The real estate market statistics and figures noted in this article were obtained through the MLS and www.AccuFlip.com, and are for Los Angeles single family residences that sold for under $7,000,000.

Sale Price

The median sales price for single family homes in Los Angeles County for the month of May came in at $542,000. April’s median sale price was revised down from $545,000 to $542,000, so we had a 0% change month over month. This is odd compared to previous years, where the April to May change on price is usually one of the biggest price jump. The price changes over the past 3 months have been pretty abnormal in general. There are a number of factors contributing to these recently volatile months. The 0% month over month change brings our year over year change to 6.2%; a much more sustainable rate of change than what we’re seen over the past couple years.

Volume and Active Listings

There were 4,100 homes sold in May, which is basically flat from April.  I would like to see positive change in the sales volume, but breaking even is better than loosing. The good news is that volume is up 1.5% from May 2014, marking another month of positive year over year change. That’s three consecutive months of positive year over year change.

Active listings are down to 12,300 properties for sale. At this time last year there were approximately 14,700 properties for sale, which was and still is consider a very low number.

Key Ratios and Additional Comments

While the numbers for May are strange, they are not surprising, given that we were and still are above the threshold of the sustainability index, but at the same time have more properties coming off the market than going on the market. The sustainability index is unchanged from last month at 8.91. That means that the median sales price is 8.91 times the median household income in Los Angeles. I consider 8.75 times to be the threshold. Breaching the threshold does not mean that prices will drop, but it does mean that unless the rate of growth eases up to be more on track with income growth, we will see a correction. The changes is happening, or at least appears to be happening. We had 0% change last month, while incomes continue to improve.

When assessing the current demand I look at two key ratios (as percentages); number of currently active properties to sales volume and number of properties under contract to active listings. Both of these are very high, Volume to Active is at 33% and Under Contract to Active is at 86%. Normally we are at or around 25% and 66%, so demand is currently high. We are in a struggle between the high demand for properties and prices being at the upper limits of affordability. We also have the pending rate hikes that have again been pushed back. These factors and many others are contributing to this volatile market that we’ve been experience over the last few months. Going forward, we will likely continue to see the same volatility with the change being mostly to the positive. Even a slight dip in month over month prices is okay because it will continue our sustainability of the market. Large growth trends lead to bubbles bursting.

*The median household income in Los Angeles County is estimated to be $60,803. While this estimate will range, depending on the source, I am using $60,803.

For questions or comments, contact Bret Pfeifer, [email protected]

Going through foreclosure is a homeowner’s worst nightmare (when it comes to material possessions). So, it is important to keep that in mind. The entire foreclosure process can be completed within a few months or very long, dragging on for years, but it is a legal process with minimum timelines that must be followed. I want to briefly go over these timelines, so that you are generally informed of the process, whether you are attempting to avoid foreclosure or interested in “buying a foreclosure.” I put the quotation marks because it’s more complicating than most people think. I’ve received many phone calls over the years from people saying their interested in “buying a foreclosure” and they don’t understand what that means. So to start, I’ll go over the general filings and timelines to a non-judicial foreclosure.

Foreclosure Process:

Note: There are two general types of foreclosures, judicial and non-judicial, and which type is determined by the state. Judicial foreclosures are a court process and non-judicial foreclosures are completed through a 3rd party (trustee), involve an auction, can be completed much quicker, but have laws governing the proceedings.

In California, the soonest the foreclosure process can be completed is 110 days after missed payment. There were a couple laws in place that extended this timeline an additional 30 to 110 days, but these were temporary laws and have since expired. That being said:

Step 1: Missed payment. Once a payment is past due a lender can start the foreclosure process. It can be the lender of a 1st loan or 2nd loan, even 3rd loan. It doesn’t matter which loan, they all have a right to foreclose.

Step 2: Notice of Default (NOD). This is the initiation of the foreclosure process. The notice is required to contain certain information, like the date of the loan, trustee information, amount delinquent, etc. and MUST be filed in the county of the property, sent to the owner by registered mail and posted at the property. The property owner has the right to reinstate (pay delinquent amount plus fees) at this point and stop the foreclosure process.

Step 3: Notice of Trustee Sale (NTS). After a minimum of 90 days from when the NOD is filed, the lender can file the NTS. This is the notice that an auction is going to be held to sell the property. This notice must be given at least 20 days before the intended sale. Like the NOD, the NTS is required to state certain information, sale date, total amount due on the loan (loan balance plus accrued interest and fees), contact info, etc. At this point the property owner still can reinstate the loan by paying the past due amount plus fees, BUT only up until five days before the sale date. In the last five days before the sale, the only way to stop the foreclosure is to pay the entire loan off (loan balance plus accrued interest and fees).

Step 4: Trustee Sale: This is the foreclosure auction. The auction is held by the lender’s trustee. The lender sets the minimum bid and automatically takes the first bid, after which it is open to the public. Most of the time, the highest bidder must pay with cashier’s check at the time of the auction and the trustee mails a trustees deed, which transfers title to the winning bidder.

The title is subject to priority liens. Liens are prioritized by the time/date they were recorded, with the exception of tax liens, which always take priority. So, if a 1st lien forecloses, the 2nd (and 3rd) liens are usually wiped out. If a 2nd lien forecloses, any 3rd lien would be wiped out, but the 1st lien remains a lien on the property. This is VERY important.

Buying a Foreclosure:

                Before I ge

Link: www.AccuFlip.com

Southern California has been seeing the return of the flipping investor in large numbers over the last few years. The investors are trying to make a quick buck by finding dilapidated properties that are under distressed, rehabbing them and selling them at the upper end of the market. I’m all for this, but I see many issues with the strategies and expectations of these flippers. There are many seasoned flippers that have it right, but the majority of flippers out there that don’t have the experience and are either losing money or not making money at all. There are dozens of ways to lose money on a flip, but why are these flippers not making any money?

The main reason I’m seeing these inexperienced flippers not making money is because they are NOT doing deals. I meet so many investors that have just taken some course, read a book or have gone to some flipping boot camp (for thousands of dollars) and come out with these highly unrealistic expectations of home run deals that make $90,000 profit on a few short months happening every month. That’s great and these deals happen all the time, but not as frequent as people are led to believe, especially if you are a beginner or are trying to do ten of these deals a year as a side job. The bulk of these beginners will waste thousands of dollars and countless hours trying to hit a grand slam and end up back to focusing on climbing the corporate ladder or pleading for their job back. So why do these boot camps pump out these pipe dreams if they are unrealistic? Because that’s what sells $5,000 courses; the “secret system” that only they have.

I am all for flipping properties, it’s what I do. But, if you’re a beginner you need to have realistic expectations of the outcome of your first few deals. First off, you probably don’t have a couple hundred thousand dollars at your disposal to buy properties. So, you’re going to have to get hard money loans at 2 points with 11% interest; there goes $15,000 to $30,000 right there. Second, when you find a potential deal, be realistic about both your competition and the seller of the property. The seller may be under distress and have a property that needs work, but they are unlikely going to walk away from $100,000 and they’re likely talking with other investors (competition drives up prices). Third, DO NOT use a standard formula for all deals! The formula of “Purchase Price = 65% of ARV minus Rehab” does not work for all deals, especially all price points.

As a beginner you should be getting out there and looking for experience. DO DEALS. Pursue all deals with the expectation of making $25,000 to $30,000 (a bit more if you do have all cash). If you go at it with reasonable expectations you will have great success. You will be making money, gaining experience and learning how to turn more profits on each deal. On top of that, you will be in the game and the home run deals will come. The best way to get deals is to DO DEALS. It will get easier and easier and you’ll find deals coming to you and not the other way around.

                The Los Angeles real estate statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences that sold for under $7,000,000.

April 2015 Revisions

                There’s good news in the revisions to April’s numbers; median sales price is revised down from $545,000 to $541,000. Why is this good? Because for one it’s still positive growth both month over month, 4% and year over year, 9.3%, but most of all, it’s closer to sustainable rates of growth. At $545,000 median price, our month over month was at 4.8% and year over year at 10.1%, absolutely unsustainable. Our current (revised) numbers are still high, but still a little better than originally reported, in respects to sustainability.

Volume is revised up to 4,119, another positive revision. This gives us a change of 11.5% from March and 6.9% change from April 2014. Volume is a big deal now and has been for several years, because sales volume has been so frighteningly low. So, it’s always good to see positive growth in volume.

Interestingly, the median list price was revised down from $548,000 to $540,000, which changes list price to sales price from 99% to over 100%. This shows both competition and demand, both high. I’ve been writing about a highly volatile buying season that could take wild swings in percentage changes and our glimpse at May is backing that up.

Glimpse at May 2015

                Before getting into these numbers, please note that there is still a week’s worth of sales data to come through, which could drastically change these numbers.

I like how May is looking. Median price, so far, is at $543,000. Less than .5% higher than April. This is great for sustainability! It’s very low growth, but still positive. Our year over year is at 6.5%, basically, right around where I would like to see every month’s year over year change come in at.

Volume is on track to meet or beat the sales volume in April. If it does, it will beat the sales volume in May 2014. That’s will be three consecutive months of positive year over year volume change. Active inventory is up slightly, again good, and our indicating ratios are unchanged.

Overall, I’m liking how these numbers are looking. If we continue to see progress in household incomes and our monthly numbers continue to taper off, but remain positive, we will be in good shape for a long while, without the fear of a correction. With that being said, let’s not forget that our indicators and outside economic factors, are creating high volatility in the real estate market. So, while May is showing modest growth, June could have very high gains, putting us back in “correction mode.”

For questions or comments, contact Bret Pfeifer, [email protected]

The real estate statistics and figures noted in this article were obtained through the MLS and AccuFlip.com, and are for Los Angeles single family residences that sold for under $7,000,000.

Sales Price

The median sales price for Los Angeles single family home sales in April came in at $545,000, up 4.8% from March and 10.1% from April 2014. This is a pretty big month over month change, but after looking back at the last month’s ratio of pending properties to active (91%), it’s not too surprising. We’re seeing a surge in demand, likely due to the enticingly low interest rate and threat of an upcoming rate hike. Let’s keep in mind that that threat has been upon us for a couple years.

Volume and Active Listings

            Volume is again showing improvement, with 4,073 single family homes selling in April, beating March out by 11.3% and once again giving us a positive year over year change, up 5.7% from April 2014. This marks two consecutive months of positive year over year change, after 19 consecutive months of negative change.

Inventory is getting better, there are 13,092 homes for sale (Active status and Backup status). However, this is still very low. The inventory level is improving, but has a ways to go and we should see the active listings continue to rise at increasing rates as price rise, which gives homeowners incentive to sell.

Key Ratios and Additional Comments

            Last month we saw a significant jump in the ratio of number of properties under contract to the number listed and available; as a percentage 91%, as opposed to 65% to 69% in the preceding 9 months. We also showed the volume to Active property ratio pretty high at 29%. Both of these indicated that we would see a high month over month median price jump, which we did see. Currently we have increasing volume along with increasing inventory, keeping these ratios relatively the same. As percentages the under contract to active properties is at 89% and volume to active is at 31%, so demand is still very high while supply remains low.

The sustainability index, median price divided by estimated median household income is at 8.96. That means that the median price is nearly 9 times the median household income. This is high and putting us into bubble territory. My sustainability threshold is 8.75. However, I do not think that prices are going to come down anytime soon, but the rate of price increases need to be backed by something more than inventory levels. We need household income growth. Fortunately, even though the last couple job reports have been disappointing, we are still seeing continued overall strength in the job market.

Over the next four months expect Los Angeles real estate market to see a continuing run up in prices, fueled by high demand, low interest rates relatively and low inventory. I hope to NOT see month over month price increases greater than 1.7%, but demand is high and supply is low, so I wouldn’t be surprised to see next month’s update to be similar to this one. As prices rise, so will inventory which help stabilize prices, but as long as the interest rates remains as low as it is, the price gains will continue at an undesired rate. During the last bubble, the banks gave money to anyone who applied, which drove prices through the roof. Now they are only lending to qualified buyers, but the low rates are pushing buyers into strong competition leading to higher and higher prices. If and when the interest rate does increase, there will likely be a sustained period of low to zero gains, if not a slight, but sharp dip in prices.

*The median household income in Los Angeles County is estimated to be $60,803. While this estimate will range, depending on the source, I am using $60,803.

For q

Links: www.AcccuFlip.com

Today I checked in on the numbers for March to see if there were any revisions and unlike February, there aren’t any significant changes. Everything is basically the same.  However, when checking these numbers I got a glimpse at the real estate market update for April.

Before jumping into the numbers, please note that we still have another week’s worth of sales data to come. The last week of each month usually has more closings than the first three. So these numbers below are based on only 2/3 of the total month’s data. There are going to be around 1,400 more homes sold, which could and likely will have a great impact on the overall data. That being said, let’s take a look at where we’re at so far.

As of now, the median sales price in April is at $545,000, up 4.8% from March 2015 and 10% from April 2014. This is a sharp increase for one month. March’s month over month change was 1.7%, which as I noted, was a good sign, because that shows a leveling off of prices, which is more sustainable over the long run. The key ratios in March (see March 2015 Market Update) showed that demand was up while supply was flat and indicating that we could see a very sharp increase in the prices. There is only one of the main key ratios that I can check in real time and that is the Active listings to listings under contract. The last time I reported this ration was at the beginning of April and we were at roughly 9,000 actives to 8,200 under contract. We are basically still at those numbers, which still shows a pretty high demand for properties.

I hope to see downward revisions to April’s price gains. Possibly down to $535,000 for median price, putting us at 2.8% higher than March and 8% year over year. Still higher than desired. Median price at $527,000 would be much better, but very unlikely.

It’s going to be very interesting to see where the numbers actually come in at for this month. If they remain on the same track as todays findings, we are looking at a sustainability index at 8.9. I was hoping to see the index peak at 8.9 around August. Keep in mind that there are a number of economic factors and speculations indicating that we could see a highly volatile market between now and October. There’s a chance we’ll see a very high month over month price increases followed by a very low month over month increases, continually.