For this real estate bubble watch, the statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

. Many people and experts alike are already suggesting that we are in a real estate bubble. I have to somewhat disagree. Yes, I do agree that Los Angeles is un-affordable and overpriced, but one key factor that’s missing for the real estate bubble equation, mania. Demand for Los Angeles real estate is high, but it’s partially because inventor is low. If inventory went up to where we were at pre-recession, demand would seem frighteningly low. But, there is very little inventory, so the relatively low number of buyers out shopping are in competition. This will continue even as, or if, inventory rises. Believe it or not, but if interest rates go up and prices do too, more and more people will be out looking to buy, just to get into the game, driving prices up further and officially putting us in a real estate bubble. My suggestion to anyone on the fence about buying; buy now. Prices could ride the bubble up for 4 plus years and if the bubble does burst, prices will not drop below today’s values. Take advantage of the great rates on future equity, because there’s no way you can go back and buy in 2011 or 2012.

Aside from speculating years in advance about a real estate bubble, let’s review how the market looks now and what the immediate indicators are telling us. What are we seeing? Let’s take a look at the numbers first.

Sale Price

The median single family home price for Los Angeles County came in at $555,000 in December 2015. Up 2.78% from November and 8.6% from December 2014. The median price had been declining since August, so it looks like the winter lull started early and bottomed in November. However, there is still January. We may see a small dip in January, but I don’t think the median price will come in lower than November’s.

Volume

3,978 single family homes sold in December, beating November by 33.4% and last year by 12.75%. Volume is one of, if not the most important number to watch. The trend in volume usually precedes the price trend. Positive changes in volume is always good, especially year over year.

Actives and Pendings

The number of Active listings is very low, only 8,219 properties. This will increase as seller waiting for the holidays to pass list their homes. There are currently 6,052

Comment and Ratios

Analyzing the numbers and how they relate to each other tells me that prices are going to increase. One negative ratio is the sustainability index (median price divided by median household income). We are sustainable as long as the S.I. is at or below 8.75 and it’s currently at 9.02. This is the first time since the last real estate bubble that the S.I is over the threshold during the winter lull. However, this does not mean that prices will adjust. Prices can and will likely continue to increase. Both the ratio of sales to inventory and pendings to active are very high, showing a great demand from buyers. We also have a loosening credit market

The statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

It’s the third week of December and we only have four closing days left in the month. So, let’s see how this month is performing so far. Before going into the numbers for December, take a look back at November. We had a 24% drop in sales volume from October to November. Prices dropped another 1.5% in the same period, which was a total 7% drop from the July peak price. I had noted that for the last few years, the winter month that had a significant drop in volume from the previous month, 17%-25%, was the month that market the bottom of the winter price dip. We still have a few days left for closing this month and the winter lull usually lasts to and sometimes through February, but did November mark the bottom? Let’s see…

Sales Price

The median sales price for December (so far) is at $550,000. Up 4% from November!!! This month is looking to come in showing a 7.6% gain from December 2014.

Volume

So far, 2,967 homes have sold this month. It looks like we are going to outpace November’s 3,198 sales count, but I don’t know if we can beat December of last year, which had 3,528 sales. If we don’t beat last year’s sales, then we will break our nine month streak of positive year over year volume change.

Comments

I did not run any of the key ratios for this update, there’s more data to come. I will say this though; if we do not beat last year’s December sales volume, I think we could have a slight dip in median price when January’s numbers come out in February. Even if we do beat the 2014 sales volume, prices could dip next month, but it is highly likely we will see a dip if we don’t beat last year. If we do have a drop in price come January, it will likely only be 1% to 2%, which is relatively insignificant.

It’s an interesting market right now. I hope to see mild gains over the next year to preserve sustainability. Unfortunately, I think we could see a sizeable jump in prices as interest rates rise.

I will talk more about all of this on my podcast. The Tack Real Estate Podcast. Available on ITunes and at www.starboardresidentialrealty.com

Please comment below or email me any questions or comments. [email protected].

Sponsored by www.goldenstatemoldinspections.com

The statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

The Los Angeles real estate market is changing and I’m finding conversations and articles about the future of the market very interesting. Like always, there are some that feel the market will change for the positive and others for the negative. The majority of the population is on the side of positive, but both sides definitely have some valid arguments. Pro-real-estate side banks on a strengthening and growing economy and Downers argue the affordability of property and the overall sluggishness of the economy. There’s also the double or triple dip recession theory. I am on the positive side and not so worried about minor dips in property value, but major corrections. I would like moderate sustainable growth and get concerned when the market takes off. Right now, there are tells that could be interpreted to show almost any of the scenarios. Let’s take a look at what has happened in the last month.

Sales Price

The median sales price for November 2015 came in at $525,000. This is down 2.3% from October and 7.3% from the 2015 peak back in July. While values have declined over the last several months, we are still up 5% from November 2014. Real estate is seasonal, so comparing with the previous year is more telling than comparing recent months. This time of year almost always shows negative numbers. The winter dip in values is somewhat artificial as more distressed homes sell at deeper discounts. We can expect a dip of around 5% from the summer peak to the winter trough. Last year the bottom of the trough came in November while the year before last hit bottom in January. So, will we continue to depreciate or is this the bottom? I wish I had a crystal ball. Let’s look at activity to see if there are any signs pointing one way or the other.

Volume

3,221 homes sold in November. Down 23.5% from October, but up 2.5% from last year. We can expect to see volume decrease this time of year, but 23.5% is quite a jolt. However, in previous years the last declining month for prices was the month that had a big dip in volume (17%-25%). This doesn’t mean that November’s prices are the bottom of the trough. It certainly could, if the declining market is purely seasonal, but what if we’re seeing a true decline in the market driven by outside factors beyond the season? One notable positive is that we’re doing better than last year, which is good for the overall health of the market.

Active and Pending Properties

There are currently 9,726 properties for sale with an Active status. Another drop in the numbers, but normal. Now here’s something interesting; 8,223 properties are under contract and in escrow. This is the highest number of pending properties since July. Typically the number of pending properties declines through the winter months. But what does this tell us? Well, think of Active and Pending properties as supply and demand, where Actives are the supply and Pendings are demand. We have a declining supply and increasing demand. It could be argued that people are just rushing into the market to try and buy before rates increase. This could be the case. The talk of rate increases within the real estate/ mortgage industry is prevalent and a common subject, but a lot of the buyers’ I talk to, don’t bring it up. The threat of rate increases have been hanging over the people for years, and nothing has really happened. So, I don’t think the pending rate increase is pushing the current market.

Ratios and Comments

The 7% decrease in prices (from the peak in July) has pushed the sustainability index down to 8.54, which is great for the sustainability of

The statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

The Los Angeles real estate market is just moving along. Buyers are buying and sellers are selling. Home prices over the last year have been bouncing along with some months showing positive change from the previous month and some with negative change. This is not surprising though… We have a an economy that is certainly not in bad shape and continues to get better, great interest rates and a market that is at the upper limit of affordability, which is keeping prices in check. Prices took off in 2013, showing almost 30% year over year appreciation. Fortunately, this out of control rise in home prices was curbed in early 2014, keeping us out of a bubble, which we were heading for. So, what’s to come? Let’s take a look at the stats from last month first.

The median sale price came in at $537,000 in October. This is down 2.6% from September and up 4.25% from October 2014. Sales volume was at 4207, up 3.7% from September and more importantly, up 7.3% from last year. Volume is probably the most important statistic when forecasting.  Active inventory is down to 10,328 from 10,883 last month, but Pending sales are up, 8122 currently pending. Last month was at 7419. What happens when inventory (supply) drops and sales orders (demand) increases?

We are heading into the seasonal winter lull, when markets tend to dip. The dip is artificial, due to the increase in the ratio of distressed sales to standard sales and the deeper discounts to those distressed sales. Currently, demand is up and supply is down, so we should see an increase in prices. Also, the SI index is down to the sustainable threshold, 8.73 (which is good), this means that we are back in the realm of affordability. These indicators do point to a bump in prices in the next few months, but it will be interesting to see what happens. Will the discounts to distressed properties be deep enough to show negative numbers, probably. I’m more interested to see the market activity come March.

All in all, it’s a good time to buy. The market does not show any signs of a pending correction. I think we will have a nice long healthy market over the next few years. If you want to flip properties, now is a great time to buy a property to flip. Just make sure you know what you’re doing. If you don’t know what you’re doing, contact me, I can help.

Questions or comments? Leave a message below or email me at [email protected]

Sponsored by www.goldenstatemoldinspections.com

At this point in the buying foreclosures series, we have purchased a property and obtained possession. Now it’s time to get to work, we need to get this property ready for the market and sold. This is where many investors get into trouble and end up losing money. There is a compromise between, the extent of the rehab, the timeline and money spent. You need to do the best job possible while spending the least amount of money and in the shortest amount of time possible. Many investors’ dreams of a grand remodel that will blow the minds of buyers, end up destroying their investment. Also, the expectations of the selling price needs to be kept in check as well.

Let’s start at the remodel/rehab. First assess your market. What type of neighborhood is the property in? What finishing products are expected and what is the lifestyle of the locals? This very important to know… It’s fun to remodel a home and make the property amazing, but this is business. If you’re in a neighborhood that calls for granite counters, don’t buy marble. Plan your remodel according to the market that you are in. Keeping it as simple as possible will keep you on track, because the more extensive the job, the more things that can go wrong, costing you time and money. Many first time flippers end up moving into their first flip. They go BIG on a remodel job and get in way over their head. They get put in a position where they’re going to lose money, so they end up moving into the property. I know from experience.

Now that you know the extent of the remodel, you need to get construction bids. Always get at least two bids. I suggest to get two bids from different general contractors along with individual bids from subcontractors. However, keep in mind that subbing out all of the work creates a LOT of work for yourself. If you don’t have the time to manage a construction site, use a general contractor (get three different bids too). When getting bids from the contractors, always have them itemize all work and be sure to get bids on some of the work you’ve decided not to complete, you may find out that something you thought would be too expensive, isn’t much work at all. Once you have the bid you can pick and choose the work you actually want completed. You can save a lot of money if you purchase all of the materials yourself, separately. If you purchase your own materials, you can shop for the best deals and likely get a contractors discount.

Which contractor to go with? If you get three bids, the difference between the high and low bid will likely be 20%. DO NOT JUST CHOOSE THE LOWEST BID! The contractor’s reputation is key. Do research on the contractors and get references. The low bidding contractor may do shotty work and be a complete flake. This will cost you in the long run. Choose the contractor with the best reputation and most reasonable price. Negotiate the cost of work by using the competing bids. Make sure that you have a contract with the contractor. The contract should state milestones along with the timeline for completion. There should be a penalty clause in the contract that deducts money for each day completion goes over, as well as a bonus clause for each day that completion is early. A payment schedule should also be included. DO NOT pay in full until the job is absolutely complete. Once the job is started, you need to check up daily, at least a drive by.

You now have a beautifully remodeled home that is ready for the market. Before listing the property, go check out the competition. Go view all of the active properties and note the condition and price they’re listed at. Compare your property to your competition. This can be difficult for some people to do this with an un-bias mind, take your pride out of you investment. When choosing your price, be competitive. There are different pricing strategies. I prefer to list on the l

The statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

The Los Angeles County real estate market continues to level off. There’s not much exciting news to report for the month of September. Median price and volume are down slightly. Even though these key statistics are down it really doesn’t mean much. They are not tanking, they’re just down a little. There are no economic indicators that are warning us of a true substantial dip in the market.

The median sales price for Los Angeles County SFR for September 2015 came in at $552,000. A decrease of 1.1% from August. Year over year prices are up 6.5%. Volume also dipped a little with 4040 sales down from August’s 4258 sales. Year over year sales are up 9.9%, which is a much more important statistic. Increased year over year volume is always a positive sign.

There are currently 10,883 Active listings, which is basically where we were at last year. Pending properties are up, 7,419 properties in escrow.

Key Ratios

The S.I. index is at 8.98 (median price divided by median household income), a good sign to be back under 9. An S.I. of 8.75 or less is ideal for sustainability and we may dip under that threshold again, by the end of the year. Keep in mind that the dip in prices that we will see between now and February are artificial. It happens every year and does not mean that the real estate market is collapsing. The ratio of Pending to Active properties is at 68%. This shows that demand is still high and buyers are in strong competition with each other.

Overall, the market is pretty boring, from a statistical standpoint. However in reality, the market is great! Prices continue to rise and we are somewhat maintaining sustainability. If you are investing in real estate, you can still make money and you can do it at a sustainable rate. Be sure to check the micro market that you are investing in. Los Angeles County is a huge market and individual zip codes will differ greatly from each other. Some markets are depreciating and others are VERY hot.

Questions or comments? Leave a message below or email me at [email protected]

The statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences.

The median sales price for Los Angeles County SFR for August 2015 came in at $558,000. A decrease of 1.24% from July. Year over year prices are up 5.2%. Volume also dipped a little with 4258 sales down from July’s 4710 sales. Year over year sales are up 8.3%, which is a much more important statistic. Increased year over year volume is always a positive sign.

There are approximately 11,100 single family homes for sale, up slightly from one month ago. As we come out of the buying season we should expect to see the ratio of pendings to actives come down, which we are. There are currently 7,386 properties under contract, dropping the pendings to actives ratio down to 66%.

The market statistics for August aren’t giving us much of a story. Prices are flattening off, but there are no indicators of any big changes in the near future. Price appreciation in nice to have, but it cannot appreciate at too steep of a rate because that creates the need for a correction. Prices are increasing, but at a more reasonable rate, which is needed to prolong the sustainability of the market. Buyers are still active and the market is moving along. Sometimes no news is good news.

Questions or comments? Leave a message below or email me at [email protected]

Sponsored by www.goldenstatemoldinspections.com

Analyzing a deal is going to be the most important part of buying foreclosures. Get it right and you will make great returns and purchase regularly. If you get it wrong, you will either lose money or rarely purchase anything. Once you have a property in your line of sight, you will need to put a potential value on that property, determine your rehab costs and run a reverse spreadsheet to determine your max purchase price that will meet your minimum desired return on investment. Errors at this point can cost you, big time. One of the issues with seasoned investors is amateurs dropping the ball in their deal analysis and paying too much for properties; here everybody loses, a new investor loses money on a property that had potential for an experienced investor to make money. Far too often we see amateur investors in a bidding war at an auction, driving the price up which likely ends up in major losses. There’s also the flip side of this where, poor deal analysis leads to an investor determining a maximum bid that is way too conservative to be competitive. In either situation you’re either wasting time, money or both.

Note: verifying information is part of your deal analysis, but was already touched on in part 2.

Valuation

                Through verifying the property information you have the property specs; beds, baths, square footage, etc. You will need to get an initial potential value. This is going to be a paper value based mostly on the characteristic of the property directly compared to surrounding properties. When pulling comps, do not use just a simple radius, look at a map and look for obvious boundaries that determine a neighborhood and use properties within the neighborhood of the property you are analyzing. You will be surprised by the how much property values can differ depending on which side of a major street they’re on. Ideally you want to find at least three recently sold properties with similar characteristics as the subject property. Because you haven’t driven by the property yet, compare the subject property to the comps as if it were a similar style home which you have already rehabbed. Take into account the location, size, year built and condition of your comps to determine your initial potential value. This takes skill and the better you are at this the more money you will make. It will also vary from investor to investor depending on the quality and extent of rehab work done. As always this part of the process is going much easier if you have access to the mls. If you don’t have mls access, you will need to use a 3rd party provider such as accuflip.com. DO NOT, use any valuation from Zillow, Trulia or any other listing source. You absolutely must be able to see the specs and location of the comps, and if available, description and pictures. Websites like AccuFlp.com are designed for deal analysis and provide the comps to with their automated value.

Now, you or a partner need to go put eyes on the property. A lot can change here. This is where you are really going to compare the property to the recent sales, so yes, you are driving by the comps as well. You need to check on how the property really holds up to the neighborhood. Is it the same style? Quality? Or is there some characteristic that makes it more or less desirable than the comparable sales? You will have to use your imagination, because you have to look past the properties current condition and imagine what it’s going to look like after you rehab it, but be careful, keep your imagination within reason. Don’t over remodel in your head.

On top of narrowing in on the property’s true potential value you need to determine two other factors, occupancy and rehab. Occupancy is usually fairly straight forward; does it look occupied or not? If it looks occupied, what does the exterior tell you about the occupants? Is it well kept or ar

At this point you have been tracking the foreclosure auctions, found a property you like, done your due diligence and won the auction. Now what?… You have to get possession of the property. This can be one of the most difficult parts of buying foreclosures, there are a lot of potential hurdles. I want to give you the general process of gaining possession with the three scenarios that you will most likely encounter. I’m not going to go over vacant property procedure. There’s not much to it… get a locksmith and start your rehab.

It is important to remember that there isn’t much you can do until you receive the Trustees Deed from the auction. This will take a week or two. However the first think you ABSOLUTELY MUST do as soon as you win the auction is call your insurance agent and get insurance. The last thing you want is a disgruntled former homeowner burning down the house you just bought and not have insurance. SO, get the property insured.

Making Contact

                Warning: Be careful when approaching a home you just purchased. This can be very stressful to the occupant and they may do something to harm you.

Although there is really nothing you can do until you have the Trustees Deed, you can still knock on the door and attempt to make contact with the occupant. If you are able to make contact be respectful, introduce yourself and explain the situation. You need to find out if they are the former owner or a tenant. Also, try to get a peek at the condition of the interior. Exchange information and let them know you’ll be in further contact.

If the occupant is a tenant, you must honor their current lease for 90 days; given two conditions. 1. They provide you with a valid lease. 2. The lease is of reasonable terms at current market rent. If they try and provide you with a lease that shows they pay $5.00 a month rent, the law does not apply (still check with your attorney).

In your attempts to make contact you will come into three likely scenarios. As soon as you receive the deed you can start taking real steps to gain possession. In either of these scenarios, ALWAYS start the eviction process the day you receive the deed.

Hostile Occupant or Non-responsive

                Now that you have your deed, keep knocking the door at different times of the day. You can also post a notice on the door explaining that they must contact you immediately to discuss options. If you don’t get a response within a week or two, or you do get a response and they are hostile towards you and won’t cooperate… Easy, evict. Be sure you have good insurance too. In this situation there’s not much you can do but wait out the eviction process. Your attorney will basically handle everything for you. If it comes all the way down to a lock out (police remove the occupants) be sure you are there with a locksmith. You will have to arrange something with the former occupant for them to remove their possessions or talk with your attorney about what you must/can do with their personal property. This whole process can take 3-4 months.

Willing to Talk

                Often times the tenant of former owner will be willing to talk with you. They’ll sometimes say something along the lines of, “I haven’t paid for years and was waiting for someone to come knocking.” Or, they’re just willing to cooperate. First off, don’t offer anything yet. Ask them if they have plans to vacate and how soon can they be out. You will likely get a long story at this point; remember, be respectful. What you want to end up negotiating is a voluntary move out within 30 days. You may need to offer cash as an incentive. Cash for keys should be no more than $3,500. DO NOT GIVE THEM ANY MONEY UNTIL THEY HAVE COMPLETELY MOVED OUT!!! If they agree to cash for keys, write up

It’s the third week of the month and as always I run a check to see if there are any revisions to last month’s market statistics and in doing so, I get a glimpse at the numbers to come. The last few months there have not been any major revisions worth talking about, which is true for this month as well, but next month is always worth talking about. So let’s get into it.

The real estate market statistics below are provided by www.AccuFlip .com and the local MLS. The statistics pulled are for Los Angeles County single family homes.

First off the only revision to the July’s numbers, were that volume was up slightly. Less than 50 sales. Now for August; it’s looking like the cooling trend is going to continue for another month. I think this is a good thing for the longevity of the market. Los Angeles is mostly unaffordable and as the market pulls back, we are given some time for incomes to catch up. This helps keep us out of bubble territory and gives us the potential to have a healthy real estate market for years to come.

Sale Price

The August median sale price for single family homes is looking to come in at $566,000. A whopping .18% increase from August’s $565,000 median sale price. Again this is fine in my book. This gives us a predictable and safe market. The flattening off of the market is because of a market that is not in a manic state of mind. There are many indicators that can show a dive coming, but I don’t see that. Just a flatting out due to affordability, not loss of interest or a sell off.

Volume

                Volume is currently at 2310 sales for the month and we’ll probably see at least another 1600 to 1900 sales by month’s end. Yes, volume will be down from July, but it’s okay and somewhat normal. As long as we hit 4000 sales we will beat sales volume from last year, which to me is more important than beating July. I WANT TO BE BETTER THAN THE YEAR BEFORE, ALWAYS AND WITH EVERYTHING!

Active Listings and Pending Sales

                Currently, Active listings are up from a month ago and Pending sales are down, ever so slightly. Again, no biggie. There are 11,000 homes for sale and 7935 in escrow.

I know that I’m going against my usual talk of warning signs, where I always say to watch out for rising inventor and falling sales volume, it’s a lead indicator of price decline… But it happens from time to time. You could see the current trends as showing that we are going over the top of the hill and the Actives to Sales and Actives to Volume gap will continue to widen and prices are going to come down, but I’m telling you they’re not. We will probably see less sales through the end of the year, as always. If you want real proof that nothing is happening (which is good), look at the ratios and compare them to years when it REALLY WAS bad. Right now the ratio, as a percentage, of Pendings to Actives is at 72%. This is a high and if I were just looking at this ratio alone, I would say that prices are going to go up. Now the ratio that will put it into real perspective; Sales Volume to Actives. Even if we fall short and only hit 3900 sales by the end of the month, the ratio as a percentage, would be at 30%. Prices tend to rise when this ratio is over 33% and fall when below 19%. Let’s compare this to a time when things were really bad… January 2008. In January 2008 the Volume to sales ratio was at 5%. There were 36000 active listings and only 2000 sales. That is what bad looks like.

In conclusion, things are looking good. Prices are flattening out giving us longevity. The market on a macro (mini macro) level looks good. Micro markets will be different. Some will have dips and others will take off. Long term real estate is always good, so if you’re looking to buy a pri