Palos Verdes Source

Chris Ayres loves his house.  In his refreshing and thoughtful opinion piece in the LA Times, he challenges us to remember why we should love ours too.  He actually purchased his home one year ago and instead of bemoaning the fact that his home may be worth less today, he tells us why he is lucky.

First, the price - Ayres concludes a $1,200,000 purchase price, a loan of $1,000,000 at a fixed rate of 6%, and $200,000 of your own money for the down payment.  Next he factors a hefty devaluation of the property to $800,000 (and that is a big hit).  He moves on to inflation - ”At its current unbowdlerized rate of 5%, inflation alone will devalue your million dollar loan over the next decade to the “real money” equivalent of about $600,000, while at the same time causing your home to appreciate to $1.3 million..”  Ayres then factors in mortgage deduction and property tax deduction; in the 33% bracket over the decade, you would save $230,000.  He adds another $200,000 for the theoretical savings over the same period if you had waited to buy and paid a higher 8% fixed rate; “and the $700,000 of equity you’ll potentially end up with after inflation’s gone to work on both your loan and the value of your home.”   End result is a $1.1 million gain.

Palos Verdes real estate owners have been fortunate.  Our property values have reamained fairly steady this last year.  As perception can become a self-fulfilling prophecy, this article reminds us that we are really okay.

Statistics for the month of July for Palos Verdes Real Estate are available and the results were mixed again for July - more closed escrows and less pending sales.  There were 38 closed escrows and 45 pending sales in June vs. 48 closed escrows and 21 pending sales in July.  The days on market for sold properties in July was only 52 days compared to 67 days in June.

Average price for homes that closed escrow in July was down at$1,489,000 which could be an anomoly (please see entire chart by clicking here or on the “Statistics” tab above) as was the $700,000 spike upward for December 2007.  Average prices for some individual neighborhoods like Lunada Bay actually posted an increase of 30%.  Large swings can be caused by the specific homes that closed that particular month.  Months of Inventory (how many months it would take to sell existing inventory at the current rate of sale) fell from 7.1 months in June to 5.8 months in July (a good sign).

Currently, there are 278 single family homes for sale on the Palos Verdes Peninsula.  Additionally, 27 homes have pending sales; 22 homes are in escrow accepting backup offers; and 22 homes have sold/closed escrow since August 1st.  Overall, 15% of single family homes for sale are in escrow!

Walker Williams, Superintendent of Palos Verdes Unified School District, spoke this morning at our Remax meeting.  Our schools are one of the reasons that Palos Verdes real estate is so desirable.   Here are some interesting facts from his presentation:

• There are approximately 12,000 students in our district (30 less than last year)
• 80% of our funding comes from the State which is why the State budget situation will impact us.  The school district budget is balanced for the next school year. 
• Early indications are that our students performed well in recent state testing and “a little better than last year”
• 99% of our high school graduates go on to college - 80% to a 4-year college and 19% to a 2-year college
• U.S. News & World Report named both Palos Verdes High School and Peninsula High School in the “Top 100 High Schools in the Nation”
• A new language program (Chinese or Spanish) will be introduced at the K-5 levels this Fall which is paid for by the Education Foundation
• Palos Verdes High School will get a new pool, track and field and currently has 1800-1900 students on the block system
• Peninsula High School will get a new Practice Gymnasium and currently has 2400 students
• Malaga Cove School (photo above) will get a $8.5 million construction/modernization and will eventually house the District Offices
• Valmonte School (with no district offices) will probably be reopened as a K-5 elementary school or a Preschool through Kindergarten facility
• Currently Valmonte and Miraleste Elementary Schools house a paid Preschool program which brings income to the district
• Kindergarten programs district wide will be full day programs with 20 to 1 student/teacher ratio

Mortgage rates have changed again this week.  The market seems to  swing according to the media focus.  With the start of the Olympics, we may be in for a bit of a reprieve.  However, according to a CNN article by Les Christie, borrowers may benefit by locking in their interest rate (pre closing).  Several experts cited in the article expect interest rates to go up in the next six weeks and forecast at least 7% interest rates by the end of the year. 

“For every half point interest rate increase, the monthly payment on a typical mortgage of $200,000 jumps nearly $70.  That adds up to ore than $800 a year, and $8,000 in the first 10 years of a 30-year mortgage”  For Palos Verdes real estate, the numbers are much higher but one can use this information as a base to compute what it will mean to their new mortgage.  Locking in an interest rate today (if you are in contract or have a binder on a home) is good for 60 days and may cost as much as an extra 1/8 of a point.  It’s worth a call to your lender to inquire.

Above mortgage rates are provided by Jim Kurata, Peninsula Mortgage/Chase.

Yesterday, there were 30 homes on the Palos Verdes Real Estate Broker’s Tour.  Below is a sampling which includes 3 single family homes (one available for lease/option) and 1 townhome.  We currently have 285 active single family homes for sale in Palos Verdes ranging in price from $849,000 in Rancho Palos Verdes ($539,000 in Eastview) to $23,000,000 in Rolling Hills.  There are 50 townhomes for sale priced between $305,000 and $2,500,000.

Steven Cohen’s 30725 Cartier Drive, Rancho Palos Verdes, (above left) is a 5 bedroom, 6 bath, 5,475 square foot home for $3,875,000.  This completely remodeled Monaco home has a tennis court, swimming pool and ocean/whitewater views.  Joyce Yang’s 1 Via Granada, Rolling Hills Estates, (above right) is a 3 bedroom, 3 bath, 2,006 square foot townhome for $789,900.   This Casas Verdes end-unit townhome has a secluded rear patio, clubhouse and gated pool area.

Chris Fitzpatrick’s 27449 Halescorner Road, Rancho Palos Verdes, (above left) is a 4 bedroom, 2 bath, 2,230 square foot home for $1,295,000.  This Grandpoint home has been extensively remodeled, and has a pool and backyard playhouse.   Harold Maltz’ 29520 Driftwoood Lane, Rancho Palos Verdes, (above right) is a 4 bedroom, 3 bath, 3,092 square foot home for $1,299,000 or for lease/lease-option for $5,500/month.  This home near Hesse Park has some ocean/canyon view, is on a cul-de-sac and has a 3-car garage.

Photos courtesy of MRMLS

That is the question of the hour from buyers of Palos Verdes real estate (and probably nationwide).  Should buyers believe the doomsayers or the optimists?  Today the LA Times has a very balanced answer to their question. 

Reasons not to buy are mostly from economic forecasts, statistics and ratios.  Reasons to buy look at the benefits of home ownership (you can’t be evicted, you can control the environment that you live in and looking ahead - you potentially can own your home free and clear/no monthly payments).  Another important factor is the mortgage interest deduction and property tax deduction which saves big money at tax time.  And if you are renting, you could spend less bottom line after income tax deductions. Gary Smith, a Pomona College economist is quoted as saying “Buying a house is risky, but waiting is risky too.”

Words of wisdom from the pros are: “Don’t count on price appreciation.  Don’t expect a house to make you financially stable.  Don’t buy if you think you may be moving soon.”  Richard Green, director of USC’s Lusk Center for Real Estate, says “A house can be like a car, something you use and enjoy and have for a while.  Whether it goes up or down in value may not be so important.”

Recently, there have been Blue Whale sightings only two miles off the Palos Verdes Peninsula coast near Point Vicente.  The Peninsula News reported that the whales are here to eat the abundant krill that are attracted to the nutrients near the continental shelf off our coast.  The blue whale is the largest mammal on earth (as long as 3 school buses) and can weigh up to 336,000 pounds.  They are an endangered species with approximately 2,000 living in the Pacific Ocean (the largest grouping) and hundreds more in the Antartic and Atlantic Ocean.

Dudley Wigdahl, Curator of Mammals at the Aquarium of the Pacific said the blue whales will be swimming up and down the coast for the next 3 to 6 months before they migrate south for the winter.  To see the blue whales, Captain Dan Salas of Harbor Breeze Cruises has special blue whale excursions (562-432-4900) .  Tom Underhill, photographer for Peninsula News has posted more photos of the blue whale which can be accessed by clicking here.

Above photo courtesy of Tom Underhill, Peninsula News 

It’s finally happened!  The news media is discussing the turn in the real estate market.  Although they do not specifically mention Palos Verdes Real Estate, statistics are given for the Los Angeles area.  Recently, Barron’s Jonathan R. Laing had a lengthly and well- documented article which is worth the read (click here for link to article).

National statistics in the April S&P Case-Shiller Index showed that prices actually rose in 8 out of the 20 markets covered (versus only 2 in 20 markets for March).  “Jim Paulsen, chief investment strategist of Wells Fargo’s primary investment unit, expects home prices to steady by year end…”  Mr. Laing finishes his article by saying, “…long-term buyers in the top 20 U.S. metro markets have seen their properties appreciate by 70% since 2000.  Home prices often take five to 10 years to recover fully from severe declines such as this.  But at least the available data suggest the scary dive in home prices soon will be over.”  As you can see from the Barron’s chart below, Los Angeles actually experienced 107% appreciation since 2000.

Statistics for real estate on the Palos Verdes Peninsula for the past 15 months are available by clicking here or on the “Statistics” tab above.

Today’s Tour Tip for Palos Verdes Real Estate Broker’s Tour is my own listing at 838 Rivera Place, Palos Verdes Estates, which has spectacular panoramic ocean and Catalina views - and is a 4 bedroom, 3 bath, 3,025 square foot home on a 14,600 square foot lot for $2,499,000.

This is a lavishly remodeled home with a private courtyard entry and ocean views from nearly every room.  This exquisite home was designed with meticulous attention to quality and detail.  The custom cabinetry throughout resembles fine furniture.  It’s perfect for entertaining with a ground level kitchen, dining room, living room open floor plan with dramatic ocean views.  The downstairs family room has a full bar (with 100-bottle wine refrigerator, humidor, draft beverage dispenser, dishwasher, refrigerator and ice-making machine) and leads to a covered patio and gardens, all with incredible ocean views.

Please come join me today, August 12, between 11:00 and 1:00 to view this beautiful home.  There will also be a public open house on Sunday, August 17, from 1:00 to 4:00.   View property website at www.838Rivera.com

Friday’s mortgage rates are up between 1/4 percent (jumbo 5/1 Year ARM) and 3/4 percent (jumbo 30 year fixed) compared to my last Mortgage Update on June 8, 2008.  As you can see from the chart above, today’s borrower of a 30 year fixed loan will pay 6.5% conforming and 7.75% jumbo.  Attention buyers:  The time is right to get off the fence and purchase your new home now.  Rates are not forcasted to return to last year’s record lows and may even be going in the opposite direction.  There are FHA loans available with as little as 3% down on loan amounts up to $729,750 (this higher loan amount is only approved through the end of this year unless Congress extends it).

Above mortgage rates for Palos Verdes homes are provided by Jim Kurata, Peninsula Mortgage/Chase.