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

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

Time to change our Bookmark

4/25 update:   For our newest post, click here:  “A post from Tennessee:  Update on out of state investing“

Starting today, to find our most recent posts, you’ll need to look elsewhere. Specifically, SoCalRealEstateNews.com.

For example, we finally got that post up on who might want to think about buying now. (“More bad news: Time to buy?“) But you’ll have to drop the “wordpress” from the domain name to find it.

You see, we’re in the middle of switching our domain from wordpress to our own host, which we think will give us some greater flexibility in several areas. Or at least we hope so. (Remember, we’re professional Realtors, not bloggers, so we’re doing the best we can as we go. Thankfully with some assistance from my 16 year old son, but high schoolers are busy people. So your input and suggestions on this are more than welcome.)

So right now, you’ll find “SoCalRealEstateNews” in two places, SoCalRealEstateNews.wordpress.com (that’s where you are now, with a photo of Blair and Beth at Crystal Cove across the top), and SoCalRealEstateNews.com (with a closeup of green leaves at the top, for now at least).

For now, when you click on “internal” links, you’ll sometimes find yourself switched to the other site, but the posts themselves are the same. Except for now we’re only adding new posts to the new site.

So if you’ve got us bookmarked, thanks, but please change that bookmark to our new site.

If you’ve set up an RSS feed from our site, you’ll want to switch that over too.

Now we think the world of WordPress, and are still using their software, just not their hosting. Eventually we may phase out the .wordpress.com site–time will tell. Right now we’re just trying to figure out how to send a “change of address” note to Google & company. (If you know, the comment option is right here:)

Top 5 Ways Not to Pick A Listing Agent

Over 30 years of selling property has shown us that selecting the right agent may be the single most important step to a successful sale or purchase.

Unfortunately, experience also has shown us that most sellers pick their agents for the wrong reasons, and they pay a huge price for that mistake.

Yesterday, we listed 5 of the most common mistakes sellers make in choosing an agent. Today we’ll identify the top 5, starting with one we’ve seen a lot of in the last two years, picking their agent based on:

5. Past performance as a buyers’ agent, in an easier market, or in another area. These might be good reasons to consider an agent, but they don’t prove anything about selling your property in today’s market. We could give dozens of examples from our experiences, but we’ll settle for just one, from baseball:

Just because Tim Salmon played great outfield for the Angels three years ago doesn’t mean he can play shortstop for them today. Let alone Center for the Lakers. Get the picture?

4. “She works my neighborhood.” This is called “farming,” and we do it ourselves. It’s a good way to get to know a neighborhood over time. But the number of notepads left on your porch or postcards mailed to your home proves neither competence nor integrity.

Until the agent’s been “farming” your neighborhood for at least four years, it proves nothing. In this market, you’d need to go back 17 years to get to the last major downturn!

Even with 17 years experience, you’d still want to investigate track record, and speak with sellers who’ve worked with him or her. The fliers or postcards may only tell half the story.

“Neighborhood specialists,” or “listing farmers” are like preachers, car salesmen, or Realtors as a whole. Some are ethical, competent, and diligent, but many others are not.

3. Lots of sales. This could be good or bad, but it raises a red flag. Most high volume agents operate with what they euphemistically call a “team,” which can also be good or bad.

We have a team–Dave, Blair, a transaction coordinator who is shared with several other agents, and a number of affiliates from escrow officer to termite inspector who are the best we can find. But other teams consist of several licensed and unlicensed assistants who pretty much do all the work for the named agent. You often never see the “superstar #1 agent” again after you’ve signed the listing.

At one seminar I recently heard the superstar speaker describe running into some poor seller of his in an airport. The superstar had “sold” his home a few months earlier, and he was actually bragging to us that this was the first time he’d ever actually met his “client.”

One more true story. A few years ago, the buyer for one of our listings was represented by one of those superstar top producers. When it came time for the walk-through I showed up to keep an eye on things. When the buyers came to the door (alone), I introduced myself as the listing agent. The buyer literally hugged me! “Oh my God! A real, licensed agent–not just an assistant!” she exclaimed. “We haven’t spoken with one since we signed the purchase contract seven weeks ago.”

Turns out, everything had been handled by unlicensed “assistants,” which were pretty much part-time kids. We’ve seen the same thing with sellers. They were “working” with top producing agents, but they rarely saw them, and weren’t happy campers.

2. Great listing packet or presentation. This doesn’t prove anything, either. Just because a politician’s a great campaigner with good commercials doesn’t mean he or she will make a good president or governor. It probably just means they bought a good listing presentation software package. In fact, most agents know they can easily get any listing if they dress nice, are friendly, have a persuasive presentation and, most important if he or she . . .

1. Tells you what you want to hear. Works every time, and most agents know it. There are even terms for it in the business. When an agent tells you what you want to hear about price, it’s called “buying the listing.” Happens all the time–then the listing sits for months while the agent tries to get a price reduction. Worked in ’04’s up market, but not today!

Sellers have words for it, too. “Great rapport!” “We felt so good about her!” “We just really clicked!” “She was so bubbly!”

It’s kind of like interviewing three doctors about your medical condition, then going with the one who tells you every thing’s fine. Tempting, but not real smart. Better to go with the best doctor, regardless of whether you like with his diagnosis or not.

Telling you what you want to hear (instead of the truth) is amazingly effective. It appeals to the sellers’ pride as well as to their wishful thinking. Kind of like flattering them while promising to make their dreams come true. Not that different from how most politicians operate, and you know how good they are at keeping their promises.

If two people agree on everything, one of them is not necessary. If an agent agrees with you too much, they’re either lying or incompetent, or you don’t need an agent at all. It’s probably one of the first two.

You need an agent who knows and tells you the truth. I remember telling an older seller who was “interviewing” us that they really needed to remove the velvet flocked red wallpaper they loved. I knew they didn’t want to hear it, but it was the truth. A few days later I got the call. “Dave, we decided to go with Suzy Q. We just had such great rapport, and she really loved our decorating.” Guess I’m glad somebody did.

If you want to feel good, go find a friend. But if you want to sell your house for top dollar in any market, especially today, go find an honest, experienced, diligent agent who will tell you the truth.

In another day two, we’ll give you some tips on how to do that. In the meantime you can always post a question or give us a call. 562.822.7653.

What to Do When Nobody Knows What’s Next

In our last post we explained why we agree with Freddie Mac’s chief economist, Frank Northaft that “We just don’t know [when the market will hit bottom or how low prices will drop] because we’re in totally uncharted territory.”

As if to illustrate our point, since we wrote that we’ve seen huge swings in stocks as Federal Reserve leaders twice surprised the markets with supposedly clear indications they intend to further reduce rates.

Now, as promised, we tackle the logical next question of what buyers and sellers should do in such an uncertain situation.

The key is to base your decision making primarily on what you know, not on speculation about market trends. Market timing is nice, but it’s highly speculative and subject to surprises from the Feds, politicians, consumers, other nations, and even terrorist attacks. Instead of trying to precisely time the market, figure out what you really want or need and brainstorm options, work, & wait until you find an acceptable solution.

As my mortgage broker once told me when I was trying to time the interest rate market in locking a loan, “if the loan works at the current rate, go ahead & take it. ” In other words, don’t gamble on something that works. As my mother used to say, “A bird in the hand is worth 2 in the bush.”

This approach usually works with buying, if 3 conditions are met:

1. You’re planning to live in the home for a long time, 5 – 10 years.

2. You’re buying with a loan that’s fixed for at least 10 – 15 years.

3. You’ve got fairly stable income.

If it works, do it. The better it works, the more you should do it. Especially if you like the location and the floorplan. After all, location is the one thing you can’t change, condition is the easiest thing to change.

The same goes for selling. If you can sell & move up to your dream home at today’s prices, don’t roll the dice on prices going up. Especially any time soon. A year from now you may wish you’d sold today. What your neighbor got two years ago is irrelevent–the question is, will today’s price work for you?

For those of us who are people of faith, we’d add in prayer. God is the only one who does know what the future holds, but he’s also a lot more concerned about our character than our money. (Actually God’s the only one with a perfect perspective on money, too.)

King Solomon was the wisest and richest monarch of his day and he said it well: “Trust in the Lord with all your heart, and don’t rely on your own understanding. In all your ways acknowledge Him, and He will direct your paths.” (Proverbs 3:5,6) That worked almost 3,000 years ago, & it still works today.

A Pretty Good Summary of National and Local Trends

The Wall Street Journal released their quartlerly survey of housing-market conditions in 28 major U.S. metropolitan areas today, along with an analysis that’s rings true with what we’re seeing throughout our region.

 The article’s title pretty much sums it up:  “With Buyers Sidelined, Home Prices Slide.”  The survey itself reveals that what we’re experiencing locally is being repeated across the country, with some areas doing worse than us but more areas doing better. 

To see the complete article and the survey results, just click here: http://online.wsj.com/article/SB119326355265670448.html?mod=googlenews_wsj

Our Fires and Our Real Estate Market & Values

If you live in Southern California, you’ve almost certainly seen & breathed the smoke. You probably know someone who’s been evacuated.

Certainly our thoughts and prayers are with the evacuees, and especially those who have lost their businesses or houses, but not their homes.

We’ve already been asked how this will affect the local real estate market. For areas that haven’t burned, not that much. Over the short term, the fires should result in a tighter rental market, especially in San Diego County, which appears to have the most homes lost.

Value wise, fire-prone locations will take a hit for several years, and the areas that actually burned will take an even greater hit. That may result in a modest bump (or at least a slower decline) in less fire prone areas. Overall, any more modest negative from a national perspective will be more than offset by the additonal construction jobs created.

Of course, we’ve experienced fires before, but I can’t remember this many in so many different areas all at once. A foreseeable that could have been prevented if federal forest service bureaucrats could only connect the dots. (For an excellent editorial about that in the OC Register, click here: http://ocregister.com/opinion/planes-fires-fire-1902825-california-tanker

When people get too hung up on material things, a friend of mine likes to help them keep perspective by saying, “It’s all going to burn.” After cleaning out my Mom’s home when she moved into a senior community, I concluded “It’s all going to end up in a landfill.”

Hopefully these fires can serve as a reminder to all of us to be thankful for what we have, and to put our time and energy into God & people, not things that will not last.

Local Real Estate News from the Front Lines

We love Southern California, we love real estate, and we also love to write. So we’ve been writing about the Southern California real estate market since 1980. Through this blog we can now deliver our thoughts, perspective, and insights at the speed of light. Even better, now you can add your thoughts, insights and questions too.

Who are we? Well, we’re both native Southern Californians, SoCal homeowners, and Realtors ™ who have also served as professional educators.

Dave Emerson, the lead writer, grew up in Lakewood, CA, graduated from UCLA back when their football teams didn’t routinely lose to unranked teams, and currently live in Los Alamitos. He’s an investor who owns dozens of local rental units, primarily in Long Beach, and he’s been #1 in sales out of 500 agents in his company seven different years and has been elected “Agent of the Year” by his peers 4 times.

Blair Newman has the perspective of a younger generation. He has helped dozens of his friends and clients buy and sell property, and is a member of Prudential California’s “Cutting Edge Society,” putting him in the top 15% of all agents. He graduated from Biola University in La Mirada, then lived in Anaheim until buying his present home in Lakewood.

Over the years, we’ve sold homes everywhere from the San Fernando Valley to Orange County. We specialize in Southeast Los Angeles County (Long Beach, Lakewood, Norwalk, etc.) and West Orange County (Los Alamitos, Rossmoor, Cypress, Garden Grove, etc.).

Over the years we’ve developed contacts in most So Cal areas we don’t service ourselves. We’re excited about finding this fast, interactive way to share our perspective on what we see going on every day in the So Cal Real Estate Market.

We’ll also use the expertise of others we know in real estate and related fields, from finance to property management. And we’ll gain the expertise of our readers as well, as you choose to contribute.

Our non-blog website, which features a direct link into the SoCal Multiple Listing Service and more info about us, including brief resumes. We can be contacted directly by phone, 562.822.7653, and we also respond promptly to all comments and questions left on this blog.

Thanks for visiting.