Deadline nears for Orange County “informal” property tax appeals

4/30/09 update:  I’ve simplified this info into easy steps to determine if  you should file an appeal and posted it on our other real estate website.  Please click here for “Easy 3 minute test on if you should appeal your property tax.”

If you purchased a home in Orange County, CA between January 1, 2003 and December 31, 2007, you’re probably running out of time to save on your 2009 – 2010 property tax bill.

That’s because “informal appeals” of OC property tax assessments must be postmarked tomorrow at the latest.

Fortunately, the links below will enable you or your friends to determine how much you’re likely to save, and to complete the entire process in about ten minutes.

Whether or not you really need to appeal is another hot question, with Orange County Assessor Webster Guillory claiming that

Moody’s $3,995 report predicts housing bottom this fall

(2/13/09) In a report released earlier this month, Moody’s “Economy.com” predicts a nationwide home price bottom in metropolitan areas in the 4th quarter of 2009.

While we think that may be possible, we think there are a number of red flags Moody’s may be neglecting. We’ll explain our own theory of when to buy or sell after we discuss Moody’s new report

Giving some evidence that there’s no recession among economists, you can buy the report for only $3,995 from economy.com, or you can read Moody’s summary and key findings below for free:

I love Southern California!

(12/6/08) Today I’m writing as a native Southern Californian who’s lived here all of my 58 years, not as a Realtor.

Every now and then it hits me what a very special place I’m privileged to live in. Today’s one of those days. There are many things to love about Southern California, here are a few that hit me today:

1. The weather: December 6th, 2008. Forecast high in my home town of Los Alamitos in the mid 70s. Low in the fifties. Crystal clear, warm, sunny day. I took my shirt off when I went outside to jog a couple miles. We went to a local Christmas parade last night in shirt sleeves.
2. The sunshine: Every year I tally in my journal the number of days I don’t see the sun. It averages about five. Somehow, it seems like we get most of the little rain we get at night. And almost never on the Rose Parade. I tell my friends that was the deal the Rose Association made with God about a hundred years ago. No Rose Parade on Sundays, so people can get to chuirch, and no rain on their parade! Maybe the NFL should try that one!
3. The geography: I live about 12 minutes from the beach. 1 minute from a nice local park. An hour from the San Gabriel Mountains, which include a peak over 10,000 feet high and two major ski resorts. To the east, the San Bernardino Mountains include a peak over 12,000 feet high, several alpine lakes, and three more major ski areas. I could see both mountain ranges clearly this morning, as well as Mt. San Jacinto, just South of Palm Springs. (Did I mention the deserts?) It’s not all that hard to snowboard (or ski) and surf (or boogie board) on the same day, but I would recommend a wet suit for the Pacific in winter.
4. The rivalry: Right now, I’m taking a break from the USC – UCLA game, where my Westwood alma mater is doing better than expected. . . so far. USC-UCLA is the only true cross-town rivalry among NCAA Division 1 schools in the country! Both schools are within the Los Angeles city limits, only about 12 miles apart. Many USC students live in Westwood, by UCLA. When I went to UCLA, it wasn’t uncommon for athletes from the rival schools to room together. My best friend in high school went to USC while I went to UCLA.

Rival banners are flying throughout my neighborhood. Three of the sixteen families on my cul-de-sac have UCLA alum, but we have SC season seat holders & alum anchoring the start of the street. My mother and I both graduated from UCLA, my son’s girlfriend hopes to go there. My boss is a USC alumn. Both are great schools with great traditions. And a great, but generally friendly rivalry. As a tribute to the Trojans, let me share the words to USC’s famous Fight Song, at least the way I learned them at UCLA (with apologies to my friends from “Figueroa Tech”):

Fight on! for USC.

You pay a fee; you get a degree!

You’ll be smarter than me, because I went to USC!

I went to USC! I went to USC!

Just kidding. I think they’re both great schools, one public, one private, two of several dozen outstanding colleges and Universities ranging from Cal Tech to the University of San Diego.

I could go on and on. Diversity. Opportunity. Culture. Great churches. Great museums. Great beaches. Great mountain biking. Over 100 languages spoken in local schools. Forward thinking.

Sure, we’ve got a lot of people, but locals figure out ways to deal with and even enjoy it.

For me. So Cal is a wonderful place to live year round. If you live someplace else and want to move here, I just happen to know a good So Cal Realtor. Actually, quite a few, since Blair and I mainly cover West Orange County and Greater Long Beach.

Happy Holidays from Southern California!

Thanksgiving traditions

(by Dave Emerson) What a great idea–a day set aside for a celebration of thanks! In many ways, it’s my favorite holiday–less commercialized, more family oriented, with unique American roots and even a healthy main dish.

Thanksgiving is a uniquely North American holiday. It is only celebrated in the U.S. (4th Thursday in November), Canada (2nd Monday of October), and, more recently, in Grenada (October 25th).

The first “first Thanksgiving:” en Espanol!

The first Thanksgiving in North America was actually celebrated in Spanish in what is now St. Augustine, Florida. On September 18, 1565, 600 Spanish settlers landed there and immediately held a Mass of Thanksgiving for their safe arrival in the “New World.”

The second “first Thanksgiving”

54 years later, a group of 38 settlers arrived from England at a site about 20 miles upstream on the James River from Jamestown, to begin a second English settlement in the Colony of Virginia.

Although this settlement was a commercial venture of a secular nature, their charter stated, “We ordain that the day of our ships arrival at the place assigned for plantation in the land of Virginia shall be yearly and perpetually kept holy as a day of thanksgiving to Almighty God.” So when they arrived on December 4 the group’s leader, Captain John Woodleaf held their first Thanksgiving service.

The third & most famous “first Thanksgiving”

The “first Thanksgiving” most of us think of took place about two years later. . . or was it 4 years later?

On November 21, 1620, the Mayflower dropped anchor off of Cape Cod to begin a new English colony. The “Pilgrims” were primarily motivated by a desire for religious freedom, but they were joined in the venture by some who came for commercial reasons. They suffered a horrific first winter in America, losing almost half of their group, but new hope came after the harvest in 1621. Governor William Bradford decreed a three day feast, which the colonists celebrated with the local Native Americans.

Two years later, a lengthy drought threatened the harvest, and the colonists prayed fervently for rain. When their prayers were answered, an actual Day of Thanksgiving was declared by Governor Bradford for July 30, 1623. This was more of a church observance than a feast day, but over time the two distinct harvest events have been combined into our Thanksgiving holiday.

The first “national” Thanksgiving

In 1777, the second year of the Revolutionary War, the Continental Congress issued the first national Thanksgiving Proclamation, declaring December 18th as a national day of Thanksgiving, encouraging the governors of each of the thirteen colonies to set the day aside for “solemn thanksgiving and praise,” as well as prayer for the spiritual and material success of the newly independent colonies.

President Washington’s first Thanksgiving proclamation

On my birthday, October 3, but a few years earlier, in 1789, at the urging of Congress, President Washington declared Thursday, 11/26, a “day of public thanksgiving and prayer.” Although clearly non-denominational and non-sectarian, the proclamation was deeply religious.

Here is the text of that proclamation:

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor, and whereas both Houses of Congress have by their joint Committee requested me “to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be. That we may then all unite in rendering unto him our sincere and humble thanks, for his kind care and protection of the People of this Country previous to their becoming a Nation, for the signal and manifold mercies, and the favorable interpositions of his providence, which we experienced in the course and conclusion of the late war, for the great degree of tranquility, union, and plenty, which we have since enjoyed, for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted, for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.

And also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions, to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually, to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed, to protect and guide all Sovereigns and Nations (especially such as have shown kindness unto us) and to bless them with good government, peace, and concord. To promote the knowledge and practice of true religion and virtue, and the increase of science among them and Us, and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.

Given under my hand at the City of New York the third day of October in the year of our Lord 1789

Thanksgiving wishes, 2008

This year Thanksgiving again comes in the midst of trying times–at least by modern standards. We really have no complaints, however, compared to that first New England Thanksgiving in 1621, where half of the colony’s residents had died since landing a year earlier!

A thankful attitude makes life more enjoyable and more worthwhile. Our real estate and stocks may be worth less than they were a year ago, but we are still richly blessed, and have much to be thankful for.

I’m going to try to make some time to count my blessings and thank God for them, between cleaning, cooking, eating, and then shopping. Also time to reflect on what’s really important, and to ask God’s blessings and mercy for myself, my family, and our nation.

May you have a blessed Thanksgiving as you celebrate our nation’s oldest and most unique holiday tradition!

Southern California on Fire

(Saturday afternoon, 11/15/08) Being a second-generation native Californian, I tend to take our local disasters in stride. Local’s joke that we really do have seasons out here in So Cal, they’re just not the traditional winter, spring, summer, & fall outsiders are used to. Our seasons are more like flood & mudslide season, riot season, fire season, and earthquake season. (I left off “drought,” but that’s more like a year-round thing every few years).

Trouble is, in the last few years fire season keeps getting longer.

I just flew back from a wet, chilly, but fall-foliage beautiful two days in Nashville on Thursday night. During the last half of my non-stop Southwest flight home the “Tea Fire” in Montecito ignited, spread, and burned several dorms and other buildings in my wife’s Alma Matre, Westmont College. I teased my son-in-law that he needed to keep I couldn’t leave the state for two days without Barb’s college burning down. Fortunately, injuries and loss of life was minimal, but hundreds of gorgeous acres and scores of expensive mansions were lost, along with the Tea Garden well known among Westmont students.

Fortunately, the winds died down on Friday, but when I got up this morning and saw the Santa Ana winds gusting through our Los Alamitos neighborhood, I knew the fires would be back today. Before we even turned the TV on for the non-stop coverage I told Barb to expect at least 4 new fires and 500 homes destroyed. Sadly, it appears that I may have underestimated.

Most of our natural disasters aren’t really that widespread in their devasation. This week’s fires, for example, will probably devastate less than a hundredth of 1% the homes in Southern California. That’s still hundreds of homes and millions of dollars, but most of us aren’t severely impacted.

The smoke and pollution will be felt by millions, lots of patios and cars will need to be washed off sometime early next week, but life essentially goes on.

Fire season is brought on by the infamous “Santana” winds, often mistakenly called “Santa Anas.” The word is probably a contraction of vientos de Satan, Spanish for “winds of Satan.” These are hot, dry offshore winds that descend from the Great Basin through the Mojave desert down into Southern California, primarily in spring and summer. While the threat of fire is generally greater in the fall, with recent dry winters fire season has extended to include spring and, now, late fall as well.

Los Angeles weather is the weather of catastrophe, of apocalypse, and, just as the reliably long and bitter winters of New England determine the way life is lived there, so the violence and the unpredictability of the Santa Ana affect the entire quality of life in Los Angeles, accentuate its impermanence, its unreliability. The wind shows us how close to the edge we are.

—Joan Didion, “Los Angeles Notebook”

Ultimately, additional restrictions will be imposed on construction and additional clearance and greenbelt requirements imposed in fire prone areas. Our wildfire challenges are actually easier to manage and less widespread than California’s earthquake risks.

To most Californians, our natural disasters are less ominous than those in so many other regions of the nation or the world. Most of us regard them as one trade off for 360 days of temperate sunshine a year and the many other benefits of living in a dynamic, diverse land of opportunity.

While our thoughts and prayers and help will be going out to our neighbors in these days of loss, while it’s annoying to curtain outdoor activity and deal with the smoke and ash, most Californians still consider this our Golden land of opportunity, and really wouldn’t want to live anywhere else.

(photos from L.A. Times’ Gallery

A $5, 2 hour seminar to get buyers ready for the bottom

(10/8/08) I’ve been teaching brief buyers’ and sellers’ classes for the city of Lakewood for about 20 years now. I like to do a buyers’ class early in the fall each year in anticipation of the market bottom that usually occurs during the winter months (see “Real Estate 101: Our 2 market cycles.”)

Several months ago we scheduled this year’s class with Lakewood’s Community Services Department for this Saturday, October 11, from 9 – 11 a.m. at Lakewood’s Mayfair Park (details & registration link here). At the time, we were anticipating at least the annual market bottom and possibly a cyclical bottom as well, but we weren’t exactly anticipating the events of the last few weeks!

The current market presents that rare combination of low prices and low interest rates that usually mark a bottom. That bottom could be occurring right now, or it could still be years away. Regardless, smart buyers should prepare now for the bottom that eventually will come.

Our little class includes basics of buying, an overview of foreclosures, break-out sessions for first time buyers, move-up buyers, and investors, an overview of current lending options, and an up to the minute discussion of the current market and what may be anticipated. It’s open to all, whether Lakewood residents or not.

Blair and I were both teachers when we first went into real estate, and we enjoy getting back into a classroom setting from time to time. My decision to buy my first home way back in 1976 was largely based on information I received in a similar, but longer, Saturday class taught by Los Angeles realtor Scotty Herd for UCLA’s extension program. It gave Barb and I the information, tools, and confidence we needed to make that first purchase. The buyer and seller classes we do give us an opportunity to discuss real estate in a classroom, rather than selling, setting.

If you know of someone who may be thinking about buying in the next year or two, this course would be an excellent opportunity to get some useful information.

We’ll also be doing a similar class for sellers on January 24, same place, time & price (info & reg link here). You can also call us directly at 562.822-SOLD if you have questions or want additional information.

A Sellers’ Market!?!

“ECONOMY HAS HEADS SPINNING” my morning paper 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?

Sort of.

What’s going on now:

You see, what we try to do here, as our masthead says, is give you “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 Southern California.

So we’re 3 months ahead of DataQuick, whose monthly median closing price stats just reported August closings on sales that were negotiated mostly in June. We’re 5 – 6 months ahead of Case-Schiller, who 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 over the past 2 weeks:

• 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 that I told you about (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!
• Yesterday 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 are about to make an offer.

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 ticked up a bit since then, but are still near record lows.

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 (we give you two links for that under “Useful Links” in the column to the right, but we prefer the data in the “Preforeclosure” link.) A month ago, it looked like homes entering foreclosure were peaking, but recently released August stats are up for both Orange and Los Angeles Counties. 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. Pretty much what we said three weeks ago, except it’s happening now, not early next year.

Is this the bottom?

For SFRs in the coastal plane of OC & L.A. Counties, maybe so, maybe this December, maybe later. It largely depends on the economy, interest rates, and when foreclosures peak. Stay tuned, & we’ll keep you posted on what we’re seeing here on the front lines of So Cal Real estate.

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. Registration & more details here. It’s just $5, & we’re not selling  cds or books.  We’re both former teachers, & we enjoy a chance to discuss real estate in a “classroom” setting.

An intro to Los Alamitos & local politics

Los Alamitos, the second smallest city in Orange County, sits just east of Long Beach on the Orange County/Los Angeles County line. Because most of the city is in the 562 area code, many people think its in Los Angeles County. It shares it’s zip code and post office with Rossmoor, a large, upscale unincorporated trac. Los Al shares its highly-regarded school district with Rossmoor and Seal Beach.

Los Alamitos has been my home town for twenty years. It’s a great place to live. In many ways ranging from location to schools to climate it may be one of the best places in Southern California for someone with a middle class income to buy a home. (In fact, I just happen to have a beautiful 5 bedroom pool home on a cul de sac that we recently listed–details and virtual tour at LosAlDreamHome.com.)

Like any town, Los Alamitos isn’t perfect. Two things about it bother me the most. Although Los Alamitos has fewer than 7,000 registered voters, it’s in the big leagues when it comes to traffic congestion and hostility on it’s City Council. It’s a case of periodic gridlock on the streets and at city hall.

As a Realtor, my job for the last 28 years has involved getting buyers and sellers to work together for their mutual benefit. I’m a big believer in “win-win” negotiating. So I decided to toss my hat in the ring for this year’s Los Alamitos City Council election, to see if I could get our divided City Council to work as one team instead of two. In a town this small, we have more things that unite us than that divide us.

I recently started a blog, LetsFixLosAl.com, for several reasons:

• To promote a greater spirit of teamwork on Los Alamitos’ City Council.
• To suggest and promote strategies to reduce the occasional gridlock on Los Alamitos’ streets.
• As a 21st century town hall meeting in cyberspace where citizens can discuss these issues 24/7/365.

Oh yeah. The blog seemed like an inexpensive way for a political neophyte to compete for two council seats against three former mayors and another neophyte.

LetsFixLosAl.com is less than a week old, and only has a few posts up, but I plan to add to it several times a week, chronicling first-hand the adventures of a newbie small town politician. At this point, I’d also appreciate input from both local residents and anyone else with a good idea to share.

Check it out, and let me know what you think. It should at least provide some interesting insights on politics from a front-line perspective. Pretty much what we try to do with Southern California real estate on this site.

Are new homes bottoming in Southern California?

Frequent readers know Blair & I have been candid about what we don’t know during this amazing real estate market cycle here in Southern California. (See “How low will prices go?“)

But today, as I was looking through the Orange County Register’s Friday new homes advertising section, it suddenly hit me:

Prices on most So Cal new construction have either already hit bottom, or will be hitting bottom between now and December 26.

So, if you’ve always wanted to live in a new home, I suggest you start doing your research now.

Why now?

Simple: Supply and demand. New home permits have been way down for over a year now. Most developers may be as addicted to building as a drug addict is to dope, but they aren’t crazy. And even if they are, their bankers aren’t. There just isn’t that much additional inventory coming onto the market.

In most segments, we’re in the final phases of a clearance sale, and the stores haven’t been ordering new inventory for some time. Essentially, they’re going of business–some permanently, others temporarily. And the “going out of business sale” is winding down.

Exactly which new construction?

In the developed areas of Orange, San Diego and Los Angeles Counties, the lower end of new construction will probably hit bottom first, as may also be the case in resales. That would include almost all starter homes, especially condo/townhomes/lofts and “C” neighborhood detached homes. As Lyon Homes reported today, the lower end homes are now the bulk of their sales, allowing them to sell out these tracts earlier.

In the outlying areas, it’s a bit trickier due to the impact of high commuting costs and economic problems from the building slowdown itself. The areas with shorter commutes will most likely bottom first. High end, move-up tracts may have further down to go as well. Do your homework and look for desperate builders or whole tracts that are now bank-owned.

What about resales?

The glut of bargain basement new homes needs to be cleared out to stabilize resales, so this would be a step in the right direction. There are two additional problems facing resale housing:

1. The glut of foreclosures and “short sales,” especially on the low end.
2. The lack of the normal buyers for move-up homes, because most owners of starter homes either already moved up during the boom or else have had their equity disappear during the plunge. For example, last weekend we held open a beautiful Los Alamitos five bedroom, three bath pool home. Over 50 people came through, and most of them fell in love with the home. Unfortunately, almost all of the potential buyers had another home they needed to sell first. In most cases, that home had been taken off the market because they couldn’t sell it at a price that they felt they needed to make the move, including one family that was making a lateral move back to California from Florida. (The first Florida summer will do that for you!) Same problem that Lyons is having with move-up homes. On the flip side, prices have been “stickier” on most move-up resales, due to both a lack of competition from foreclosures and the ability of their sellers to wait out the downturn.

For resales, we’re sticking for now with our latest projections (see”An optimistic update on our projections of a home price bottom“). In short, we think the odds are for a bottom either this coming winter or next, but it’s too close call as to which.

What to do?

• If you’ve got your heart set on a new home, start looking now and be ready to close before year’s end.
• If a resale will do, get your “ducks in a row” by figuring out what you’ll qualify for and what your home might sell for if you’re moving up, or if you’d be better off refinancing out your down payment now and renting it out. (You’d need to close escrow on it within 3 years of moving out or you lose your tax free $250,000/$500,000 exclusion of capital gains.) This winter should be good–prices have already dropped more than I’ve ever seen in my 28 years as a Realtor and broker. But prices might be better in winter of ’09-’10.

We think the deciding factor should be your personal situation. For more, check out our classic post on “What to do when nobody knows what’s next.” Of course, we’ll try to answer any question you leave in the form of a comment below. You can also feel free to go to “About Us” and scroll to the last few lines to get our phone numbers, or simply put “contact me please” in the comment section below (click the word “comments” below if there’s no box to complete).

Times of great opportunity are ahead. For many new home buyers, they’ve already arrived, and quite possibly for resale buyers as well. Praying for wisdom might be a good place to start!

The price bottom for Southern California home may be getting closer!

July 26, 2008: Let’s start off by reiterating that this is risky business. There are lots of variables that could change in the months ahead, from interest rates to employment to the international scene. That’s why we continue to insist that nobody can predict the bottom with absolute certainty, as Freddie Mac’s chief economist Frank Northaft told us last fall. (See “How low will prices go?“)

Be that as it may, everybody wants to take their best guess at what’s coming next, and recent developments are making us think it may be time to update our projections.

The Housing Relief Bill

A big reason for our increasing optimism is President Bush’s pragmatic decision this week to accept $3.9 billion for cities to buy up and fix foreclosed properties as a trade-off for federal guarantees for Fannie Mae and Freddie Mac which should calm both the stock market and stabilize lending.

Although the additional deficit spending the bill may create will put some more upward pressure on interest rates, we do think it will go a long ways to reducing the glut of foreclosures. On the whole it seems to be a surprisingly good example of well-crafted, bipartisan legislation.

Besides the money to buy up foreclosures, other features in the bill that we like include:

1. A permanent increase in loan limits for Fannie, Freddie, and FHA to $625,000 in the highest cost areas like much of Southern California.

2. A tax credit of up to $7,500 for first time buyers who close escrow between 4/9/08 and 7/1/09. (We think this will increase demand, and recommend first time buyers contact us now so we can set them up with a personalized “web portal” which allows them to search, save, and categorize properties on the SoCal Multiple Listing Service. 562.822.SOLD.)

3. $11 billion in tax free municipal bond authority for states to set up low interest loans to first time buyers.

4. It tightens regulations to avoid future repeats of the recent mortgage meltdown.

5. Making FHA mortgages more available, especially for “work outs” of over encumbered (“upside down”) borrowers who qualify and whose lenders will participate by writing down the loan to 90% of the home’s current market value (details in the article below).

6. The complex but intriguing arrangement that encourages loan workouts instead of foreclosures or “short sales.” The lender reduces the loan amount to 10% below current market value in exchange for getting the loan off their books. The borrower agrees to share that 10% and future equity with the taxpayers. And we the taxpayers (also known as the government) guarantee the new loan through FHA, provided the buyer can qualify.

The total revised package is expected to sail through the Senate and Bush has now promised to sign it. While dangers of inflation and unemployment still threaten, we think the housing bill will have a more positive impact than we originally thought. Combine that with the fact that the market seems to be finding a bottom in terms of price, and we’re hopeful the positives will outweigh or at least neutralize the negatives of the normal summer slowdown, foreclosures, and shaky employment.

With that in mind, we’re now revising our projections as follows:

Our Current Best “Guestimate”

40% chance: Bottom sometime between now and the end of winter:

We think the limited time offer of $7,000 tax credits for first time buyers will provide a significant stimulus to a market where we’re already seeing multiple competing offers on well-priced bank REOs. At the same time, cities will begin bidding for some foreclosures, and others will see favorable workouts with the lenders which the bill makes possible.

Some of the bills provisions don’t kick in until October, but the tax relief is retroactive. We think the bottom will most likely coincide closely with our normal seasonal cycle, which bottoms in December or January. (We’re talking about escrows that open in December or January, which would close in February or March be reported by DataQuick a couple weeks later. See “Predictions 101: Our 2 market cycles” and “Two big problems with DataQuick’s monthly median price reports.“) However, it’s possible that the bottom may actually come earlier.

Of course, nobody will know for sure it’s a bottom until prices start rising in the months following. Then we’ll be wondering if it’s a false bottom through the following winter.

Which So Cal County will bottom first? All real estate is local, and we think Southern California’s Coastal Plane will hit the bottom first, followed by the desert and Inland Empire areas possibly a year later. This is due to the impact of gas prices on outlying areas plus overbuilding and more foreclosures there. Of the larger So Cal counties, we expect Orange County home prices to bottom first because it’s the most built-out and has the lowest percentage of starter homes. We expect either Los Angeles or San Diego County home prices to hit bottom next, followed by Riverside and San Bernardino Counties.

Of the smaller counties, Santa Barbara looks like it’s already bottomed, with June foreclosures there hitting a 14 month low. Ventura County homes may be nearing a price bottom, while the smaller inland counties are largely in the same boat as the Inland Empire.

The other 60%: There are at least three challenges to a bottom this winter:

1. Inflation pushing interest rates up and reducing affordability.
2. The economic slowdown that we seem to be entering, with major job losses in automotive, construction, finance and real estate.
3. The continuing onslaught of foreclosures and resulting REOs.

40% chance: Bottom next winter. If the economy stabilizes and foreclosures slow down by year’s end, we could hit a bottom this winter. This is still the most common pick by most economists–recovery sometime in 2010, and has been consistently for the past year. We think the recent sharp decline in prices may speed things up. What would help even more would be a resumption of safe oil drilling offshore and in Alaska, with an excess profits tax being used to spur energy alternatives industries.

Again, we’re talking about the Coastal Plane areas of L.A. Orange and possibly San Diego Counties, with the Inland Empire and desert regions bottoming sometime in the following 14 months.

20% chance: Bottom later than next winter. Either a lengthy recession, or a bottom late winter of 2010-2011.

What to Do?

We still think market timing shouldn’t be as important as your personal situation in making housing or maybe even investing decisions. (See “What to do when nobody knows what’s next.”)

Sellers: Act now or be prepared to wait–maybe several years.

Buyers: There’s a significant chance that what we’re seeing now is as low as prices are going to go. But we’re saying there’s an equal chance that the bottom won’t hit until a year from this winter. And we’re also saying nobody can know for sure.

If you’re in a position to buy, start looking now & if you see something that works for you, make an offer at a price you can afford. You can use the MLS links in the right hand column to directly access any MLS in Southern California.

As a minimum, buyers should start saving your down payment (new concept, I know–check out wikipedia or google it) and get your credit in order (another new concept for some of us, but necessary now.) Do your Christmas shopping & card writing now, & see how the economy’s doing in November–it may be time to start writing lowball offers. Or to wait another year.

Although predicting a 40% chance of a bottom in the next five months hardly echos NAR’s “buy now!” theme, it’s dramatically more optimistic than we were just a few weeks ago. Of course, new developments could reduce or encourage our optimism. Stay tuned, & we’ll keep giving you our best projections based on what we’re reading, what we’re seeing on the front lines, & our experience of over 30 years in this amazing, interesting, and unpredictable business.

What Would Really Help

The “Housing Bailout Bill” seems like a pretty good example of Congressional give-and-take for the common good. We think there are two logical but somewhat radical additional steps our politicians need to take now to protect our economy and our way of life:

1. Modest steps to federal deficit reduction, specifically, reducing “pork.” I’m thinking of wasteful spending to get Legislators re-elected, like Alaska’s famous “Bridge to Nowhere.” Passing a bill eliminating such Congressional “earmarks” and also giving the next president a line-item veto would be a very simple step in the right direction. I’d also favor a mandatory deficit reduction bill that would impose across-the-board spending cuts and tax increases if our politicians couldn’t come up with budgets that meet a long term schedule to reduce the federal deficit. Taxing our great grandkids is the ultimate in “taxation without representation,” which our forefathers rightly considered tyranny.

2. Reduce the trade deficit by allowing careful new drilling for oil, but with a catch. The U.S. is sitting on more untapped oil reserves than any country in the world. I say use the revenue from that oil to create the best clean, renewable energy industries in the world. Open up more areas for safe drilling but dramatically increasing leasing fees on federal lands. Then split the billions in increased federal revenue between federal deficit reduction and renewable energy innovations.

That would undoubtedly strengthen the dollar, stimulate the economy, reduce the trade deficit, and lead to a cleaner environment. In the case of Alaska’s Arctic refuge, drilling would sacrifice less than .01% of ANWR to actual exploration in return for a $137 – $327 billion reduction in our trade balance (see Wikipedia, “Artic Refuge drilling controversy.”) We can keep sending our the money to the Saudis, or keep it here and use it for high paying jobs, deficit reduction, and energy innovations. Seems like a no-brainer to me, but I am a Realtor. . . .

We welcome your questions or comments