123 N Kings Road - Boutique Lofts Near the Boutiques

Within walking distance of the Beverly Center, the Grove and all the excitement of Beverly Boulevard are the twelve new residences at 123 N Kings Road. Protected from the street by the de rigeur wooden-slatted façade, these multi-level townhouse style condo units blend concrete, wood, glass and a heap of stairs into comfortable dwellings at the center of this high-profile shopping and dining district.

Updated September 4, 2010:  After disappearing for a long time, 123 N Kings Road is back on the market.  The project ran into financial difficulties is now in receivership (i.e., rather than the embattled developer or bank selling the project,  the court appoints a 3rd party to supervise the disposition of the condos) Bottom line: these excellent units are priced to sell at $579,000 - $799,000, a competitive $430/sq ft.  

It's difficult to comprehend that eighteen months ago, when the project debuted, the units were priced from $949,000 - $1,185,000.  This high-end Pugh + Scarpa design will satisfy modern aesthetes as well as well-heeled urbanites who want to be at this swanky crossroads (get your coffee at Kings Road Cafe just across the street.)

Entry to the units is off a central courtyard. On the ground level is an open kitchen-living area with ¾ bath and steps leading to a mezzanine office-sitting-area (in 8 of the units). Up another level is the bedroom and full bath. Up another flight of stairs is access to the rooftop deck. (Cancel your membership at the gym, you’ll do plenty of walking if you live here.)

The finishes are high-quality. The units give the air of clean simplicity, to be enhanced by the owners’ personal touches.

The rooftop deck, a great place for a gathering, is accessible from the units’ top floors and has excellent, unobstructed 360 degree views. Margaritas and martinis are sure to follow.

The bedrooms are in general large, and the ceilings are high (true throughout the units.)  The white wide-plank floors look very cool.  

One of the more spectacular features is the master bath.  Walk up a few steps and enter a loft-like space with dual sinks, floating cabinets, excellent tile and finishes.

The complex is presented by Abitar Development. Units come with two parking spaces. HOA costs are lower than most comparable complexes.

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Adner Realty Group is always looking for the best value in the Los Angeles condo market. If you have questions about the 123 N Kings Road or other buildings, please call us at (310) 845-6810 or email us by clicking on this link.

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123 N Kings Road
Los Angeles 90048
HOA: $284 - $313/month


Unit type:
(2) 1 br, 1-3/4 ba
(8) 1 br + 1 mezzanine flex space, 1-3/4 ba
(2) 2br, 2.5 ba
Square footage: 1,371 – 1,940 (interior sq. footage only)

Condo Financing Under Pressure

Condo refinances are proving to be a thorn in the FHA’s -- and owner’s -- sides. A simple FHA refinance is anything but simple for condo owners whose neighbors may be in arrears on their dues.

If 15% of a building’s owners are 30 or more days late on their dues, FHA guidelines will not permit an owner to refinance.

New construction has also been hit hard by the FHA’s tighter regulations. 70% of units (up from a previous 50%) must be presold before Fannie or Freddie will buy the related loans.

Read more about condo financing in today's Los Angeles Times article.

Underwater Homeowners: Help Is On The Way

One gaping hole in the Obama administration's “Making Home Affordable” loan modification program is that it didn’t help three categories of homeowners: 1) those whose loans were not held by Fannie Mae and Freddie Mac; 2) those whose first loan amount was more than 105% of the appraised value; and, 3) those who held a second mortgage on the property.

Now, help is on the way, and the neediest cases – those homeowners who are seriously “upside down” and owe more than 105% of the value of their property – are getting backing from the government.

Banks holding 2nd mortgages on these underwater properties are getting incentives to reduce interest rates to as low as 1% for five years or in many cases to write down the 2nd loan value in its entirety to help owners stay in their homes.

The President and the country's legislators, including California Assemblyman Ted Lieu (D-Torrance), should be applauded in their efforts to stand behind the people and to help remedy the nation's foreclosure epidemic.

Read today's Los Angeles Times article.

Read the Making Home Affordable Second Lien Update dated April 28, 2009.

Read the Treasury Department Press Release on the Program.

Westside LA Income Property Market – 1st Quarter 2009

Buyers of Westside Los Angeles income property pay a premium to own property on the Westside and their objectives differ from those who invest in neighborhoods further east.

Westside buyers are typically not assessing a building on its current cash flows but are looking at its: 1) future development potential; 2) future market rents; or, 3) value as an owner-user opportunity.

Below we’ll look at an example that sold during the 1st Quarter of 2009 from each of these categories.
1) 430 - 506 Pico Boulevard, Santa Monica – Development Opportunity

These five contiguous lots near the corner of Pico and 4th in Santa Monica total almost 25,000 sq ft, are delivered vacant, and are zoned for redevelopment. Asking price was $5.8 million. Sale price was $4.5 million. Sale time 117 days.

These units are sold for land value. In spite of the jitters in the commercial real estate market, a developer is seeing an upside by buying in this area.


2) 209 Venice Boulevard, Venice – Capture Upside in Rents

This 10-unit non-rent-controlled building located a few blocks from the beach sold for $3.8 million, close to its $4.125 million asking price, in 24 days. With 12,279 sq ft of living area, units, on average, are over 1,200 sq ft and come with two parking spaces. Gross rent is $282,000, yielding a GRM (Gross Rent Multiplier) of 13.5.

Although the building is advertised as having an upside rent potential of 17%, the building is trading at a 30 – 35% premium to properties in Hollywood or Silver Lake / Echo Park, where comparable buildings are trading at a GRM of approximately 10.


3) 2137 20th Street, Santa Monica - Owner-User Opportunity

2137 20th Street sold for $1.5 million, below its $1.7 million asking price. This 6-unit compound is essentially a 3 bedroom, 2.5 bath house on the same parcel as five rental units generating on average $1,500/month. The owner benefits from a heavily subsidized mortgage payment but most bear the cost of owning and operating a 5-unit income property at his doorstep.

During the boom, cap rates for “bread and butter” income properties (say in Santa Monica) were compressed to as low as 3.5% as investors saw future value in properties and were willing to forgo income in the present in order to obtain these returns.

Values may have declined from these heady days, but the Westside Premium is still very much in play. One may ask, why are investors willing to pay such a premium to own Westside property? The answer is twofold.

The first can be attributed to “availability bias”: buyers tend to buy (and to overvalue) what is most familiar to them. Investors who live on the Westside know the Westside and buy on the Westside.

The second is experience: these buyers invested on the Westside, yielded outsized returns, and are looking for a repeat performance. During past real estate cycles, property close to the beach proved to be gold – and there is no reason to expect the trend to change.

Sherman Oaks – 1st Quarter Market Round Up

Single Family.

The Sherman Oaks market mirrors neighborhoods over the hill: lower median sale price, overabundance of REOs and and short sales, and brisk sales on the lower end.

In the first quarter of 2009 in Sherman Oaks there were 67 single family home sales. The median sale price was $645,000. A solid 16% (11) of these sales were over $1 million. The average days on the market was 49.


The highest-priced sale was 15664 Castlewoods Drive (above), closing at $4,383,000 before it was put on the market. There are few comparable properties -- 7,305 sq ft of living area, 32,051 sq ft lot, pool, tennis court, new construction, views.


28% of all home sales were either REO (13) or short sales (6), and these were not exclusively on the lower end of the market. One REO, 2946 Glenridge Drive, sold for $1,250,000. Another sold for $900,000.

One MLS listing advertised:“this is a regular sale.” It should read, “this is a liability”, since ordinary sellers not in distress are competing with the ultimate motivated sellers: the banks.

Condo.

The Sherman Oaks condo market in the first quarter of 2009 did not differ significantly from the single family market. 5% of sales were REO, 20% of sales were short sales. The median sale price of a condo was $415,000. Average sale time was 142 days on the market.

$18,000 in Tax Credits for California Homebuyers

Are you eligible for $18,000 in tax credits available to California homebuyers?

The $8,000 Federal tax credit is available to first-time homebuyers and is subject to certain income limits.

See the IRS's Questions & Answers about whether you're eligible for the $8,000 first-time buyers credit.

The $10,000 California credit is for previously unoccupied properties -- and is intended for any buyer -- but the funding has a $100 million cap.

Read about the California $10,000 Tax Credit.

Update July 4, 2009: As of July 9, 2009, the Franchise Tax Board will no longer be accepting applications for the credit. Over 12,000 applications have been received to date.

Check out this matrix for a simple explanation of the tax credit programs. [CAR]

Concerto: Headwinds Greet Downtown LA Condo Project

The Downtown LA condo market is facing major obstacles just when the economy is rolling through one of its deepest, darkest periods in decades.

Many projects are facing bankruptcy.

This month, the owners of the nearby Roosevelt Lofts filed for Chapter 11 bankruptcy protection after failing to sell enough condos to open the elaborately renovated office building to residents. Owners of the Brockman Building, another downtown condo project, also recently filed for bankruptcy protection. [Los Angeles Times]

Then, along comes Concerto, a high-rise condo project at the corner of Flower and 9th Streets. Developer Sonny Astani paid $30 million for a 100,000 sq ft parcel in 2004 and embarked on building a three tower residential and retail complex.

The results are quite impressive. And the location near LA Live can't be beat.

Updated 8/8/09: The 77-unit Lofts building at 9th Street and Flower Street is having a one-day sales event on August 29, 2009. Prices have been announced on the Concerto website:

Studios start at $219,000 (738 - 782 sq ft)
One bedrooms start at $279,000 (959 - 973 sq ft)
Two bedrooms start at $449,000 (1,325 - 1,689 sq ft)

California: More Missed Mortgage Payments, Fewer Foreclosures

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures.

The drop in foreclosures follows moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac. The increase in loan defaults, meanwhile, suggests that rising unemployment and the continuing recession are still claiming fresh victims.

But another factor in the soaring default rate could be that some struggling homeowners are purposely skipping their payments so that they can get their loans refinanced, industry experts say. [Los Angeles Times]

In the complex world of loan modifications, distressed homeowners are finding the fastest route to obtaining a loan workout is to stop paying the mortgage altogether.

Banks are so deluged with loan-mod requests and are so understaffed that only the neediest cases -- homeowners in default and on the route to foreclosure -- are getting the attention.

Rewarding homeowners in default runs counter to the newly-launched "Making Home Affordable" Program, which offers refinances to homeowners whose loans are held by Fannie Mae and Freddie Mac. Only homeowners who are current on their loan are eligible for the program.

Enjoy "The Vue": 921 San Vicente Boulevard, West Hollywood

Another condo project is nearing completion in central West Hollywood – the sleek, modern five-unit “The Vue”.

These private, multi-level units, which combine sun-dazzling white stucco exteriors with cool walls of glass, capitalize on the outstanding views at the foothills of the Hollywood Hills.

Prices start at $1,189,000.


Amenities include:

Living area: 1709-1830 square feet
3 bedrooms and 2.5 bathrooms
Outdoor living and entertaining on private rooftop decks
Open floorplans, 18-foot ceilings
Commercial grade windows
Tranquil water features
Designer kitchens and baths
Stainless steel appliances
Ventilated underground parking

One of the most outstanding features are the roof-top decks.

The developer is Talbert Development Inc. Interiors are by Brown Design.

Coming soon.

10 Palms, Hollywood: On Sale, Concrete Not Yet Dry

As an illustration of how eager developers are to bring their product to market, a Brokers Open House for 10 Palms, a 9-unit development at 6683 Franklin Avenue in Hollywood (corner of Las Palmas) was advertised -- and cancelled because the sidewalk concrete was being poured.


Indeed, the lofts may be quite nice. They have the clean-lined look popularized in Dwell and have unique, multi-level floor plans.

A 3 bedroom, 3 bath, 2,044 sq ft unit is advertised at $995,000. A 2 bedroom, 2 bath, 1,621 sq ft unit is listed at $795,000.

The developers have every reason to be jittery -- these fine-looking lofts are competing with plenty of other product -- in Hollywood, West Hollywood and Downtown.

Updated 5/5/09: The concrete is dry and the units are ready for their close-up.

Fannie or Freddie? Find Who Owns Your Home Loan

The biggest benefit of the Obama Administration's Making Home Affordable program is that homeowners who are current on their payments can refinance their loans on excellent terms. But the program is available only if Fannie Mae or Freddie Mac holds the loan.

Through June 2010, borrowers whose loans are owned or guaranteed by Fannie or Freddie may be able to get quick refinances for up to 105% of a home's value. They must be current on their mortgage payments, but administration officials estimate that as many as 5 million homeowners qualify. And refis are available for borrowers with credit scores as low as 620. [Los Angeles Times]

To find out if your loan is held by Fannie or Freddie call your lender or go to:

For Fannie Mae: http://loanlookup.fanniemae.com/loanlookup/

For Freddie Mac: https://ww3.freddiemac.com/corporate/

Cutting the Cord: Banks Drop Home Equity Lines of Credit

The Home-As-ATM, one of the most egregious abuses of bubble era, is shutting its doors.

Home equity lines of credit, which many homeowners used for repairs, upgrades – and ultimately vacations, tuition payments and luxury goods, are being all but eliminated by banks.

These lines of credit essentially replaced savings accounts as the fallback, with many financial advisers counseling homeowners to keep a $50,000 line open at all times.

But that fallback is evaporating. Lenders in the past year have made it much more difficult to qualify for home equity lines of credit, and even those who do get them will pay a much steeper price in interest — about 5 percent, in fact, which is higher than the average long-term mortgage. [New York Times]

Abundant, easy money has disappeared as banks have pared back home equity lines, credit card limits and home mortgages with high loan-to-value ratios.

It’s no wonder that home values have fallen and retail sales have hit the skids: a dollar today is worth more than a dollar of yesteryear.

LA Times: "Is Worst Over For Housing Slump?"

click chart for more detail

Southern California home prices held steady for the third straight month in March, a sign that the housing slump may be near its bottom.

The median sale price remained at $250,000 for the six-county region, which is less than half the median value of homes at the market's peak in 2007. But the fact that home prices have stayed the same since January could be an indicator that the market is beginning to stabilize -- which is considered key to a broader economic recovery.

For the last year, home sales have become increasingly dominated by the low end of the market as the presence of a large number of foreclosures pushed down prices at the same time that credit became available for smaller loans.

Low prices and attractive mortgage rates drove March home sales up 52% in Southern California compared with the same month a year ago. Just over half the sales were of homes that had been foreclosed on.

"There are a number of indicators that show the housing market is in the process of bottoming out," said Delores Conway, director of USC's Casden Real Estate Economics Forecast. Chief among them, she said, was that home buyers previously priced out of the market are now able to buy.

One point of contention among housing market observers is whether expensive homes aren't selling because of the limited availability of jumbo loans, or because their prices are too high relative to incomes.

But there is no doubt the upper end of the market is frozen. "It's stagnant," said Aliso Viejo real estate broker Steven Thomas. "Demand just doesn't exist above $1 million." [Los Angeles Times]

The freefall in Southern California housing prices seems to have been arrested as the sale of foreclosures and distressed properties creates a bottom in the six County region.

The theory goes, as the housing market firms up on the low end, prices stabilize up the property ladder.

The under $1 million inventory in a five neighborhood central Los Angeles area (Sunset Strip/Hollywood Hills West, Silver Lake/Echo Park, Los Feliz, Beverly Center/Miracle Mile, Hancock Park/Wilshire) is only 4.8 months, the lowest level since May 2007. By most standards, this is considered a stable (verging on tight) market.

For first-time buyers considering the purchase of a property, there may be no better time than today. The combination of high inventory, low prices, historically low interest rates and government incentives ($8,000 first-time buyer credit, $10,000 new construction credit) make for a “perfect storm” for buying.

First-time buyers may be surprised that there’s plenty of competition. Well-priced properties under $700,000 (that can be financed by a non-Jumbo loan) frequently get multiple offers, including bidding wars where thirty or more offers are submitted on a single property.

click chart for more detail

The over $1 million market may be “stagnant”, but in central Los Angeles it shows dramatic signs of improvement.

The months supply of inventory in the same five neighborhood area (Sunset Strip/Hollywood Hills West, Silver Lake/Echo Park, Los Feliz, Beverly Center/Miracle Mile, Hancock Park/Wilshire) is 11 months, nearly half of what it was last fall when there was 21 – 23 months of inventory.

There is no doubt that high-end buyers have a harder time qualifying for loans (particularly in Los Angeles where many self-employed and entrepreneurial types don’t show traditional W-2 income) and that many of these buyers have diminished purchasing power because of the stock market rout.

It is also worth pointing out that the “burning off” of inventory is due not only to sales, but to sellers removing their properties from the market because they failed to find a buyer.

Whatever the source, recent data point to an incipient housing recovery that should gain some legs as the general economy improves.

W Hollywood Residences: Play Hard. Work Tomorrow.

Address: 6250 Hollywood Boulevard, Los Angeles 90046 – corner of Hollywood + Vine
Asking price: $800,000 - $9,000,000
Number of units in development: 143
Number of units in contract: 50
Monthly maintenance: $1,331 - $2,940
Smallest unit (studio): 1 bedroom, 1 bath, 900 sq ft + 130 sq ft exterior terrace
Largest unit (penthouse): 3 bedroom, 3 bath, 3,230 sq ft + 945 sq ft exterior terrace
Completion date: November 2009

High wattage, luxury living reaches a fever pitch in the stunning W Hollywood Residences, part of a $350 million condominium-hotel complex under construction at Hollywood and Vine, with occupancy slated for November 2009.

The W Hollywood Residences offers high design and a raft of amenities: terraces, private pool, 24-hour “whatever whenever” concierge service, a Sweat fitness club, a Bliss Spa, and VIP access to the W Hotel’s bars, clubs and eateries (including the much-anticipated French brasserie Cote d’Azur). W Hotel will operate this 143 condominium building in conjunction with the 305 hotel rooms.

Certain to attract an elite class of high-powered, city-hopping entrepreneurial and creative types, the W Hollywood Residences will usher in a new era of hip, catering to a clientele whose every need (and perhaps vice? Hollywood is literally at their footsteps) can be satisfied on the premises – or is just a phone call away.

It is nothing short of a coup that the developers Gatehouse Capital brought this high-end condominium concept to market in an arguably noisy, traffic-dense neighborhood, during the worst real estate climate in decades -- and succeeded.

The units are selling – and despite the economic downturn, Hollywood is undergoing rebirth, dusting off its gritty Times-Square-in-the-70's dinge and returning to its place “at the center of the world.”

The building’s floorplans range from modest 900 sq ft studios to sprawling 3 bedroom, 3 bath penthouses. The complex is built in accordance with the U.S. Green Building Council’s green and sustainable principles and is one of the largest buildings in LA to be LEED certified.

The units’ finishes include top brands: Kupperbusch, Subzero, Varenna, Ceaesarstone (kitchen), Kohler, Duravit, Dornbracht (bath) and Poliform (closet) and are sleek, contemporary and modern – as is to be expected from the W Brand.

Make no mistake – the W Hollywood Residences is no ordinary condo building and the developers are not appealing to the ordinary buyer. Occupants are paying a hefty premium (including homeowner’s fees that begin at $1,331 per month) to be where the action is.


If your typical night out involves a movie at the Arclight, dinner at the Hungry Cat, drinks at Club Pure, and a late-night swim with new friends at the private rooftop pool (with room service), you’ve come to the right place. W Hollywood Residences has style and magnetic star-power, and is destined to become the crown jewel of the Hollywood renaissance.

Bottom line: If you can swing it, sign on the dotted line. Beware: paparazzi and twitterati may follow.

Buyers: What to Verify Before Removing Loan Contingency

Buyers, beware. Even for qualified borrowers, loans are difficult to obtain and have many more underwriting conditions than in years past.

Buyers should be especially vigilant about removing the loan contingency. We've heard too many stories about buyers who are given additional conditions to fulfill after the loan contingency was removed (and sometimes a few days before closing.)

If the loan is not approved, Buyers risk: 1) losing the property; and, 2) losing their earnest money deposit (typically 3% for California residential sales.)

Easy loans of yesteryear led to lax practices where buyers would get a verbal sign-off from the lender and then would remove the loan contingency.

No longer. Buyers should request a Letter of Commitment from the lender prior to removing loan contingency. They should also ask what underwriting hurdles might exist that could prevent the loan from funding.

This wise advice comes courtesy of Dana Dukelow at MetroSunset Mortgage in West Hollywood, CA. These are questions you should ask your lender prior to removing the loan contingency:

1) Have all the "Prior to Docs" conditions been cleared? These are the loan conditions that the lender requires before they will allow loan docs to be drawn.

2) What are the "Prior to Funding" conditions? These are the conditions that have to be cleared before you can fund the loan. Many times these conditions are related to the escrow company.

3) Has the "4506T Form" been processed and have they received the tax returns back from the IRS? This is a new thing in the past couple months. The lender submits this "4506T Form" to the IRS to request copies of the tax returns the borrower submitted. We are seeing many issues where the returns coming back from the IRS have info that was not included in the loan application. SO MAKE SURE THEY HAVE RECEIVED AND APPROVED THE 4506T TAX RETURNS!

4) Has the appraisal been approved? If so, have they asked for a "desk review or field review"?

5) CONDOS - have they received and approved the "Condo Certification Form" or the "Limited Condo Cert"? Be very aware of any litigation with a building!

6) CONDOS - has the underwriter asked for info on pre-sale requirements, budgets, insurance? Most condos now go through a condo approval in addition to the underwriting. This generally happens after the loan has been underwritten. Ask if the condo building has been approved by their condo department.

Beverly Center - Miracle Mile: 1st Quarter 2009

Single Family.

During the 1st Quarter of 2009, 24 single family homes sold in the Beverly Center – Miracle Mile area, with a median sale price of $940,000.

Sales volume of single family homes is off considerably compared to the 1st Quarter of the four preceding years: 30 (2008), 68 (2007), 51 (2006) and 64 (2005).

6430 Colgate Avenue

The top sale was 6430 Colgate Avenue, new construction with contemporary design, that has 3 bedrooms, 4 baths, and 3,528 sq ft of living area. The home sold for $2,365,000 after 16 days on the market.

One third of these sales were either REO (6) or short sales (2), showing how much distressed owners are “making the market”. The lower price echelon is not the sole province of these properties -- case in point -- 6139 Maryland Drive.

6139 Maryland Drive

This 4 bedroom, 3 bath Spanish home sold for $1,349,000 in August of 2005. Three and one-half years later, the house sold for $1,120,000 in a short sale – even after the owners put in a pool. This is a dramatic illustration of how much prices have fallen in the over $1 million category since the boom years.

Income Property.

Six income properties sold in the Beverly Center – Miracle mile during the 1st Quarter of 2009.

512 N Sycamore Avenue

512 N Sycamore Avenue, a 6,866 sq ft ten-unit character Spanish building with no parking, sold for $1,779,000 -- an 11% reduction from its $1,995,000 asking price.

123 N Swall Drive

123 N Swall Drive, a 7,540 sq ft eight-unit Beverly Hills-adjacent Spanish building, sold for $1,530,000 – $35,000 above its asking price – in one day.

The Gross Rent Multiplier (GRM) for these two buildings are 11.0 and 11.5, respectively. In Hollywood and Silver Lake – Echo Park, GRMs trend lower (approximately 10), indicating that buyers are willing to pay more for a given income in the Beverly Center-Miracle Mile neighborhood than they are in neighborhoods further east.

No More "Cash Out" Refinancing

A hallmark of the great debt-binge era of 2004 – 2008 (R.I.P.) was the “cash out” home refinance. The idea is simple: the owner takes out a new loan higher in amount than the previous loan and pockets the difference in cash.

As a property rose in value, the owner was able to take on more debt – and to buy vacations, luxury vehicles – and maybe even a new investment property so they could repeat the cycle all over again.

Money, created when banks relaxed their lending guidelines, was used to make money and more money until the merry-go-round stopped.

Now, it’s all but impossible for owners – even with superior credit – to get a cash-out refinance.

Banks are understandably leery about lending money on an asset that, in most areas, is losing value, especially as it is far from clear when the real estate market will bottom out.

Studies have also shown that borrowers who need to take cash out of their homes when they refinance have higher default rates than those who do not.

[Banks] will often lend up to only 60 percent of the home’s value, while others place a cap of $100,000 on the amount of cash a borrower can extract from the home.

Homeowners who do find a lender willing to offer a cash-out refinance should be prepared to pay a higher interest rate than they would pay if seeking a conventional refinance loan.

Those with good credit — and credit scores of at least 720 — can expect to pay an additional three-fourths of a percentage point. Borrowers with lower credit scores face much worse conditions. [New York Times]

It’s an unfortunate by-product of the mortgage meltdown and credit crisis that qualified borrowers cannot easily tap the equity in their property.

This “easy money” can be put to useful purposes. Yet it was so abused during the boom that cash-out refinances are likely a primary cause of the short sales, foreclosures and underwater mortgages prevalent today.

Less home equity to tap means less money circulating in the US economy. It’s no surprise car and retail sales are hitting all-time lows because the “home as ATM” has been taken away from the American consumer.

With “returns” from homes and investments sorely negative, the harsh reality for most Americans is that they’ll have to earn money the old-fashioned way: with hard work.

1220 N Orange Grove: Art Lofts Coming Soon

Those who want to be within walking distance of Whole Foods on Fairfax and Santa Monica might check out the 1220 “art lofts” at 1220 N Orange Grove Avenue in West Hollywood. Updated 9/30/09: The units are completed and they are big, industrial and nicely finished. Updated 6/1/20: The prices have been slashed on all units and six are currently in contract. The six still for sale are:

• Unit 2: $719,000 -- 1925 sq ft
• Unit 3: $699,000 -- 1925 sq ft
• Unit 4: $699,000 -- 1925 sq ft
• Unit 5: $679,000 -- 1925 sq ft
• Unit 7: $749,000 -- 1982 sq ft
• Unit 8: $739,000 - 1888 sq ft
  

Address: 1220 N Orange Grove Avenue, Los Angeles 90046
Unit type: 2 bedroom + lofts, 2.5 bathrooms

Situated in a neighborhood of multi-family properties, the project consists of two blocks of lofts surrounding a landscaped courtyard.

The project has been almost five years in the making, and like many others, spanned boom to bust. Prices have been lowered so much, buyers are the ones clearly reaping the profits.

Sold by Keller Williams - Westside

950 N Orange Grove Avenue: "Builder's Close Out"

Four (more) architectural lofts in a five unit complex east of Fairfax in West Hollywood have come to market at “builder close-out prices”.
Address: 950 N Orange Grove Avenue, Los Angeles 90046
Asking price: $849,000 - $1,095,000
Unit type: 3 bedroom, 3.5 bath
Square footage: 2,078 – 2,150 sq ft
Number of units in development: 5
Number of units sold: 0? Unclear – one unit is not currently marketed
Days on Market: 14

These gargantuan units have over 2,000 sq ft of living area on four levels, and 3 bedrooms and 3.5 baths – enough room for an entire family.
Despite their size, the monthly cost for even the most affordable unit ($850,000) may be considered onerous. Do the math:

$850,000 purchase price

First, cough up the 20% downpayment -- $170,000 -- in case you have that lying around (say under your mattress.) Add in mortgage points and closing costs, and total cash requirements to buy the unit are $180,000.

Then, finance the remaining 80% with a 30-year loan -- $680,000 @ 4.875% = $3,599/month
Add in homeowners fees: $450/month
Add in property tax (approximately): $815/month

Total monthly nut: $4,863 – for the most “affordable” unit
Even with interest rates at 50-year lows, the cost of owning is far more expensive than renting. With the glut of unsold condos, a similar unit could be rented for $3,000 - $4,000/month (and the landlord will throw in a free flat-screen TV). And you can keep your $180,000 in a safe investment like a CD (or under your mattress).

Despite the polished, glimmering concrete floors, the spanking freshness of ceramic tile and Grohe-esque fixtures, and the generous, loft-like space, the price is too high.

You might see this pricing at a central West Hollywood or Beverly Hills or a Westside location – but not East of Fairfax … not at Romaine.

Bottom line: Good product. Wrong price. Wait it out.

Las Vegas CityCenter: Colossal Debacle?

Las Vegas’ MGM Mirage CityCenter, one of the most expensive construction projects in the world, may be the AIG of real estate – teetering on the brink of insolvency, but too big to fail.

The stakes are enormous – the $9 billion project – a 67-acre “mini-metropolis” with condominiums, hotels, retail and casinos – would remake the landscape of Las Vegas. The project currently employs 8,500 in construction and would result in 10,000 full-time jobs.

Global titans in architecture – Cesar Pelli, Norman Foster and Daniel Liebskind – left their impratur on the colossal development of epic proportions. In typical Vegas fashion, the developers risked it all – and now it’s unclear whether the crap shoot was worth it.

It was conceived as the centerpiece of a thriving Las Vegas -- one of the world's most expensive building projects that would bring back glamour to the Strip and cap an unprecedented three-year economic boom.

Instead the $9 billion development named CityCenter -- touted as the city's most ambitious endeavor -- has come to symbolize a global retail and leisure slump and the city's struggles to come to grips with crushing unemployment and dwindling casino revenue.

Partners MGM Mirage struggling to bankroll the project's ballooning cost -- and Dubai World DBWLD.UL had pondered placing the development under bankruptcy, thrusting its future into question, sources say.

In March, Dubai World, the development arm of the United Arab Emirates, sued MGM Mirage, claiming mismanagement and wanting out of further financial commitments. The U.S. company hired bankruptcy counsel, setting off alarms about solvency. And the company was forced to inject an emergency $200 million to keep construction going.

"The events of the last six months have been our Pearl Harbor, economically," said Bill Thompson, gaming expert and professor of public administration at the University of Nevada, Las Vegas. "CityCenter might be too big to fail. If it opens, it's a dramatic gesture that says we're winning, we're not defeated, we're on the way back."

"If it fails, it would be like a second Pearl Harbor." [Reuters]

Hanock Park - Wilshire Market - 1st Quarter 2009

Single Family.

In the first three months of 2009, 31 homes sold in the Hancock Park – Wilshire area. The median sale price was $869,000 – an astonishing 42% decline from the median sale price of $1,502,000 during the first three months of 2008.

68 Fremont Place

68 Fremont Place, a 1923 Paul Williams traditional home “reimagined and re-defined by European designer Marc Canadell” sold for its $5,995,000 asking price in 25 days. Located on a private way, this Hancock Park home has seven bedrooms, eight and one-half baths, and 8,544 sq ft of living area on nearly half an acre.

523 S Lucerne Boulevard

523 S Lucerne Boulevard, a fully-remodeled Mediterranean manor on a prime Windsor Square block sold for $3,250,000 -- close to its $3,299,000 asking price -- in 14 days. This home has five bedrooms, four baths and 3,966 sq ft of living area on a 12,600 sq ft lot

There are currently 36 homes on the market priced $2 million or more. Six in this price range sold during the first three months of 2009 – or enough inventory for 18 months at the current sales rate.

The Hancock Park – Wilshire area is not immune to the REO and short sale scourge – three of the sales were foreclosed properties and one was a short sale.

Income Property.

In this prime neighborhood of trophy, owner-occupied properties, six duplexes and one fourplex traded hands during the first three months of 2009.

160 N Orange Street

160 N Orange Street, an incredible Tudor duplex built by Hancock himself (of “Hancock Park” fame), sold for $1,650,000, $150,000 off its original $1,800,000 asking price, in 148 days. The property, which had been in same family for 50 years, has two three bedroom, three bath units, enormous fireplaces and 5,213 sq ft of living area.

412 N Orange Boulevard

412 N Orange sold for $1,025,000 – a drastic reduction from its original $1,499,000 listing price. This 1927 character Spanish duplex has two three bedroom, two bath units and 4,273 sq ft of living area, an amazing $239/sq ft for a central, high-quality property.

(click chart for more detail)

The percentage of homes under contract during the first three months of 2009 began at 4 – 6 %, close to its two year lows, and then experienced an uptick to 13% during March, indicating that buyers are sellers are increasingly making deals.

Click here for a map of the Hancock Park Historical Preservation Overlay Zone (HPOZ)

Click here for the Hancock Park Homeowners Association website

Los Angeles Rents Decline

According to the annual USC Casden Forecast, rents fell 4% in the Los Angeles area in 2008. On the brighter side, the report indicates that rents are not in a freefall and should stabilize in 2010. Highlights of the report:

The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. The decline should continue this year as more renters lose their jobs.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.

To keep their units occupied, some landlords are lowering rents or offering concessions for signing a lease, such as a month of free rent or a reduced deposit, she said.

Rents should level out in 2010 as the economy recovers, the report said. The average one-bedroom apartment in Los Angeles rented for $1,397 a month at the end of last year.

The Westside remains the priciest, while Pasadena and Burbank are stable with little change in occupancy or rents. Rents in Hollywood and central neighborhoods such as downtown Los Angeles are being weakened by new condominiums that are being leased rather than occupied by owners. [Los Angeles Times]

The cause of the rent decreases are twofold – increased supply and decreased demand.

Unsold condominiums in key markets (Hollywood, Downtown, Long Beach) have been converted to rental property, increasing supply of rental units.

High unemployment and financial hardship have caused renters to move in with friends or family (or move out of the city) rather than renting, decreasing demand.

Several forces should prevent rents from spiraling downward – and in fact should cause (excessive) rent momentum going forward:

1. Few apartment buildings are under construction. Once the condos-turned-rentals are absorbed, there will be virtually no new supply of apartment units.
2. The glut of REOs and short sales – which has served as a “ghost” rental market – will dry up, decreasing rental supply.
3. Fewer renters will make the transition to becoming homeowners as loan underwriting guidelines are tightened.

It may be a few years off, but Los Angeles rents have the potential to climb precipitously in the not-too-distant-future. For now, financially-strapped renters can take advantage of the cooling rental market and lock in favorable terms.

SoCal Housing Costs Decline

The cost of shelter in Southern California is declining. The numbers for the February Consumer Price Index are out for the region:

• All housing costs rose at a 1.3% annual rate, lowest since August 2003.
• Renters’ costs rose at a 3.2% annual rate, lowest since November 1998.
• Homeowners costs — odd math equal to what it might cost to rent your own home — rose at a 2.9% annual pace. That’s lowest since December 1999.
• Heating gas costs tumbled at a 29.4% annual rate. These volatile costs last fell at a faster rate in October 2006.
• Electricity costs fell at a 2.9% annual rate. These expenses have declined in 22 of the past 24 months.
• Inflation in “household furnishings and operations” was up at a 0.5% annual rate, smallest since January 2005.
• The costs of living on SoCal, minus the expense of the roof over your head, fell at a 1.2% rate — 4th consecutive decline. This local CPI minus shelter math — that dates to 1979 — had never gone negative before November of last year.
• The overall SoCal inflation rate was zero. [Orange County Register]
  

Remodeling Tax Credit For Homeowners

A little known part of the Economic Stimulus Package is a tax credit for homeowners who make their properties more energy efficient. The current version of the tax credit is a “sweetened” version of an initial remodeling credit introduced last fall.

Under the old remodeling credit, which was part of the economic rescue package enacted last fall, homeowners could claim a credit equal to 10% of the cost of energy-efficient windows, doors, roofing, insulation, furnaces, air-conditioning systems and heat pumps. They could claim 10% of the cost of each product, up to a lifetime cap of $500.

Remodelers maintained that the energy credit wasn't sufficient to persuade owners to make upgrades.

So Congress upped the ante, raising the per-item credit to 30% of the cost and boosting the lifetime ceiling to $1,500. It also extended the deadline for making the improvements to the end of 2010.

The stimulus package also expanded the list of permissible improvements by including solar-energy panels and water heaters, geothermal heat pumps, small wind-energy systems and fuel cells. Moreover, while the 30% credit applies to the added products, there is no cap on their cost, and the credit is available through 2016. [Los Angeles Times]

Get those Energy Star appliances – it’s on Uncle Sam!

Mortgage Delinquencies Soar Across the US

On the national front the news is grim – 7% of borrowers are 30 or more days delinquent on their mortgages – up more than 50% from last year.

The numbers are worse for sub-prime borrowers – 40% are 30 or more days behind on their payments.

The continued increase in mortgage delinquencies foreshadows more foreclosures, short sales and home price declines as homeowners default and banks then repossess the homes to sell them at deep discounts.

The rising jobless rate manifests itself in consumers' increasing reliance on credit cards even as lenders try to restrict access to credit, Adams said.

The data shows that lenders have good reason to be wary. Bank card delinquency is at its highest level in the past five years. Some 4.5 percent of total balances on bank-issued credit cards were at 60 days past due in February, a 32.7 percent increase from a year earlier. [Reuters]

We’d like to underline that trends vary on a micro level, and national statistics shouldn’t be applied in a blanket fashion to any particular state, city or neighborhood. But with 8.3% unemployment nationwide – and rising – expect a steady stream of short sales, foreclosures and REO auctions.

Los Angeles Office Market (Somewhat) Stable

In an economic environment which skews at least 99% to the negative, there is good news to report in the Los Angeles County office market. In 2008, the area outperformed all other SoCal regions in terms of office occupancy (12% vacancy by the end of 2008) and was nearly on par with the number of leases over 20,000 sq ft that were signed in 2007. We’ll take the smidgen of good news.

Despite the downturn, the pace of new leases or office expansions in L.A. County barely slowed last year, according to the Los Angeles County Economic Development Corp.

In 2008, 98 companies signed leases of at least 20,000 square feet or $1 million in annual value in L.A. County, down from 100 such leases in 2007. The numbers include new leases or expansions of existing leases.

The total square footage of these leases rose 13 percent in 2008 to 7.6 million square feet.

Office vacancy rates rose from 9.7 percent at the end of 2007 to 12 at the end of 2008, meaning that the space coming onto the market exceeded space being absorbed in new or expanded leases.

Nonetheless, Los Angeles significantly outperformed the rest of the Southern California region, which saw a 14 percent reduction in the number of major expansion leases signed and a 25 percent drop in the total square foot leased, led by major drops in Orange County and the Inland Empire. [Los Angeles Business Journal]

Silver Lake / Echo Park Income Property: 1st Quarter 2009

Seventeen income properties sold in Silver Lake / Echo Park during the 1st quarter of 2009. Seven of 17 – an incredible 41% -- of the sales were foreclosed properties.

The top two sales show there’s a vital investment community that’s purchasing income properties that aren’t distressed.

632 N Maltman Avenue

632 N Maltman Avenue sold for $2,080,000. The 1924 trophy-quality property which has been meticulously maintained consists of nine bungalows, each with private garden, and 6,902 sq ft of living area. The property sold in 55 days at a big reduction from its $2,495,000 asking price.

1549 Silver Lake Boulevard

1549 Silver Lake Boulevard, a seven-unit mid-century property that has deferred maintenance sold for $1,095,000, close to its $1,175,00 asking price, after only 17 days on the market. This stretch of Silver Lake Boulevard, between the 101 Exit and the "village" surrounding ground-zero -- LA Mill Coffee – is a high-visibility rental area.

The Gross Rent Multiplier for 632 N Maltman and 1549 Silver Lake are 10.54 and 10.15, respectively. (GRM = sale price/annual gross rent) Gross Rent Multiplier is a crude tool in assessing a building’s income-generating power (“cap rate”, which takes into account a building’s expenses, is the true test), but it does reveal how much income investors are willing to accept for a given purchase price.

During the 1st Quarter 2009, the Silver Lake average GRM of 10.34 was close to the Hollywood average GRM of 9.9 – approximately a GRM of 10.

To simplify the income property market to the broadest strokes, the GRM of 10 for Central Los Angeles means investors are looking to get $100,000 of income annually ($8,333 monthly) for $1,000,000 sale price of 7+ unit buildings.

Two to four unit properties and/or properties that are to be “owner-user” cannot be analyzed on these narrow terms and have variable GRMs.

Almost half of the sales of income property in Silver Lake / Echo Park in the 1st quarter of 2009 were for $500,000 or less. One year ago the median sale price for income properties in Silver Lake / Echo Park was $842,500. Like in this neighborhood’s single family market, bank-owned properties dominate sales and have driven down the average median sale price of income properties.

Lower Your Property Taxes: Have Your Property Reassessed

Declining homevalues in Los Angeles County may translate into lower tax bills for homeowners. The Los Angeles County Asssessor’s office is initiating a massive reassessment of up to 500,000 single family homes in Los Angeles County.

See if your home is under review for reassessment.

Download a Decline in Value Reassessment Application.

Is My Property Being Reviewed for a Decline-in-Value?

It has been widely reported that the property values of single-family homes and condominiums throughout most of the State have been declining. While the declines in Los Angeles County have not been as dramatic as those in other parts of the State, property values have dropped in most areas of Los Angeles County.

How does this impact your property taxes? In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in assessed value when a property suffers a "decline-in-value." A decline-in-value occurs when the current market value of your property is less than the assessed value as of January 1. The assessed value is the value shown on your most recent property tax bill.

Typically, an application is required to initiate a review of your property’s value by the Assessor. However, in 2008 the Los Angeles County Assessor’s Office did a proactive review of those single-family homes and condominiums that were purchased between July 1, 2004 and June 30, 2007. 318,000 properties were reviewed, resulting in lower assessments on 128,000 homes and condos. The average reduction in assessed value was about $73,000, amounting to an average property tax savings of $750. With the market still declining, we will again initiate a review in 2009. The number of properties in this review may approach 500,000 as we look at homes that sold between July 2003 and June 2008. In some areas, earlier purchases will be looked at. After April 1st, owners will be able to check this website to see if their home is part of the review. [Source: Los Angeles County Assessor's Website]

"Making Home Affordable" ; Getting the Best Mortgage

The Los Angeles Times ran two excellent articles on mortgages following yesterday's New York Times article on shopping for mortgages.

This first is a summary of the government’s “Making Home Affordable” refinancing plan, which allows homeowners to refinance up to 105% of the value of the house if they’ve been current on their payments.

The second presents an overview of how to obtain the best mortgage in the current challenging climate when FICO scores, low debtload and documentable income matter.

Mortgage Broker or Direct Lender?

There’s some debate on whether buyers of homes, condos and 2 – 4 unit income property should rely on a mortgage broker or a direct lender (bank, credit union, etc.) to get their loan. The New York Times in its coverage recommends shopping among a number of sources.

The comparison shopping will be simpler if you pick a specific kind of loan and look only for that, say a 30-year fixed-rate mortgage with no points. Because rates (and terms) can change daily, take an entire weekday and make all your calls. This sounds severe, but there’s no other decent way to compare apples to apples.

Start with a credit union or two. Hit a few community banks. Then try a few big national banks nearby. Give your investment firm a shout and the bank that has your checking account, since they may offer you a deal. And if you’re refinancing, don’t forget your current lender.

Next, call a few mortgage brokers recommended by people you trust. Talking to more than one isn’t a breach of etiquette. “You’re making the largest financial decision of your life,” said Mr. Savitt of the mortgage brokers’ association. “Why not check out what everybody has got?”

Mortgage brokers work for themselves, not for you. They do not provide a personal shopping service and may compare only a handful of lenders on your behalf. If you want to be sure you’re getting the best rate and the lowest costs, the only way to come close to succeeding is to hunt extensively on your own. [Source]

Much scrutiny has fallen on the mortgage industry as a whole. However, individual mortgage brokers can help consumers by getting excellent loans and providing a valuable service.

In the fast-shifting waters of loan underwriting and mortgage making, experience counts. Mortgage brokers who know the ins and outs of the business may succeed in getting a buyer a loan when a lesser mortgage broker or bank would fail.

Buyers can protect themselves by getting a “good-faith estimate” in writing from the mortgage broker which outlines the full extent of the costs. They can also make sure they are getting the best rates and terms by following the course suggested above -- comparing rates to other sources.

The ability of a mortgage broker to “perform” matters – if the loan is delayed (or not funded) the buyer’s deposit may be on the line. Banks are deluged with refinances and may not provide the service of a mortgage broker. The trifecta of a loan that has the best rates, best terms, and that closes on time may convince buyers that a mortgage broker is a valued professional.

Hollywood Multi-Family Market -- 1st Quarter 2009

Corner of Hollywood and Vine

Hollywood is cited as the #1 hot sub-market in the five county Southland. Much of this reputation is due to the massive residential and commercial developments under construction near Hollywood Boulevard and Vine Street.

These projects include the new W Hollywood Hotel and Residences just east of Vine Street and a huge retail complex including anchor tenant Whole Foods Market at Vine Street and Selma Avenue. Loft buildings, including the Hollywood Lofts and the Broadway Lofts, have brought residents to create a vibrant live-work-play neighborhood.

5623 Virginia Avenue

There were ten sales of income properties in the 1st quarter of 2009. Four out of ten were bank-owned (REO) properties; one was a short sale.

Over-leveraged investors clearly mismanaged their assets, and new buyers were able to swoop in and purchase these income properties on excellent terms.

1238 Kenmore Avenue

5623 Virginia Avenue, an Art Deco 11-unit building, sold for $965,000, generating $110,000 annual income. 1238 N Kenmore street, an 8-unit building from 1954, sold for $900,000, earning $82,000 annual income. The gross rent multipliers (GRM) are 8.8 and 11.0, respectively. (Neither was an REO).

Because many of the buildings have vacant units, unpublished rents (properties are sold as foreclosures) or have rents substantially below market rate, it’s difficult to extract meaningful cap rates or GRMs from the data. However, the most dominant trend is that REOs are “making the market” and establishing a new, lower baseline for pricing.

Silver Lake - Echo Park Market Round-Up: February - March 2009

2420 Moreno Drive

Single Family Home Market. 28 single family homes sold in Silver Lake – Echo Park in the months of February and March 2009, an average of 14 homes a month.

The two highest priced sales were 2420 Moreno Drive and 2130 Kenilworth Avenue – both in the desirable Moreno Highlands neighborhood – which sold for $1,275,000 and $1,150,000, respectively.

2130 Kenilworth Drive

Much of the sales activity was at the low end – just under half of the single family homes sales were under $400,000. Just under a third of all sales were bank-owned (REO) properties.

Because of this flood of bank-owned properties, the median sale price was $460,000 for February and March. Consider that for all of 2008, the median sale price of a Silver Lake – Echo Park home was $637,500.


The inventory is moving. As of March 2009, nearly 20% of homes on the market are in contract. As recently as six months ago, only 7% of homes were in contract. This should be taken as a positive sign – buyer demand is strong, and the excess inventory (mostly of REO properties) is being burned off.