there is no limit on how much you can spend on your improvements. As long as the total loan amount does not exceed the FHA maximum, you are good to go. The current FHA ceiling ranges from $271,050 to as much as $729,750 in the country’s high-cost areas. (For the maximum loan amount in your area, go to http://www.fha.gov.)

On Oct. 1, though, the ceiling in expensive markets such as California and Massachusetts is scheduled to revert to the old maximum of $625,500. And the Obama administration has signaled that the high-cost ceiling may be whittled down even further. In addition, the FHA’s annual insurance premium will be increased with the start of the next fiscal year.

As long as the “as improved” appraised value of your property — that is, the value of the house plus the value of the improvements — does not exceed the maximum loan amount, almost anything goes. Only luxury items are verboten, says Jim Ragan, who manages the 203(k) program for Bank of America Home Loans.

“You can’t build Bobby Flay’s outdoor kitchen or a swimming pool,” Ragan says. “But other than that, practically anything else is permitted.”

Actually, the extent of the project can range from something relatively modest to a virtual reconstruction. The cost must exceed $5,000. But as long as the existing foundation remains in place, you can tear down the house and rebuild it if you so choose. Even such “soft” costs as inspection fees, architectural fees, closing costs and permits can be included.

The formula for how much you can borrow is fairly straightforward. The maximum loan amount (subject to the aforementioned ceilings) is 97.75% of the improved value of the property.

If the appraiser says your project will add $125,000 in value to your $300,000 home, then you can borrow $415,438.

Better yet, there is no requirement for a reappraisal once the work is finished. Only a single up-front valuation is necessary.

lsichelman@aol.com Distributed by United Feature Syndicate Inc. Copyright © 2011, Los Angeles Times

There is money to be made in flipping

March 11th, 2011

April 26 and 27, 2010 I published two blogs titled “Still Flipping Out ” and “West Hollywood Fixer” . In West Hollywood Fixer I advertised a LMH listing for sale. It was priced at $650,000 but eventually sold at $520,000. to a private buyer last summer 2010. The property is at a location zoned to put up multiple unit buildings, however, the new owner  decided to refurbish the house instead. As you can see from the image to the left, it looks completely different today. They added a new master bedroom and a bathroom increasing the square footage from 1200 sq.ft to 1600Sq.ft. To go with the new look there was a new price of $949,000.00. After only 27 days on the market it sold March 7th, 2011 for $917,000.00. An increase in price of $397,000.00. A phenomenal profit. So to answer the question that many still have, “are people still buying then flipping a property?” The answer is still “Yes”. Paul Cruz

Still Flipping Out

April 26, 2010

Recently at one of my open houses I was asked, “are people still buying then flipping a property”. For those of you not familiar with the jargon the question is – “Are people still buying property and making the necessary repairs or improvements to put it back on the market for a profit.” The answer is “Yes”. Experienced investors know that their money is made up front. This means you buy a property below market value that has upside potential once the necessary repairs are made. Recently my business partner and I listed a property for a client that fit this bill. He originally purchased it as a foreclosure. During our open houses many of the would be bidders came through to comment on the improvements and share on how they had considered buying the property originally but were deterred by the many known and unknown repairs required, the property was being sold “As Is”. Our seller, after careful analysis of the area sales comparables and a very good knowledge of the location, made the move to purchase. He knew that if he were the successful bidder he could always complete the repairs on  the building and rent the units for income, the area rent average was high enough to cover any mortgage, taxes or insurance on the property with utilities being paid by the tenants. Or, he could sell the building recouping his renovation costs and any sales commissions while still achieving a profit . After the renovation he decided to sell. We had offers within the first two weeks of the listing, he accepted an offer and 45 days later we closed escrow. Yes, there is always an element of risk with this type of transaction but at the end of the day the risk taker can still turn a profit on the right buy. I want to stress that the knowledge of the neighborhood, attention to the area comparable values along with the guidance of an experienced Real Estate Area Specialist made for a very smooth profitable transaction.

West Hollywood Fixer

April 17, 2010

1050 Genesee FrontCity West Hollywood fixer upper ready to be transformed into your dream home. Large flat lot with room for pool. House is surrounded by mature greenery, gigantic Birds of Paradise, Bougainvillea and Cacti. There are 2 bedrooms 1 bathroom with plenty of space to expand. Plans are available to build 5 townhouses on this site. Very easy to see. Call Paul Cruz 310-498-4942.

Foreclosure Activity Drops

March 10th, 2011
By Alejandro Lazo and Jim Puzzanghera, Los Angeles TimesMarch 10, 2011 
Reporting from Los Angeles and Washington—

Big banks put the brakes on foreclosure activity last month as the American foreclosure system faced a major overhaul and homeowners challenged their lenders in court.

The decline in foreclosure actions — from default notices to bank repossessions — dropped the most in states where a court order is required to take back a home; such so-called judicial states do not include California.

Nationally, foreclosure activity fell 14% from January and 27% from February 2010, according to RealtyTrac. That is the largest year-over-year decline since the Irvine data firm began keeping statistics in 2005.

Evidence of a foreclosure slowdown comes as state attorneys general and federal regulators push the banks to revise the way they service loans, consider troubled borrowers for potential mortgage relief and conduct their foreclosure proceedings. Officials last week sent the nation’s biggest mortgage servicers a 27-page list of terms outlining these demands.

“The foreclosure process is stalled, and the seemingly impending settlement is delaying foreclosures,” said Mark Zandi, chief economist for Moody’s Economy.com. “The whole process is slowing down because of these issues.”

Negotiations involve the five largest providers of home loans. They include the arms of four national banks: Bank of America., Wells Fargo & Co., JP Morgan Chase & Co. and Citigroup IncAlso part of the talks is Ally Financial Inc., the former GMAC, which services loans through its GMAC Mortgage unit.

The wrangling began last year after revelations that some of the nation’s largest financial institutions relied on “robo-signers,” people who signed key court documents used in thousands of foreclosure cases across the country without reading or understanding them. The revelations led several banks to issue foreclosure moratoriums and lawmakers to question the integrity of the entire foreclosure system.

The February decline was probably related, in part, to banks resubmitting foreclosure filings that had been found to be faulty, said Rick Sharga, RealtyTrac senior vice president. About 70,000 foreclosure filings were resubmitted nationally last month, a number RealtyTrac did not include in its February estimates.

Courts have also delivered setbacks to some of the nation’s largest lenders in recent months, ruling on behalf of homeowners in key foreclosure cases. This increased scrutiny is probably leading banks to be more cautious with the way they conduct repossession proceedings, said Walter Hackett, an attorney who represents Inland Empire homeowners.

In seeking a global settlement, government agencies have proposed penalties against banks ranging from $5 billion to $20 billion. That money would be used to fund principal write-downs, officials have said.

But bank executives and Rebuplicans  this week began publicly pushing back. “We’ve got to be very careful that we don’t create an environment where we encourage people not to pay, and that’s the danger you have when you get into broad-based principal forgiveness,” Charlie Scharf, chief executive of retail financial services for J.P. Morgan Chase, said in a CNBC interview Wednesday.

Sen. Richard Shelby (R-Ala.) also on Wednesday blasted efforts by the state attorneys general and the Obama administration, calling them a “regulatory shakedown.”

House Republicans sent Treasury Secretary Timothy F. Geithner a letter asking him to explain the government’s legal justification for trying to impose sweeping changes on the way banks process problem loans, the Associated Press reported.

A total of 225,101 properties received a foreclosure filing last month, according to RealtyTrac, meaning 1 in every 577 homes was caught in some stage of the process. Big banks took back 64,643 properties, a 17% decline from January and an 18% drop from February 2010.

In California, 56,229 properties received filings, a 16% decline from January and an 18% decline from February 2010. Banks took back 12,734 properties, a 20% drop from January but a 1% increase from February 2010.

Luxury apartment, retail development to get underway…

March 8th, 2011

With construction cost down, developers move forward on projects providing much needed jobs and fueling the economy. Read below about another luxury development underway. Paul Cruz

Luxury apartment, retail development to get underway in L.A.

Mall magnate Rick Caruso is set to break ground on a $60-million development near his Grove shopping center.

By Roger Vincent, Los Angeles TimesMarch 8, 2011 

Few major commercial real estate projects have launched in Southern California since 2008, when the economic downturn crashed the party.

That may be about to change.

Mall magnate Rick Caruso is set to break ground Tuesday on a $60-million luxury apartment and retail development near his Grove shopping center in Los Angeles.

The eight-story complex will house 88 apartments over a Trader Joe’s grocery store on a site on Burton Way at La Cienega Boulevard that was once home to a popular seafood restaurant known for its entrance in the shape of a whale’s mouth.

Luxury project to start in L.A.

The apartment and retail complex backed by mall magnate Rick Caruso is shown in an artist's rendering. The $60-million development will have 88 units.

The project will be smaller than the Grove or Caruso’s vast Americana at Brand shopping and residential development in downtown Glendale, but it is one of a handful of substantial developments that have gotten underway since the downturn brought most building to a halt.

Economic recoveries typically feed on new residential and commercial projects, which prompt the hiring of construction workers and spending on such necessities as lumber, concrete and furnishings. Economists say the current recovery has supported little construction so far.

But the timing is right to start an apartment and retail complex, Caruso said. Construction costs are down from their peak a few years ago and financing was available because the apartment market is tightening. By the time the complex is completed in fall 2012, he said, “we are confident the market will be even stronger.”

Caruso said he was emboldened by the popularity of apartments his company, Caruso Affiliated, owns at Americana at Brand in Glendale. The 238 units there have been nearly fully leased in recent months at rents 30% above the local average, he said.

Caruso calculates that his latest venture’s apartments will appeal to affluent young professionals, such as people in the entertainment industry or doctors at nearby Cedars-Sinai hospital. Rents will run about $3,500 to $7,000 a month, he said.

The project — called 8500 for its address at 8500 Burton Way — will rise on a parking lot that was once home to the Smith Bros. Fish Shanty, an upscale seafood eatery that helped anchor La Cienega’s restaurant row.

Los Angeles television writer Mark Evanier, a devotee of the city’s long-gone classic restaurants, remembers the eatery fondly, in part for its abalone and warm potato salad.

“You entered through the whale’s mouth. It had kind of a clubhouse feeling, with big red booths you could sink into,” Evanier said. “It was the kind of place men ate.”

The Fish Shanty was heavily damaged by a fire in 1989, about a year after it closed. Caruso acquired the property a few years after the 1992 completion of a Loehmann’s-anchored shopping center just up the street. It was his first real estate development.

A real estate investor familiar with the neighborhood said the moment was here to begin development on some prime urban locations such as Caruso’s property near the SLS Hotel and Beverly Center.

“It’s probably a good time to put a shovel in the ground on some key sites,” said Drew Planting of Goldstein Planting Investments. In January, his firm acquired the well-known Palm restaurant and a Rolls-Royce dealership on Santa Monica Boulevard in West Hollywood.

“Rick has an ability to tap into the Los Angeles consumer’s zeitgeist,” Planting said. “If he builds the right product, it will move.”