Ron's Crystal Ball (Predictions)
 
All the previous predictions remain  (proudly) posted, so you can see for 
yourself the accuracy of the Ron's real estate market analysis

12/06
Major Market Changes... Be ahead of the media!

The real estate market continues its significant correction. Overheated markets cannot last forever. After a year of inventory build-up, San Fernando Valley housing may be finding an area of stability in the 8000 unit range (see chart below). This is actually a historically healthy inventory level. If it stays in this range, and economic conditions stay solid, we should pull out of the housing value tailspin spring/summer ‘07 as sales increase. In the meanwhile housing prices will deteriorate additionally over the next 6 months, as many buyers will continue to sit on the fence.

This is a normal occurrence during a real estate cycle. Even though it appears to be a negative to some, it is in reality a positive for the market long term. The fundamentals remain great for long term value appreciation after a period of price stagnation.

 Presently, the majority of “unrealistic” sellers are being stubborn and are wanting to get “yesterday’s prices”… Short term speculators, and weak holders of properties, are attempting to get out from under their investments, and are forced into pricing their properties aggressively. Only well priced properties are seeing any activity. A year and a half ago (when the inventory was non-existent, and there were 10 buyers for every listing) properties would receive multiple offers overnight. THAT was unhealthy.

Present foreclosure rates may have doubled, but from a very low quantity, and are still below historic averages. (This is not to say the foreclosure rates won’t continue to increase and go higher than the historic average… but that is normal during this part of the real estate economic cycle, and is a lagging indicator of the cycle & values deteriorating.)

Timing has to be an essential criteria when evaluating any investment. Smart investors buy when the weak sell. Don't try and catch a falling knife, as the values continue to drop...BUY as the cycle converts to a neutral market from a buyers market. This may happen within months.

Feel free in calling me any time to evaluate your specific financing and housing scenarios.

Always check out the MRES site at http://mres.com/statistics.htm for the latest local housing statistics.

Ron on TV 
Keep your eye open for an episode of “Flip That House” that I was on, that’s presently being shown on The Learning Channel. It’s about a property in West Covina that has gone through a major restoration. Next showing is Jan 1 at 7:00pm

  http://tlc.discovery.com/tvlistings/episode.jsp?episode=29&cpi=55442&gid=0&channel=TLC

You can also see a portion of the show from a link on http://www.mres.com 

Did you know…?
Congress has approved a one year tax deduction for mortgage insurance premiums for 2007. Under the provision taxpayers with income up to $100,000 qualify for a full deduction and a partial deduction for taxpayers with income of $101,000 to $110,000. 

Freddie Mac & Fannie Mae have kept their loan limits for 2007 the same as 2006

• One-family loans: $417,000
• Two-family loans: $533,850
• Three-family loans: $645,300
• Four-family loans: $801,950

Effective January 1, 2007 there will be an alternative to the 3.33% California withholding tax when selling non-exempt real estate. Now only the estimated tax liability recognized by the seller multiplied by the highest state tax rate needs to be withheld.

6/05
Viva La France …. Thanks for the low interest rates :)

Due to the wisdom of the French population (kidding), the vote to not approve the EU Constitution the other day is helping fuel the US bond market, and drive our long term interest rates down. What is happening is the perception that the European Union’s economic scenario will be weaker into the future, & investment capital is bailing out of the EU system, and buying US assets and currency. This, in conjunction with the recent signs from the Federal Reserve that they may be nearing the last Fed Fund hikes, the 30 year mortgage rates have dropped to the lowest levels since April ’04.

IF YOU WANT TO EVALUATE FINANCING OPTIONS, CALL ME NOW…. NO TELLING HOW LONG THESE RATES WILL LAST!

The funny thing about the mortgage rates dropping is it works against Greenspan’s vision to slow the real estate market down from its rapid boil. He has no control over long term rates, only the overnight rates the Fed lends to institutions, and how much liquidity (printing of money) the Fed puts into the system. Can Greenspan pop the real estate “bubble”? Don’t count him out completely. Remember Greenspan gave his “Irrational Exuberance” speech on the stock market 2 years before he finally killed it. Meanwhile those 2 years were some of the biggest gains the stock market has ever seen. The only thing Uncle Greenspan can do by continuing to increase the Fed Funds rate is kill off GM, Ford , and other areas of manufacturing. What else can he do….?

Take Away The Money!!!

Greenspan has been on the warpath with Freddy Mac & Fanny Mae on limiting their portfolio size, and now he’s pushing financial institutions to tighten their Underwriting Guidelines to limit exposure to higher risk loans, and also limiting the quantity of money available to some borrowers. Lets face it, MORTGAGE MONEY IS MORE AVAILABLE NOW THAN EVER. This reason, more than lower interest rates, is a major underlying principle for the real estate markets strength. Even 4 years ago you could never imagine a 100% loan to value, stated income, interest only, non-owner occupied loan, with a mediocre FICO score. Back in the old days, it took 25% down, and 2 years tax returns to purchase a non-owner occupied property.

Historically lenders always ease up their lending guidelines when property values appreciate (they believe they’ll have better leverage on their security), and they tighten guidelines when values slow their appreciation (higher potential default levels, and loss of security). Since this real estate appreciation cycle hasn’t backed off, the Fed Chief wants to push the lenders into turning off the money unilaterally. This wouldn’t increase interest rates, only take away some of the liquidity… mostly hurting first time buyers, investors, stated income, and home equity line borrowers. This will be an interesting sequence to follow. Even if lenders like Countrywide & B of A get out of certain types of loans, the secondary market (private money & sub-prime lenders) may pick up the slack. If the money does dry up, the real estate market will be affected…. I’ll keep you informed.

Should I buy in Las Vegas , Phoenix , Texas … Palmdale…?

We need to be aware of two old sayings… “Location, Location, Location”… & “A rising tide floats all boats”.

Just because a property is expensive, or cheap, doesn’t make it a good, or bad investment. Every real estate economic cycle allows mediocre areas to appreciate after the prime regions have escalated to a point of a perceived “too expensive”. BE CAREFUL!!!! Not all dirt is created equal. The reality is land appreciates, structures depreciate. Always evaluate the fundamentals of an area to determine if there’s a positive future for the investment. The weak areas always appreciate last, and depreciate first, after an economic slow down.

The #1 primary economic fact that must always be in mine while evaluating any investment is the supply of the commodity. In this case, how much land can be developed, and will the economy realities of the area support the higher values.

Los Angeles City… there’s basically no land left to develop, governmental development restrictions and NIMBY (Not In My Back Yard) opponents have made the quantity of buildable housing units substantially lower than what will be needed in the future to cover the population. Thus a long term supply / demand malfunction, driving values, & rents, higher. But… if you look at desert, or any region where buildable land is plentiful, and there are fewer governmental road blocks on development, there’s a good probability of an over built condition at some point in the future. There are many more variables (rental vacancy levels, regional economic expansion, etc) that will affect the investments value. At the same time, areas that have had massive appreciation, have made it difficult to pencil out new investment purchases (i.e. cash flow, Debt to Coverage Ratios for investment loan qualification, etc).

As an example of how much the appreciation can deviate from region to region, be sure to check out First Quarter 2005 home prices ranked by change.pdf & First Quarter 2005 median home prices.pdf. This will show you that even though everyone is talking about a national valuation bubble, areas like Beaumont, Tx has lost 6.5%, while W. Palm Beach, Fl went up 36%!!!

I’m not saying that there are not good diamonds in the rough real estate investments out there, just do your homework, and don’t get caught up in the real estate horde mentality… Remember, historically, when any investment makes the cover of magazines, and becomes a household conversation, the easy money has been made…

That said, this is not a sell signal, and values will continue to rise in the Los Angeles area, until the inventory stabilizes. As of May 26, we only had 2,296 total active listings in the Southland Regional MLS... we need approx. 8000 units for a point of equilibrium. Always check MRES.COM for latest statistics.

5/05
Real Estate Expo Review...

Last weekend I attended a Real Estate Wealth Expo at the L.A. Convention Center , mainly to evaluate the techniques used to conduct the seminars … but even as an old dog (30 years owning investment real estate and 20 years as a full time real estate professional) I’m open for any new tricks I can add to my arsenal.

There were a few name acts as Keynote Speakers (Donald Trump, Tony Robbins, Robert Kiyosaki) and 32 self proclaimed “Real Estate Gurus” that conducted educational seminars... that in reality were infomercials. They were conveying 15-20 minutes of information scattered amongst and hour and a half of “look what I did (or someone I know of) and you can too, so buy my system for $1500 to $2000…”.

I was amazed that 45,000 people attended the Expo (up from 25,000 last year), and huge lines of people willing to plop down up to a couple grand for each of the systems… many purchased multiple systems. This is a waste of money if the system isn’t studied, and followed up on (I’m sure many will be hoping they’ll learn by osmosis)… or if it gives just enough information that they’ll be dangerous. Unfortunately throughout the years, I’ve had to come to service many clients that had gotten themselves in trouble because they didn’t have adequate legal or technical knowledge (or had bad representation) to pull off, or get out from under, a bad transaction. (Too elaborate to describe in newsletter… call if you want, call me for specifics)

The majority of the instructors (salesmen) conveyed some good real estate investment fundamentals, but unfortunately mixed with totally misleading, or completely erroneous information. Lease options, flipping fixers, foreclosures, no down creative financing, probates, tax liens, etc, are all valid techniques… but are more valid in a different part of the real estate economic cycle than what we are experiencing presently. I didn’t hear one new purchase technique that hasn’t been used for many years. If fact, from a basic education point of view, the majority of the information included in these “systems” could be procured by studying a couple good $20 books (one book I recommend is Real Estate Investments & How to Make Them by Milt Tanzer)… or in the case of analyzing investment real estate, review my MRES site at http://mres.com/investmentpropertyevaluation.htm ... and save a bunch of $, and time (straight to the math with no fluff).

Just a couple quick observations/contradictions to what instructors were pitching…

1. “There are record levels of Foreclosures everywhere, banks are eager to sell them 30% to 50% below market value, you can negotiate directly with the bank bypassing brokers or get a deal with the owner before the property goes to the Trustee Sale…”

Reality – The actual quantities of foreclosures are at historic lows in California . 122 total for February. Now if you want to go to Texas they had 2,449. There is a heavy concentration of foreclosures in the South and Mid West where the real estate market is weak… if you want to go there to get a deal.

Financial institutions are not stupid! If the market is hot where the foreclosed property is located, the institution will attempt to get market value. In the case of Los Angeles, institutions may even get a premium on the sales price, because there is very low inventory of properties for sale as a generality, and by marketing a property for sale as a foreclosure, the property gets the maximum amount of exposure to a potential buyer base… because everyone is looking for the “deal”. This causes a multiple offer scenario.

People can fall behind in mortgage payments, but all a distressed owner has to do is a) get a proficient agent, and he can unload a well priced property in days or b) get a proficient loan broker and get a sub-prime loan to bail himself out his circumstance. (of course there is always the idiot that procrastinates, and refuses to do anything about his issues… but this is the same difficult person that will be near impossible to negotiate with, if you want a “deal” on the purchase price or terms)
This will be the scenario until the property prices stabilize. As long as we continue to realize a high rate of appreciation…, the values will bail out the owner

2. “Buy properties with no down or new loan, tie up properties using lease options, or have sellers deed you the property while they keep the loan in their name…"

Reality - Where do I start??? Same old valid “creative” approaches, but all have substantial problems, if you aren’t 100% on top of your game, structure the deal correctly and understand your limitations with existing vesting, loans, etc. I’ve seen due of sale clauses implemented by banks, bankruptcies and car accidents putting judgments on properties, etc. I’ve seen a lot of money lost, and lawsuits created because of getting “creative”. I recommend looking at PacTrusts “IF” you are even considering the lease option/creative approach (see http://mres.com/pactrust.htm ) . It’s complex, but gives much more protection to all the principles. Again, 99% of the sellers today, want to unlock their equity NOW rather than tie up their property for an extended period… and they have the ability to, because of the present hot market.

In 1995-1996, the bottom of the last real estate economic cycle, many distressed property owners were upside down on their equity, banks had too many foreclosures on their books, there weren’t a million buyers looking at the 15,000 listings (compared to the 2,000 listings today)… to get distressed owners out from under their property, some creativity was the name of the game. If the 45,000 potential real estate investors at the Expo are all looking for the proverbial needle in the haystack today, it’s going to take a tremendous amount of research, and luck, to find that “steal”. Bottom line is anyone that has purchased any real estate over the past 8 years, even at market value, has made great $ because of the economic cycle…

Nobody is a bigger advocate of real estate investing, and education, than me… I’m not a pessimist, just using common since. As a REO Specialist, I refurbished & closed escrow on hundreds of foreclosed properties for institutions, and as an authorized PacTrust Consultant, I know what I’m talking about on these issues. As with any investment, swim with the tide, and take what the market gives you. You can still make money in this market by buying “right”, adding value to a property by refurbishing or adding square footage, and understand rents will be continuing to go up (as builders/government are not adding enough units to house the increasing population, short & long term). Just stay away from major negative cash flows, and fixers that can become money pits (analyze the numbers!!!!)

The best “creativity” today has been produced by the secondary money issuance of loans from 100% stated income non-owner occupied, to 100% rehab purchase loans based on 95% finished appraised value (MRES have these and a thousand other loan product). Real Estate purchase money is substantially more available now than ever before, but when values slow their appreciation, history has proven lenders will tighten their underwriting guidelines, and lower their accepted loan to values… (but at that point foreclosures will start materializing, and we change our mode of operation… go with the economic curve)

As a quick pitch, I have MRES approved with a 100 different lenders, and offer free advice to clients on creative matters… and if you find yourself attempting to put together a For Sale By Owner, or “Creative” purchase scenario, I can be brought in as a consultant at a reasonable fee. (I will not take part in any transaction that can be construed as illegal). With experience readily available, you might as well take advantage of it…

As far as the Keynote Speakers were concerned…

Trump was Trump… basically “love what you do”, “never quit”, “stay focused”, be paranoid”, “and always has a prenuptial agreement”…

Tony Robins was entertaining and typically motivational

And Robert Kiyosaki (Rich Dad/Poor Dad) was the best in my book. Nothing earth shaking new, but solid economic approaches to life & investments that should be conveyed in school. I would have to recommend him, and his books.

3/05
More Real Estate Buddle Debate
I still receive a lot of questions pertaining to the direction of property values. Real estate markets are subject to regional & economic conditions, but the short term answer for the Valley is easy...UP!  As of 3/17/05 there are only 2,087 total units of sale in the entire San Fernando Valley. Until inventory gets back to a neutral level of 8000 units, there will be continued appreciation of values. (always check  http://mres.com/statistics.htm for latest statistics)

The interesting thing is the media has been talking about the "Bubble Popping" for a couple years now. A week ago the L.A. Times had an article predicting a major price drop. Not based on any data, but exclusively the naive perception that what goes up must come down.

On the other end of the spectrum is an amazing report released last month by the FDIC (Federal Deposit Insurance Corporation) "An Update on Emerging Issues in Banking/U.S. Home Prices: Does Bust Always Follow Boom?"  based on solid historical data, research and analysis. I highly recommend a complete reading of this report, if you're are interested in the real estate market. It's a very comprehensive report, but in a nutshell the report attempts to define housing booms and busts, considers the causes, and the FDIC finds that while home-price booms cannot sustain forever, not all booms end in busts! The fun part for me is it reiterates what I've been conveying for many years. The primary difference is the FDIC is using national data compiled from 361 metropolitan areas of different sizes going back to 1978... while my analysis has been derived from local data going back to 1959.

Megan's Law Database Now Online
I believe in people's privacy, but I think it's a good thing that website access to California's sex offender registry is now available to the public. In response to a legislative mandate, the California Department of Justice recently started providing online information about registered sex offenders at http://www.meganslaw.ca.gov. Especially if you have kids, I recommend checking this out, and being aware of your surroundings. 

2/05
San Fernando Valley 2004 Home Prices

A Bubble? In a nut shell, the 2004 San Fernando Valley home prices average went to $531,500 from $410,819 in '03. The above is a logarithmic chart showing pricing going back to 1959. This view reflects annual property values, taking into account maintaining a proportionate ratio of percentage of change. 
Is housing expensive? SURE! But at what point didn't it look like prices went up too much? Don't look for another 25% increase in prices in '05, but considering the low inventory of existing housing for sale, and interest rates still at historic lows... appreciation is still in the cards. (more current charts & stats at  http://mres.com/statistics.htm)

Voted "Los Angeles Super Agent"

Ron Henderson has recently been named a "Los Angeles Super Agent" by Los Angeles Magazine (January, 2005 edition). There are over 66,000 agents in Los Angeles county. Less than five percent of are selected for this honor. Research teams identified Los Angeles real estate agents who had achieved special recognition or had demonstrated other indications of expertise, superior in sales, integrity and market knowledge, and who are an overall asset to the Los Angeles community. The real estate agents with the highest scores were named to the list of Los Angeles Super Real Estate Agents.

12/04
Freddie Mac & Fannie Mae has just increased their single family conforming loan amounts to $359,650 from the '04 amount of $333,700. The increase is the annual adjustment based on October-to-October average house prices. The loans meeting Freddie / Fannie criteria gets the best interest rates. Also if you know a Vet that still has their loan eligibility intact, the new conforming loan amounts now hold true for VA loans. The VA amounts tracking Fannie levels were changed by Congress last year... I guess the previous $240,000 limit wasn't cutting it...

As of today (Dec 1, 2004) individuals can now procure 1 free credit report from each of the credit bureaus each year. We're lucky... the Western US has access to this system now, and other regions of the US get access starting in March. Just hit www.annualcreditreport.com and fill in the blanks... I recommend doing this late at night... as I tried to test drive the system earlier today, and logically, the system is overloaded ... If you aren't aware of what's on your present credit report, I HIGHLY pulling the report and recommend 1) verifying what's on there (just in case of fraud or incorrect information) & 2) checking if there's anything you can do to manipulate your account to get a better FICO score. This last scenario may be trickier unless you know what you are looking at, and what will help. You pull your credit, and I'll give you free consultation on what you should or shouldn't do... Some obvious moves you think would help, can hurt your score. We are all good at something in life, but if I say so myself, I'm as knowledgeable as anybody in the industry in credit manipulation/evaluation, so you may as well have me take a look at it. Credit is worth more than cash (in today's information based society)!!! You can make tons of money, but with weak credit, procuring a loan is difficult... You can be dead, and have a high credit score, and get a great interest rate.... (slightly exaggerated, but not much)

The LA real estate market is staying solid. Even with rates moving up, the inventory has moved from a recent high of 5500 units in August back down to 4100 units. Basically that means the housing pricing has stabilized, and won't be dropping off substantially. It's a good market... buyer's can find properties and have room to negotiate, sellers can sell properties because there's buyers... they just can't over price listings, and had better make their properties show well... or they'll grow cobwebs. (Always stay aware of SFV housing statistics by hitting http://mres.com/statistics.htm)

Interest rates are going to be a little tricky over the next few months. The Fed has continued to increase their rates slow but steady, but the mortgage rates have stayed low. Not going to elaborate, but the kicker is if international money continues to keep buying our bonds... If foreign money slows their investing in US securities because of the dollar strength/weakness against their currencies, rates can go up a fair amount... This will have a much larger effect on our market than what Greenspan does.

6/04
Put this (approximate) date on the calendar, as when the local real
estate market started a metamorphosis...

To reiterate a fundamental economic fact I've stated in my newsletters
over the past decade, "THE REAL ESTATE MARKET & VALUES ARE BASED ON
SUPPLY & DEMAND". The supply of housing inventory had declined, from a
maximum of 15,500 units in 1995 to the recent low of 1675 units this
past March... setting up the massive value appreciation that the region
realized over the past 8 years.

Over the past couple of months, the inventory has been expanding, and as
of June 17 it is at 3446 active listings. Still at historic low levels,
but this rate of expansion will neutralize the pre-existing "SELLERS
MARKET". We are entering an era of normalcy... making sellers rethink
their overpriced expectations... and allowing buyers the ability to have
a selection of properties to chose from, and the capability to
"negotiate" a sells price, rather than getting caught in bidding wars
with a dozen other buyers.

Is this the bursting of a bubble? Only if the media brow beats everyone
to the point where it becomes a self fulfilling prophecy. In reality,
there should only be a normal stabilizing of the market. Forget the
mid-90's market. We won't see anything like that correction. If values
back off 3-7% from where they are today, no biggie. That's only taking
the froth out of the last few months of over heated pricing. Remember,
the San Fernando Valley values are up 13% in just the first 5 1/2 months
of this year (i.e. Dec '03 ave. was $450,000 Mid-June '04 ave.
$518,000). I'm seeing $30K-$50K price reductions on overpriced listings,
bringing them back into reality. Well priced properties are still moving.

Should you sell, or hold off on buying? That depends on personal
scenarios. The easy money has been made this round of the real estate
economic cycle. The bull market days of buying "any" property and making
tons of money are over.

If you can buy for the long run, the interest rates are still low, so
unless you're buying with all cash, buying now will still make sense
(when looking at the debt servicing, and taxes). Same with selling... if
you're the same humans that have asked me for the past 4-5 years "should
I sell and put my equity in my pocket"... I NOW give you my go ahead.
Just think, if you would have done it at any other point in the past few
years, think of the substantial gains you would have lost. BUT, when
taking into account... if you still need to put a roof over your loved
ones heads, rents still going up, taxes, etc... be sure an call me for
specific personal consultation.

Another little tidbit... condos, and secondary outlying areas (Palmdale,
Landcaster...) are last to appreciate and first to depreciate in an
economic cycle. The areas with the primary economic infrastructure (San
Fernando Valley, West Side...) will continue to hold values and
appreciate long run. Warner Center has added over 40,000 jobs over the
past year... they're not adding local housing because of land
shortage... the freeways are log jammed... "What's your time worth to
you?... LOCATION, LOCATION...

5/04
Let me start my newsletter by stating some brief statistics
(complete stats on mres.com):

San Fernando Valley #'s for April 2004
Median List Price $619,000
Average List Price $859,000
Median Sales Price $475,000
Average Sales Price $603,000
(remember the better areas appreciate at a higher rate...the old
location, location stuff)
Calabasas Median Sale $1,425,000
Sherman Oaks Median Sale $640,000
Sunland Median Sale $323,000
Total single family listings 1810 in which 1633 were new within the month

All are shocking numbers, but the LOW inventory status and escalation in
the local economy has more of an impact on real estate pricing than the 1.25% increase in fixed rates we've experienced over the past 7 weeks. Will the interest rate increases and high values create the bursting bubble syndrome some people have predicted for the past 2+ years... DON'T COUNT ON IT!!! Will it slow down the rate of appreciation... ABSOLUTELY!... BUT NOT UNTIL NEXT YEAR. 2004 will see 25-30% local appreciation.

Everyone's been talking that Greenspan (Federal Reserve) will be
increasing rates. Anyone that has followed my newsletters over the years
knows Greenspan's actions are secondary to what the bond market does. In
fact Greenspan's actions many times has the opposite reaction to rates
than what most people expect. Without getting into a lengthy
explanation, the bond market investors raises rates in expectation of
the Fed's move, then they sell their positions when the Fed actually
raises rates. i.e. Fed overnight rate goes up, "long term" mortgage
rates goes down. "Short term" indexed rates (prime & 1yr. T Bill) will
go up. I expect Greenspan will make his first rate increase in June, but
quite a bit of the mortgage rate increases to be experienced over the
next 6 month is already factored into today's rates.

The mortgage investors are continuing to get creative with new loan
product, that will allow buyers to qualify to purchase properties, even
at these prices. An example is a stated income, high loan to value,
interest only, intermediate ARM loan. It's a light year from the old 20%
down 30 year fixed...

When rates go up, potential buyers that have been sitting on the fence,
jump off... too bad the inventory can't support their needs. Some buyers
want a deal. FORGET IT. Buy at market value as prices go up, and you'll
look smart in a matter of months. Play around and wait for a deal to
come up, or the values to drop... not so smart.

Had a client buy in Sylmar (marginal area) last December for $315K with
5% down (no deal at the time). Just comp'd out the property at $370K.
Almost a 400% return on his down, plus he now has a tax write-off.... He
was thinking about waiting till he had 20% for a down. Would have been a
major mistake. 

3/04 
To begin, I want to recommend reading a great article published in Investor's Business Daily from 2/27/2004. It basically reiterates information I have conveyed for several years. It's an article directed at international investors indicating that the Southern California real estate values are going through the roof, due to the supply vs demand being an ongoing issue. Hit link at http://mres.com/Newsletters/southern%20cal%20pricing%20IBD%202_04.pdf

Another tidbit... The employment numbers came in lower than expected last Friday, sending interest rates down to it's lowest point since last July! (call me asap if you want to take advantage of these rates)

This month and next month, I want to address advanced ways of approaching a few questions I have received, that initially appear to be unrelated, but are very much tied to the same issues...
Should I go with a 15 year loan instead of the standard 30?
Why would I want to go with an interest only loan... don't I want to pay off my house?
When I refinance my loan and consolidate my bills (or generally take cash out) isn't it a tax write-off?
Should I sell my house now, because it's worth so much more than when I bought it?
If I sell my house, do I need to pay any taxes on the gain?

First let me convey some information that you may have thought you knew, but may not have really known... we'll tie them all together... then you need to ask some questions of yourself (for your own long term financial well being)...

There are some limitations on interest deductibility....
Interest is tax deductible for a total acquisition debt (for principle residence & one additional residence) of $1,000,000 plus $100,000 for home equity or other debt. These debt limits are totals for both properties; they are not applied to each property separately.
Here's the fun one... Interest is deductible on acquisition debt that is refinanced to the extent it does not exceed the principle amount of the acquisition debt immediately before the refinancing!
Example: You originally incurred $500K of acquisition debt, pay it down to $200K, you'll be able to only refinance the property for $300K and still take advantage of a write-off... the $200K plus $100K of home equity. You can refinance for $400K, but you'll be only able to deduct the interest on the $300K of the refinanced debt.

Using that information, lets think for a second...
The tax deductible aspect of mortgage interest is one of the only things the government has left us as a write-off.
If you are planning on holding on to the property for an extended period, and you'll be making taxable income for a while, is it really worth paying off the loan in an expedited time frame?
As a generality, it's not what we make, it's what we keep.
If you're 60 years old, chances are none of this is an issue.
If you're 35 - 40 years old... paying off the loan early (especially at today's interest rates) may be the wrong application for the additional money you're applying towards the loan principle.

Everyone's taxes are different, but for many people, if they eliminate the mortgage interest deduction, they wipe out the ability to go long form and all the additional write-offs they can take advantage of once they hit that minimum threshold needed... thus potentially paying Uncle Sam more money.

Another approach... take a longer term loan (30+ years or interest only) rather than a shorter term (like 15 years), keep the write-off intact, and take the amount that you would have applied towards the additional principle monthly, and invest it in another investment vehicle (mutual fund, real estate, etc.).
Example (ballpark numbers):
$400,000 loan at 6.0% for 30 years $2398.20 mo. payment
$400,000 loan at 5.75% for 15 years $3321.64 mo. payment
If you kept a 30 year loan and applied the $923.44 monthly difference toward an average mutual fund, giving the historical average of 9% (based on the S&P 500) you would have a return of $466,869 in 15 years!!! Giving you more than enough to pay off the loan earlier than the 15 year amortized loan, keeping your tax write-off intact, and the bonus of not having the larger $3321 payment staring at anyone that pulls your credit report in the future when analyzing your debt to income ratios (when you look to take out a loan in the future, employment, etc.).

Now if you don't have the self control to apply that discretionary money towards investments, and don't care to keep more money in your paycheck, and don't mind paying Uncle Sam a few more bucks in the later years of your loan... getting a shorter term loan may at least force you to allow your equity accumulation to be your savings bank, and you can save long term interest expenditures (the primary reason someone would normally go with the 15 year loan).

Disclosure: This scenario, and information, is general in nature. There are more variables, and as I always recommend, come to me for personalized real estate consultation, and your accountant for tax consultation (beware, many basic tax preparers may be useless when approaching advanced investment/tax concepts... "good" accountants, attorneys and real estate professionals are worth their weight in gold)

Next month we'll be tying these concepts into how to compound your net worth using Uncle Sam's help.

2/04
With the economy looking solid, low inflation and conflicting employment statistical information being released by the government... interest rates are staying at historically low levels... making this a Goldie Locks environment for real estate.

The problem locally... the ongoing low inventory of available properties. Presently there are only 1700 properties for sale in the entire San Fernando Valley region (1438 single family & 255 condos). As I've indicated over the past several years, we need approximately 8000-8500 units on the market to maintain a point of equilibrium between buyers and sellers. Result... a continuation of escalating prices.

You would think that the 20% year over year value appreciation would be unprecedented, and we are in a bubble ready to pop... DON'T COUNT ON IT!

The updated charts on MRES.COM showing the property values in the San Fernando Valley from 1959 through 2003 reflect massive appreciation being the historical norm.

I have three charts to review, that you won't see anywhere else on the web or in print:
http://mres.com/ave_sales_price_numerical_2003.pdf
Shows annual prices (1959-2003) reflected by numerical breakdown

http://mres.com/SFV_pricing_chart_1959_2003_linear.pdf
This linear chart indicates the property values on a straight dollar for dollar increase through time

http://mres.com/SFV_pricing_chart_1959_2003_logarithmic.pdf
***This logarithmic chart best reflects property values taking into account maintaining a proportionate ratio of percentage of change. i.e. a 10% increase in a $20,000 property in 1960 ($2000) is given the same value as a 10% increase in a $300,000 property in 2001 ($30,000). Basically takes the noise out of the numbers, and shows the true historical escalation of values by percentage.

Bottom line... Expect 2004 to be another year of 20% appreciation...

1/04
This year is starting off with low interest rates, a growing economy, and the lowest quantity of housing inventory for sale the San Fernando Valley has seen, since records have been maintained. As of December 29 there were only 1583 single family houses for sale, and 1865 units including condos...

What does that mean? We are a far cry from the 8000 units we need on the market to stabilize the pricing, and we will continue to realize above average housing pricing appreciation till that happens. Part of the present low inventory levels is an annual occurrence (as very few properties come on the market over the holiday season)... the quantity of inventory should increase over the next couple of months, but because of the pent up buyer base, it will only add to the quantity of sales, rather than houses sitting on the market. Multiple offers is still the norm, within a week of a property coming on the market.

The Fannie Mae/Freddie Mac conforming loan amount has increased from $322,700 to $333,700 as of January 1. I'll take whatever they give me, but taking into account the property values in Southern Cal, this increase won't help with loan affordability levels. 

10/03
Summer's out, a new Governor is in, and L.A. real estate values keep on
truckin'.

The fun question for the month is "How high is too high... when it comes down to Southern Cal property Values?"

I've heard from the Chicken Littles among us for nearly 4 years now, that property values were too high, and they had to come down. As I've said numerous times in the past, real estate values, like any stock or commodity pricing, could care less what we think... always go by technical (even more than fundamental) analysis to determine where values will go. For those that have read my newsletters over the past decade may say I sound like a broken record, but the question of "will property values crash?" keeps coming up.

Eventually there will be an affordability issue if interest rates, and values continue to go up... but even that won't matter IF INVENTORY STAYS LOW AND THE POPULOUS IS STILL BUYING!!! Economics 101 people... Supply and Demand!

Cliff Note - Anatomy of the SFV Real Estate market!

1992 average value of SFV housing values were at there peak during that cycle ($260,000). Berlin wall fell, local aerospace business drying up, local inventory had been building since end of 1989. Real estate market was softening since 1990... time for values to drop. The old IRS rules during that era made it hard to sell, because if you had a capital gain, you got hit with taxes unless you purchased a new home for more than prior home value (no longer applicable).

End of 1996 beginning 1997 average values at bottom of cycle ($194,000). SFV inventory had maxed out at 15,500 units for sale in 1995. Inventory hit a point of equilibrium, and values stabilized, and were going up (slowly). Perfect time to buy! The majority of population thought we'd never see values back up to what they were at there peak. My take was... We had been hit with the worse local economic recession, earthquake, riots, fires, etc., during the same time frame, and we were over sold. If would only take a few years, and we'll be back to old highs.

2000 average values takes out old highs ($273,700). People were still screaming "No way can they keep going up". Inventory tight at only 5,000 units. I predicted (in conjunction with my trusty little charts) we would see an average value of $360,000 within 3-4 years!!! People thought I was nuts.

2003 average pricing took out my $360k, now running well over $400,000, and inventory is still at historic lows at 3000 units... Still hearing "prices are too high"... READ MY TYPE... a home in the SFV can average a sales price of a 1/2 a million dollars within a few more years! There is nothing in the cards (charts or fundamentals) indicating the trend will end.

The real question should be "How the heck are we going to house all these people if we don't build enough housing?" Regionally we need approx. 233,000 new housing units to keep up with the growing population... we are only building 150,000! The ratio is even worse in the San Fernando Valley/L.A. metropolitan area.

To be continued in future newsletters.... All I can say is BUY RENTALS IN THE VALLEY!. Supply will be worse on the rental side than on the purchase side... buy a couple apartment buildings... retire in a few years :) Remember one of my specialties is investment real estate sales & loans. Call any time for free consultation (referrals always appreciated)

9/03
The interest rates have finally stabilized after jumping higher... Actually they have dropped a bit over the past few days. For the most part, the refinance boom of the past year has finally come to an end.

The lenders that were soooo behind in underwriting loans, went from taking 28 days, to 2 days, in just the last past week and a half. Now that the backlog of refi's are through the system, expect the headlines within the next month to read "Lenders Laying Off"... That's because the over staffing to handle the record number of loans, will be dead weight...

The overall local San Fernando Valley real estate market is still over-heated, and values continue to appreciate. The rates have gone up, but not enough to stymie the sales market. In fact the fluctuations in interest rates are prompting some would-be buyers to quit procrastinating... not that we need to add the additional quantity of buyers to the masses already fighting to get there hands on the very tight inventory.

The local housing inventory (rental & sales) will continue to be an issue into the future. The Washington Mutual Ahmanson Ranch development, slated for the Woodland Hills/Calabasas region, looks like it will be scrapped, and the land sold to the Santa Monica Mountains Conservancy. Funny... the some of the same people that are complaining about new developments, are complaining about home/rent prices... I don't have an answer, but unless something is done to house the expanding population, supply and demand will continue to be an issue, we are going to increasingly have some real problems. Don't get me started on the traffic...

7/03
Well, it's way too hot outside for it to be Halloween, but do you want to hear some scary number's?
The San Fernando Valley's average 'single family' sale is now approx. $500,000 and median sale is $385,000!!!
Everyone is complaining that there's no affordable properties on the market... no wonder... the average listing is $723,000, and the median active listing is $500,000!!!!
Worse yet, even at these prices, there are only around 2300 active properties on the market. If you remember from my prior newsletters, we need around 8000-8500 listings for there to be a equilibrium. Otherwise the supply/demand ratio will continue to be out of balance, and will continue to drive the prices higher.
For a more defined breakdown of sales information by area, always reference my web site's statistics page at http://mres.com/statistics.htm.
On to mortgage interest rates... they're up.... Still great, but they're up. The typical "Federal Reserve does one thing and the market does the opposite" rang true again. The Fed dropped the discount rate a 1/4%, and the 10yr. note (which 30yr. fixed mortgages mirror closest) has gone up 3/4%, since they hit their lowest point approx. 6 weeks ago. Lets see what Uncle Greenspan does over the next month, because he doesn't want the higher long term rates choking off the fragile economic expansion.

6/03
It's been amazing. In a nutshell…the interest rates are still at 40 year lows, local San Fernando Valley housing inventory is non-existent (approx. 2000 total single family units), and values are rocketing higher. Now for the weather :) 

Refinance activity had appeared to peak in mid-March and had declined steadily until late April. The latest interest rate drops tied to the expressed concerns of the Federal Reserve over deflationary pressures in the economy have led to a new flood of mortgage applications. While almost 77 percent of the applications are for refinances, applications for mortgages for purchasing homes are also hitting record levels as buyers move to lock in these low rates. Unfortunately, this has led to a log jam at various levels of the loan process... we are expediting the loans in our system every way possible.

I've got an issue about the deflationary scenario the Fed is concerned about. Back a few years ago the Fed changed the way they calculate inflation rates. They used to use the housing sales values as part of the equation, and now they use prevailing rents in their numbers. Presently the values have been appreciating substantially, and (excluding Los Angeles) many regions throughout the nation have had a dropping rental base, because so many tenants have left the rental market to purchase while interest rates have been so enticing. If you switch back to the prior the mode of calculation, I see some inflation, not deflation. Technology is producing high productivity in most industry's, and that should maintain a low inflationary scenario for a while (a great thing, except for those people that are displaced from the work force).

Regardless, the interest rates are amazing, and even if you've purchased, or refinanced over the past year, call me now to see if a refi makes sense for you. Also, feel free in calling if you are curious about your property's value. They have been escalating at an amazing pace, and it's always fun to know how much your property's worth... even if you aren't planning on selling. (no cost)

The market IS feeling like it's in it's final leg of this appreciation cycle. We are experiencing many multiple offer sales, and battles are being fought over properties that would have sat on the market a few years ago. The major difference between this market and the peak in 1989 is this market is owner occupied based, and the 1989 peak was investor/speculation created. After this market slows down, don't expect a drop in prices.... too many heads to cover, and not enough housing. There can be a peak without a bubble. High prices don't necessarily mean anything... it all comes down to supply and demand. Keep your eye on inventory levels. Keep in tune with my newsletter (and mres.com statistics) for any changes in the market. Look for a 20% 2003 housing value appreciation throughout the San Fernando Valley before this plays out.

4/03

Since the March newsletter, the war has started, and as I predicted, the stock market took off & interest rates jumped up, once the bullets started flying. Now we're riding a roller coaster. Every time we hear the war's going to take longer to execute, the rates drop... shorter, they rise. As a generality, the rates are still great, and regardless of the consumer confidence waning, the local real estate market is strong. The rates (as well as all the financial markets) are presently driven primarily by war news, and secondarily by economic reports... and funky new virus's being imported from Asia (a new wild card being thrown into the economic mix).

If the battle does play out quickly, interest rates could continue to rise, but not enough to seriously damage home sales. If the battle turns out to be long and costly, the expenditures would trigger more deficit spending by the federal government, and that would lead to higher interest rates for individual, corporate and government debt. Higher interest rates could create far more uncertainty about the direction of consumer confidence and home sales.

Meanwhile, the refinance market is hitting it's last hurrah for this cycle, and the lenders are back in a log jam, where it's taking longer than normal to get through underwriting and generate loan documents.

Local real estate sales are still strong... in fact we traditionally have a surge in activity when rates are in an uptrend, as buyers don't want to miss out on the low rates, and hop off the fence. The quantity of sales will only be contained by the low inventory. Come the end on the year, our local real estate should be back on its historic normal trend of sales, inventory and price appreciation... DON'T EXPECT PRICES TO DROP!!! Too many fundamental reasons why values will continue to go up in the future, though at a much lower percentage than we would have seen from 1997-2003.

2/03
As a precursor to my real estate verb, I have to convey that my thoughts are out to the crew, family and the supporting cast of the Space Shuttle Columbia. For those of you that don't know, prior to my real estate career, I was a Corporate Quality Control Manager for an aerospace firm, and was closely affiliated with the Shuttle project. My resignation from aerospace, and transition to real estate, happened only weeks after the Challenger malfunction.... 17 years ago.... yet it seems like yesterday, with Columbia bringing back old memories.

Off to better news... interest rates are still great and the local real estate market is maintaining it's strong momentum from last year. I predict the market will maintain it's overheated mode through summer, and should back off to a historical normal pace of appreciation near the end of 2003. A pricing bubble you ask? Waiting to purchase when the prices back off?

Here's where it gets fun...

On my website, www.mres.com, I've updated all the statistics and charts to reflect the year end 2002 numbers. I've added a new logarithmic chart of the 1959 thru 2002 San Fernando Valley property values. For the non-statisticians in the group, This chart best reflects property values taking into account maintaining a proportionate ratio of percentage of change. i.e. a 10% increase in a $20,000 property in 1960 ($2000) is given the same value as a 10% increase in a $300,000 property in 2001 ($30,000). This takes the noise out of the visual element of the "linear" chart that indicates the property values on a straight dollar for dollar increase through time. 

What do these charts indicate? The SFV real estate bubble started 1974, peaked in 1989, leveled out for a couple years, corrected from 1991 until 1997, and has since been back on the historical rate of appreciation. If you check out the chart at http://mres.com/SFV_pricing_chart_1959_2002_logarthmic.pdf you will see the recent market has been consistent with the long term escalation of property values in the San Fernando Valley. In fact, if you draw a line starting at the 1959 value and end it at 2002, you can see the 2002 value is where it should be historically. 

The linear chart http://mres.com/SFV_pricing_chart_1959_2002_linear.pdf dollar for dollar value changes are fun to visualize, but doesn't take into account the percentage rate of appreciation, thus giving the inaccurate perception of a recent non-historical appreciation rate (and possible bubble).

Sorry, I like numerical (technical) evaluation, and find this type of value analysis compelling. This counters any of the "property values are too high-ites" that talk out their ..., without anything but their opinions to lean on. I learned a long time ago, the stock market, or commodity market (including real estate) could care less what I "personally" think. Get away from the emotion (of buying, selling or owning), and go by the numbers, and your decisions will be based on valid reasoning.

I'm not indicating that there won't be price corrections along the way, or the rate of appreciation won't slow down, but the numbers show the local So. California real estate market has been historically an amazing investment.

1/03
As we start this new year, there are several things we know, and several things that need to pan out over the next few months.

We know:
With interest rates still at all time lows, and local Los Angeles housing inventory below necessary levels, property values will continue to rise.
The potential Economic Stimulus Package and war/terrorism expenditures by the government will be inflationary to interest rates (the gov't borrowing more money, that will be competition for mortgage backed securities... thus higher interest rates)
Los Angeles will benefit financially from increased military/aerospace budgets
There is very little available land available to build new housing, and any potential developments are up against NIMBY's (not in my back yard opponents, like the Ahmanson Ranch scenario in the West Valley)
With freeway traffic becoming more unbearable by the day, the properties closest to the economic bases of the region will become more valuable (Palmdale land is cheap... and will stay that way). Location...

What we DON'T know:
Will the stock market stay suppressed because of Geo-Political scenarios and accounting mistrust keeping interest rates low, or will the stock market finally take off and draw money away from the bond (mortgage) market? (raising interest rates)
Will the California & L.A. budget malfunctions grind the local education and infrastructure systems below the point of acceptance?

We'll see... but my crystal ball is saying over the next 6 months were in for slightly higher interest rates of 1/2-3/4% (slowing refinancing), and a continuation of strong sales and higher housing prices (though not at 2002 record levels)

Since our economy is dynamic and always changing, be sure to always check out http://mres.com to determine which way the property values are heading. You can also access once you log onto my newsletter. 

8/02
It's happening again... Clients are calling saying "I hear rates are
going to drop again!" You should know by now from my past newsletters
that the market drives the interest rates, not Uncle Greenspan. The
rates drop before the Fed makes a move. 

The rates have dropped again recently because recent economic reports
are showing a weaker than expected acceleration in the post recession
economy. The funny thing is the weaker economy and stock market
malfunction is feeding the real estate frenzy. If the economy did a
positive jump, money would be pulled out of Bonds and Mortgage Backed
Securities, and be put into the Stock Market... increasing interest
rates, and slowing down the real estate market. It appears that this
slow climb the economy is on will help keep rates down, and the real
estate market alive and well, for the intermediate future. It will take
a good 2% increase in mortgage rates before the brakes will be put on
the RE market. 

The rates are down NOW, and even if you purchased or refinanced a couple
months ago, call me now for a free analysis, and lets see if it makes
any sense to refinance. The interest rate yield curve is very steep. The
intermediate adjustables (fixed for 3 to 5 years) are amazing (Mid
4's-5's). 

The property values are much higher, but for many reasons, we are not in
a bubble. Don't even think about a major correction in prices before
making a move in an initial, or upgrade purchase. Although the present
housing market still favors sellers, inventory levels should improve in
the first half of the year and take some of the pressure off of home
prices. However, home prices will still rise a little faster than
historic norms. In other words, the fundamentals show us there is no
risk of a national housing bubble, but the rate of increase in home
prices should slow and return to historic norms in 2003. Historically,
home prices rise at the general rate of inflation plus one- to
two-percentage points.

Always check out the latest San Fernando Valley housing statistics on my
website http://www.mres.com. Remember, my target is 8500 units in
inventory before the prices stabilize... we're at approximately 3400.

6/02
Local Real Estate is still super hot... interest rates are great (back
down after a temporary jump), sales are strong, inventory is still
low... same old news. Nothing in the fundamentals, or technicals, are
showing that any slowdown is imminent. (Always check
http://mres.com/statistics.htm for the latest San Fernando Valley
numbers)

The stock market has stunk for the last 3 years, making the bonds,
mortgage backed security's, and real estate, the place to be. Given the
confidence problems investors have with corporate accounting, the stock
market may have issues for a while. The economy is growing, but at such
a moderate, sustainable pace, there shouldn't be a major spike in rates
that would usually derail the real estate sector in the near future. The
Los Angeles market has been solid and escalating since late 1996, and at
this time there are no reasons for it to reverse it's course.

Through the years I've had the major moves in the market pegged. I've
told you numerous times, when, and why, to purchase real estate. I'm
hearing from several clients that they are thinking about selling to
lock in profits. DO NOT SELL JUST BECAUSE "YOU THINK" THE MARKET'S GOING
TO DROP. The market doesn't care what you think, and if you arbitrarily
sell without a solid reason, you may be giving away major appreciation.
Let the market (technical/numbers) tell you when to sell. 

Some reasons to sell:
1. QUANTITY OF INVENTORY JUMPS- The market is based on the basic
economic premise of supply and demand. The local inventory is still at a
low level of 3000 units, when we need approx. 8000 units to be a stable
market. Consider locking in profits when the quantity of units hits
7-8000. It may still be a good stable real estate market to hold your
real estate portfolio, but at least your easy money has been made.
(always check the statistics on mres.com)

The old "I'm in it for the long haul" is stupid in stocks or real
estate. "YOU" should always be aware of the financial markets and your
investments. Unless you are born with a silver spoon, money is not
something to take lightly. To hold on to any investment while the
technical indicators are saying there is a major fundamental negative
change in the works, is a cop out... don't throw away money, and don't
base your investments exclusively on what any stock broker, accountant,
OR I say! I'm here to give you the tools to evaluate the market. I
always base my observations on solid verifiable data.

Note- The Real Estate market fundamental and technical timeframes change
much slower than the stock or commodity markets. This allows you the
luxury of evaluating the market without isolated knee jerk reactions to
many variables (terrorist acts, and mother nature are always a wild
cards)

2. RECAST YOUR TAX POSITION- Some of the best aspects of real estate is
you can use leverage (mortgage loans that are write-offs), and the
appreciated gain is tax free. Note- The amount of an owner occupied
property's capital gain that is tax free is $500K for a married couple,
and $250K for a single. Once you have realized the full gain the gov't
is allowing, you may want to sell, and reinvest, to recast your tax free
position. I'm running into more & more people that have already
maximized their tax free scenario, and you can do this and use this tax
code every 2 years!!!

3. UPGRADE TO A BETTER STOCK (PROPERTY)- Always consider selling a
property to upgrade your holding to one located in a better area. The
properties in good neighborhoods appreciate at a faster rate than lower
quality neighborhoods. 

4. PERSONAL ISSUES- You know better than I when your personal scenario
changes (financial, marital, health). That can dictate your real estate
moves.

I want your business, and need inventory to sell, but like I said in
1994-5 to wait to buy, now I say wait to lock in profits... 

4/02
Well, let the feeding frenzy begin!!!

As I've been conveying for the past couple of years, with the use of
fundamental and technical information, the Los Angeles real estate
market was not just turning around, but has been escalating in strength.
Those individuals waiting for the housing prices to back off before
making a move, sorry... 

The inventory is still at historical lows. No inventory means lack of
supply to support the demand, and this puts pressure on prices. The
overall market was basically healthy until this past month... now we're
having 1989 da-ja-vu. Multiple offers within days of properties coming
on the market, above list price. 

As a real estate professional, I REALLY don't like this market. We will
have to get creative to make transactions close. In a market that has
prices escalate at a mega rate, the appraisal values can't keep up with
it. Appraisers have to use closed sales to justify values, and they can,
as a minimum, be at least 45 days old. That's a long time in this
market. THIS WILL BE MAY OR JUNES HEADLINES IN THE LA TIMES. These types
of news reports feed into the pricing escalation, as speculators enter
the market. 

Real estate sales correlate more with consumer confidence than interest
rates. As the rates trickle higher, and the the pricing goes up, there
will be an erosion of affordability. This will be offset by the
turnaround in the Southern California economy. This is not the same real
estate value bubble we saw in 1990!!! That was the peak of the local
economic cycle... we are now in the middle of the new one. Don't be
surprised if we realize a 10-15% appreciation by the end of summer, and
the market stays strong for quite a while. The Middle East, potential
terrorist acts, & Oil Price malfunctions are wild cards, and can effect
the market, but such is the state of world affairs.

3/02
If you're interested in what's happening to real estate (San Fernando
Valley real estate in particular), I've upgraded the MRES website to
include the most comprehensive statistical presentation of historical
values, inventory, and pricing you will find anywhere!

Now you can see a complete and up to date monthly (or weekly) breakdown
of San Fernando Valley real estate inventory, sales, and pricing of
single family dwellings and condos by zip code and district.

http://mres.com/statistics.htm

Here's an example of some fun numbers... In January, the single family
sales median price (half of sales above and below) was $270,000, but the
average sales price (total sales dollars divided by quantity of sales)
was $363,300! Sylmar sold for $210,000 while Studio City sold for
$580,000! Woodland Hills (south of the blvd) sold for $435,000, while a
stones throw away in Calabasas the properties are $695,000! Note: The
more expensive areas are those most in demand, and will appreciate at a
higher rate.

Before you say "WOW, these prices are nuts", keep in mind there is very
little inventory and our local economy may be shaping up to be the
strongest, most diversified economy of the nation during this next
economic cycle, so we haven't come close to seeing a plateau of the
pricing. Trust me... feeding frenzy is yet to come...

If you have any questions on the statistics, or have any real estate
need, always feel free in calling me.

12/01
Plenty of news…

The new Conforming limits for mortgages are now $300,100, up from
$275,000. Basically that means that the higher Jumbo interest rates
won't kick in till the loan amount is over the $300K bracket.

Speaking of interest rates… they are still volatile. For a visual view
of the rate roller coaster, check out the 6 month chart at
http://mres.com/30yr_bond_12_5_01.pdf 
You can see the rates pre-911, the volatility after the terrorist act,
the drop when the treasury said they wouldn't be using 30 year bonds in
the future, the bounce back up to pre-911 levels, last week's
stabilizing and slight drop, then yesterday's jump after more solid
economic reports were released. The main thing, is check out how the
rates are passing the 50 & 100 day moving averages. These are support
levels. If they back away from them, the rates will stay below
them...but if they pass them on heavy volume, they will be continuing up
for a while. 

Remember.. what the Fed does on December 11 DOES NOT correlate with what
the mortgage rates do. Good probability that the rates will go up if the
Fed drops the Fed rate. At this point 50/50 they drop...

The quantity of housing inventory has gone up to approx. 5000 units in
the San Fernando Valley, but is still below the 8000-9000 units needed
to meet the demand. If the interest rates stay in the 7% bracket, and
the economy escalates locally, hosing prices are still going to go up
for a while. http://mres.com/inv_sales_10_01.pdf

11.5/01
I usually don't release a mid month updates, but due to extreme events,
I felt I had to convey some information.

Interest rates go up and they go down... On recent television reports
they said interest rates will continue to drop through the beginning of
next year. Reality... "RATES HAVE GONE UP 1% IN THE PAST 4-5 DAYS!"

IT DOESN'T MATTER WHAT THEY SAID ON TV LAST WEEK! That's old news!
Interest rates are tied into economic markets that can change on a
single economic, or war/terrorist news report. Two weeks ago the
Afghanistan front seemed like it may go on for years, and our economy
was tanking... now the Taliban are running for the hills (literally),
and several recent economic reports (retail sales, unemployment, etc)
shows a stability in the economy that wasn't perceived two weeks ago. 

"IT DOESN'T MATTER WHAT WE THINK!" Mortgage backed securities are the
same as stocks. We can't think that $2 .com stock, back up to $120
because we think it should be. Markets move both directions, and (I've
said it a million times) RATES GO UP FASTER THAN THEY GO DOWN!

So, if you've been waiting for the rates to drop to 5% to refinance,
forget the television reports, because by the time it hits the news it's
OBSOLETE INFORMATION. Follow what the 10-year treasury note does. The
dollar that goes into the mortgage market, is the same dollar that the
10-year note is chasing. 

As an example of the volatility of the interest rate market check out
the chart at
http://bigcharts.marketwatch.com/intchart/frames/frames.asp?symb=tyx
It will give you a quick visual of how the credit markets got over
bought, and how it sold off.

Still the interest rates are GREAT! I've had multiple rate increases
daily, but right now we're at 7% at 0 points on 30 year fixed
conforming. If you wanted to get greedy, and squeak out that extra .25%
drop... sorry. 

If you listened to me and started the refi process a couple months ago,
things flowed fine. If you only recently started the process, you got
caught up in the log jam. Appraisers, underwriters, and anybody else in
the mortgage process has been slammed. Some appraisers are taking up to
4-6 weeks to even get out to evaluate properties. With the up tick on
rates, the volume will get back to a manageable level.

On the positive side, oil costs are down, there's no inflation showing
up in any economic report, so rates should stay in a low range for a
while. Also one more major terrorist act, and the rates can drop again.

I felt I have to give you some guidance, and next weeks headlines today.
If you have the need to know, call Ron for a quick overview on what's
happening. If you wait for the Television reports... flip a coin on if
it's still valid.

11/01
So much is transpiring all at once... the economy has gotten a kick in
the head from the September 11 events, the Fed keeps dropping the short
term rates, but now (finally) the long term rates are dropping.

The lower 30 yr. fixed rates are attributed largely to the U.S.
Treasury's decision this week to end sales of 30-year government bonds.
That move triggered a jump in demand for 10-year Treasury bonds, which
mortgage rates tend to follow. Because the yields on those bonds
subsequently moved south, lenders were more willing to offer lower
mortgage rates. 

Some of my clients are increasing their loan amounts, and using the
proceeds from these higher balances for a variety of purposes, including
home improvement, debt consolidation and investments. Also instead of
refinancing, many are selling their old homes, using the recently
accumulated equity, and buying more expensive homes homes, rather than
refinancing. This way they take advantage of the lower payments, and
don't get locked into their older residences.

The housing industry will still help keep the economy afloat, because of
rising demand, record high home equity, extremely low mortgage rates,
and the surge in refinancing. This low interest rate environment is
almost like bribery... you have to move now... or snooze, you lose...

Always feel free to call me for a free analysis of your existing
housing/loan scenario, to see how you can take advantage of this once in
a life time interest rate event.

10/01
So many changes in just a month….
Horrible terrorist acts against our nation, the possibility of long term
military action, a big jump in unemployment, a full 1 percent lowering
of the Fed Funds rate by Uncle Greenspan…what does this all mean? 

There are several plausible scenarios. The 911 Day accelerated a
national recession, which was already underway. So far, the economic
aftermath applicable to local housing appears to be minimal. Housing is
very regional in nature. Los Angeles, after a two-week hiatus after the
terrorism, is still moving right along. The drop in interest rates is
bribing any buyer that hopped on the fence to proceed with their
purchase, and the refi market has again heated up. 

My take is as long as the domestic terrorist acts are isolated to the
9/11 East Coast occurrences; the L.A. real estate market will continue
to stay solid. Potentially the increased spending related to planned
military aerospace and electronic surveillance activities likely will
provide an added boost to the local economy.

Regardless of the recent escalation of property values, due to the drop
of interest rates, the Los Angeles affordability index has made a huge
jump. Time to take advantage and evaluate your refinance or purchase
options.

9/01
We're still getting negative economic signals from the media, but as
long as we maintain the same local fundamentals, our Los Angeles
real estate should come out of this cycle unscathed. 

Properties priced well are still selling with short order, and the low
interest rates and flexible loan programs are allowing almost anyone to
purchase real estate, even with it's escalated pricing.

One interesting aspect of what's transpiring economically, is the
current perception that inflation may be in check for a lot longer
period than the Federal Reserve originally expected. Also due to an
economic slowdown of the the majority of the industrialized nations, the
interest rates will stay low for quite a while. And when the rates do go
up, the amount they go up will be in a lower range. Keep this in mind
when locking in loan programs. Just locked a 5/1 ARM (fixed for 5 years)
in the low 6's and a 2.25 margin (1/2% lower than a week ago)!

7/01
Los Angeles dodged another strike bullet with the resolution of the
Actors strike. Now we just have to keep our fingers crossed that our new
Mayor, James Hahn, perpetuates the growth of our local economy, and
mends the riffs between the San Fernando Valley & L.A. proper. If not,
we could be parting our ways with a secession in a couple years. (I
wouldn't shed any tears if we did)

San Fernando Valley housing is still strong. Inventory has dropped again
to 4382 units, down approx. 1500 from 1999 and 1/3 of what was available
in 1992. With the quantity of sales at record levels, housing will
continue to get tighter, rents will escalate, and pricing will continue
to go up. Amazingly, the affordability index is still good. As long as
the economy doesn't turn around too radically from the Fed interest rate
changes, and gas/energy prices continue to behave, mortgage rates should
be moderately stable. 

Be sure to check out the Multi Real Estate Services web site for the
latest San Fernando Valley Sales Breakdown By Price, Past 3 years
Inventory & Escrow's Closed (Chart Comparison)
http://mres.com/statistics.htm

6/01
Local real estate activity has slowed down slightly, but is still very strong. One of the main components L.A. needs to be concerned about is the housing supply. The ratio of new jobs & population to new housing units rank among the highest in the country. Basic supply and demand. Property values will continue to appreciate and rents will escalate (rents have gone up 13% locally in the past year). Hedge against housing inflation and buy your own home (if you don't presently own) & buy rental units! Many are available at good prices per unit, and they haven't become the flavor of the week, yet. THEY WILL!!! When you see the Japanese buying... sell.... they're always the last on board (it's happened the last two housing economic cycles).

 With all this talk of recession, you'd figure the sky was falling. In reality the San Fernando Valley's economy continues to grow steadily, and the jobless rates for California and Los Angeles County remain fairly close to historical lows. The state unemployment level of 4.5% in February was it's best since 1969. Likewise, Los Angeles County's rate of 4.7% was also a 32-year low. For comparison purposes, in May 2000 California's jobless rate was 5%, and L.A. County was 5.4%. Additional layoffs will probably be seen in isolated industries and regions (sorry Northern Cal), but with the Fed dropping short-term rates, we're in good shape.

SFV real estate sales are remaining solid, but have slowed from an insane level. For the San Fernando Valley Sales Breakdown By Price, Past 3 years Inventory & Escrows Closed (Chart Comparison) go to http://mres.com/statistics.htm 
Great way to determine supply and demand, and where pricing is going. Remember the SFV inventory was at 15,500 units back in 1993! Now look at it!

4/01
lot of interesting developments over the past month. 

A study showing the San Fernando Valley meets California's financial
criteria to secede from Los Angeles is financially feasible, and the new
Valley city would be able to operate at a surplus. (Even after it makes
$68 million in "alimony" payments to keep Los Angeles financially
stable)

The new Mayor of Los Angeles will be turning left (regardless on who
wins the runoff election).

Lenders are caught up in a bit of a logjam. The local home purchase
market is still running at historically high levels, and everyone else
is scrambling to refinance before the rates jump up, all at once!
Instead of the normal 24-48 hour underwriting turnaround, some lenders
are taking up to 3 weeks. Anybody that followed my lead and processed
their loan back in December - February, was in perfect position to take
advantage of the lowest rates, and have an expedited funding. I'm not
saying forget about that refi, we just have to be patient.

As I predicted, the interest rate yield curve has shifted, with the long
end of the curve bumping up, while the short end has dropped. (What does
that mean?) The mortgage rates are still great, but the standard 30 year
fixed has been trickling up, but the 3/1, 5/1 or 7/1 Arms (30 year loan
with fixed rate for 3, 5 or 7 years) are amazingly cheep, running up to
a full percent lower than the standard 30 fixed. 

The pending writers/actors strikes, and the California energy
malfunction are wild cards, but because LA is making the majority of
it's own power, we should weather the storm pretty well. 

So far the local housing market is still kicking strong. My friends in
Northern Cal…SELL! and come on back! At least reap the benefit of your
equity and don't hold on to the sucker like you did your Dot Com stock
J. Remember, Uncle Sam now lets you hold on to your gains tax free
($250,000 for single, $500,000 for married couple). Southern Cal's
economic cycle is several years behind our Northern brother, and we're
good for years of additional value appreciation. Also remember that
throughout the past century, Southern California was always the hotbed
of economic growth, while Northern Cal was envious. Silicon Valley may
have changed that scenario, but we'll never have the disparity that we
had in the 90's again. 

BTW If you know anybody looking for a single story 5 bedroom in the West
Valley, have them check out my new Community listing. Great
neighborhood! http://mres.com/proprty.htm

2/01
Since my last newsletter, Uncle Greenspan has dropped the Fed rates by a
full percent, with the possibility of more! There is talk about the
national economy slowing down, but locally, the economy and real estate
market remains robust with low interest rates, and an amazing demand for
housing out pacing supply, putting an upward pressure on prices. Supply
and demand has a profound effect on real estate activity and property
values.

On a fundamental level keep in mind the San Fernando Valley (or Los
Angeles) now has strong economic diversity, population growth, and a
shortage of raw land to develop (keeping new supply down).

People keep inquiring if the LA housing prices have maxed out? Hardly!
Check out the updated San Fernando Valley housing price charts on my
website at http://mres.com/statistics_ave_sfv_chart.htm and
http://mres.com/statistics_ave_sfv_breakdown.htm . If you evaluate the
chart as if it was a stock, or conventional commodity, the chart's
technicals are showing a buy signal. When a chart breaks into new high
territory it indicates the market doesn't have to work through Overhead
Supply. In other words, no one has bought a property at a higher price
and was waiting to get out even. 

As a basis for comparison, the average house in San Francisco in 2000
was $402,300, San Diego $313,500 and Los Angeles $280,900. Real estate
markets tend to be cyclical. Back in 1989 San Francisco's pricing was
only a fraction higher than Los Angeles, but started their cycle earlier
than LA. Los Angeles is only in the middle of the present escalation
portion of the cycle. 

My crystal ball shows the average sales price of a property in the San Fernando Valley being approx. $360,000 within a few years.

For an expedited overview, or specific questions, feel free to call Ron at 818-999-2945. 

Licensed Real Estate Broker with the Calif. Dept. of Real Estate