Archives for May 2011

New Home Sales Increase for the 2nd Straight Month…

Sales of newly-built homes surprised Wall Street, jumping 7 percent to an seasonally-adjusted, annualized 323,000 units last month. In addition, the supply of new homes dropped to 6.5 months — a 2-month decrease from October 2010 and the best reading in a year. The report runs counter to recent reports from the National Association of Homebuilders and the National Association of REALTORS® which suggest a looming housing slowdown. April’s New Home Sales report runs counter to that theory; it shows ongoing, steady, staggered improvement in terms of sales volume and sales inventory. Broken-down by sales prices, the New Home Sales report also showed that homes are selling across all price tiers. The “luxury market” improved most: Up to $199,999 : +1,000 homes from March $200,000 to $399,999 : +2,000 homes from March $400,000 and over : +3,000 homes from March These figures suggest that that move-up buyers — not first-timers — are driving the new home market. Homes under $200,000 now account for just 40% new home sales, down from 46% a year ago. However, as with most months, it’s important that we recognize the New Home Sales data’s margin of error. Although New Home Sales showed a 7% improvement in April, the reported margin of error was ±17%. This means that the actual reading could have been as high as 24 percent, or as low as -10 percent. It’s a huge range, and because it encompasses both positive and negative values, the Census Bureau assigned its April reading “zero confidence”. It’s right there in the footnotes. For home buyers in California, rising sales and falling supply may mean higher home prices. And, combined with the issuance of fewer building permits, supplies may be constrained into the summer months. This, too, would pressure home prices higher.

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Foreclosure auction set for $37 million mansion

May 24th, 2011, 4:44 pm ·  Marilyn Kalfus, real estate reporter Orange County Register

Reported by Marilyn Kalfus and Jeff Collins

The priciest mansion on the Orange County housing market – Newport Coast’s $37 million Villa del Lago – has been set for a foreclosure auction on June 20, threatening to end luxury home salesman John McMonigle’s quest to build an estate fit for royalty.

In addition, a separate auction has been set for June 8 to sell off the 20,000-square-foot building that McMonigle built two years ago to house his real estate sales and development operations.

Lender OneWest Bank moved to sell both properties to satisfy more than $29 million in loans that are in default.

The two foreclosure auctions are the latest developments in the decline of McMonigle’s personal and real estate fortunes. His wife filed for divorce early last month, and a week later, he filed for personal bankruptcy.

There’s a good possibility, however, that the auction dates on both the headquarters and Villa del Lago will be postponed. These dates frequently are put off by lenders as borrowers explore alternatives to foreclosure.

McMonigle had envisioned Villa del Lago as a sprawling estate, complete with a palatial twin-winged, 17,500-square-foot mansion, horse stables, vineyard and lake featuring a cascading waterfall.

Three marble arches adorn the home’s entry, and an underground garage the size of 1 ½ basketball courts provides parking for a fleet of limos. A separate two-story guardhouse stands sentry over the property’s entrance.

McMonigle was asking $57 million for the property when it officially hit the market in May 2010. Leading a tour of the estate last spring, he turned on fountains that shot jets of water about 20 feet into the air, then led a reporter into a wine cave stocked with casks of wine, serving up a vintage Tuscan red.

“We felt entrusted with this parcel, and we didn’t want to make any compromises,” McMonigle said at the time. “There’s only one of these.”

McMonigle hoped to finish construction by August, but work halted after OneWest cut off  funding of its $21.6 million construction loan. McMonigle dropped the price to $37 million, and by July, he stopped making monthly loan payments – in retaliation, he said, for what the bank’s “breach” of its loan commitments.

In all, McMonigle and his partners have five separate loans on Villa del Lago. The four junior loans bring the total owed to $29.2 million, according to records from CountyRecordsResearch.com, a foreclosure website.

McMonigle also has an outstanding balance of nearly $7.8 million on the two-story headquarters building he built near Fashion Island two years ago.

McMonigle agreed to let the court appoint a receiver to take over control of his headquarters building and two condos his companies own in Newport Beach. But he continues to fight efforts to have the court seize control of Villa del Lago.

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Kurt Galitski’s Real Estate Newsletter

Welcome to the latest issue of my newsletter!

As a your Realtor and Broker, I strive to keep in touch with my clients and provide them with information that I hope they will find useful. This newsletter is an opportunity to let you know about the state of the market and current trends. It may even touch on ways that you could enhance your home’s value. I hope the market data and articles will help you with understanding real estate today and help you with your real estate decisions. If you have any questions, please do not hesitate to contact me.

Kurt Galitski

Trend, Tips & Tricks

Costa Mesa Real Estate Sales Data

Average Listing Price (last 24 months)

Average List Price in April

Single Family Homes $599,655 Condos/ Townhomes $338,836 Multi-family $861,927

Monthly Trivia articles

May

Whether you celebrate Cinco de Mayo, Mother’s Day or just are happy for the long weekend this month, to many people May means that summer is just around the corner. After all, it is the last full month of Spring. Summer comes next month.
May is named after Maia, the eldest of the Pleiades, the seven daughters of Atlas and Pleione in Greek mythology. She was also the mother of Hermes.
The birth flower for May is Lily of the Valley or the Hawthorn. The modern birthstone is Emerald (patience, understanding and foresight) and the traditional birthstone is Chrysoprase (secrecy and fertility).

Costa Mesa Real Estate Sales Data

Price Reduction (last 12 months)

Recent Price Reductions in April

Single Family Homes 4.9% Condos/ Townhomes 5.3% Multi-family 5.3%

Home Improvements and Which Ones to Do

Home Improvements and Which Ones to Do

Whether you plan to sell in the near future, or just want to improve the value of your home, here is one low cost improvement you should consider.
Replace laminate kitchen countertops. This is a more expensive project than just painting, but it can dramatically improve the look of your kitchen-for less than 15 percent of the cost of gutting your kitchen and starting over. The laminates of today are available in all kind of colors and patterns, some of which resemble much more expensive solid surface materials, such as stone or tile.
Another benefit-replacing your laminate kitchen counters can be a one-day job, rather than the 8-12 weeks of disruption you can expect with a complete kitchen remodel.

Costa Mesa Real Estate Sales Data

Days on Market (last 24 months)

Current Average Days on Market in April

Single Family Homes 131 Condos/ Townhomes 153 Multi-family 159

Keys for Buying and Selling when the Market is slow

Keys for Selling When the Market is Slow

It’s a whole new world for home sellers. So, how do you make your house stand out so it will sell when sales are slow?
Curb appeal. After pricing, nothing will bring more potential buyers into your home than a house with outstanding curb appeal. Take a walk down your street with a critical eye. How does your home stack up from the outside? If it doesn’t stand out from the rest then it’s time to get to work.
Consider home staging. The quickest way to add value to a home for sale is a fresh coat of paint. After that, you may want to consider home staging-either do it yourself or hire an outside firm. A home staging professional will come in and take away some furnishings and rearrange others to make your home show better and to make it home more appealing to prospective buyers.

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Real Estate Week In Review

   For the week of May 23, 2011 — Vol. 9, Issue 21

 
In This Issue…
Last Week in Review: The economy appears to be slowing… but what’s going on with home loan rates? Read the answer.

Forecast for the Week: A second chance for a better outlook? Here’s what to watch this week.

View: Airfares are expected to rise and travel bargains may be harder to find. Read how you can still find deals!

Last Week in Review
“SLOW AND STEADY?” Last week, the economy appeared to be slowing. But despite the negative economic news, Bonds and home loan rates held steady and were unable to improve further.

Let’s look at what happened and what it means…

Housing Starts and Building Permits, which are leading indicators of the new home construction market, both came in below expectations that were already low. If you consider the significant amount of foreclosures and inventory overhang weighing on the market, it is no surprise to see a weak indicator on new home construction. Broadly speaking, foreclosures and short sales are expected to continue weighing on new home construction for the next couple of quarters… but as we all know, real estate is very local – so your particular market may be quicker or slower to improve.

Manufacturing reports were also disappointing last week. For example, Industrial Production, Capacity Utilization, and the Philadelphia Fed Manufacturing Index all came in below expectations – which helped Bonds last week.

So why didn’t Bonds and home loan rates improve?

The recent rally in Bonds and home loan rates was partly sparked on the notion that US economic growth will slow – which the economic reports last week seemed to indicate. And when you also factor that the only two ways the government can lower the budget deficit is either by cutting spending or raising taxes – or some mix of both – the austerity measures could indeed slow the economy.

Normally, such soft economic data would help Bonds and home loan rates. But last week, Bonds had trouble making gains because – despite the negative economic headlines – some of the reports included data that was unfriendly to Bonds.

Here’s an example…

Last week, the Empire State Manufacturing Index was reported a lot weaker than expected. But, when you look beyond the headline number, you see that the “Prices Paid” component of that report – which measures wholesale inflation – showed the highest rate of inflation in three years… and the second highest reading ever! Remember, inflation is the archenemy of Bonds and home loan rates.

Additionally, the employment index of the Empire State Index was positive, which suggests hiring. And, in a separate report released last week, the Labor Department’s Initial Jobless Claims number also showed the lowest level of unemployment claims in a month. Not only was that a good number from the standpoint of beating expectations, but it also indicated that April’s surge in unemployment claims was more likely due to temporary factors rather than a worsening labor market.

In the end, the positive employment news combined with the concerns over inflation offset some of the negative economic news last week and held Bonds and home loan rates in check. Both Mortgage Backed Securities and Treasuries traded dead on a ceiling of resistance last week. And unless Bonds can break above this ceiling, prices can’t improve further. I’ll be watching the markets closely this week to see if Bonds break above that ceiling this week.

Even if they don’t, the good news is that home loan rates are already historically low and present an ideal situation. If you or someone you know is looking to purchase a home or refinance, please call or email today to see how you can benefit from that situation.

Forecast for the Week
 

A second chance for better news? We’ll see new reports this week on housing and inflation. Here’s what to watch:

  • After last week’s disappointing Housing Starts and Building Permits, we’ll see more housing news this week. First up is the New Home Sales report on Tuesday, followed by the Pending Home Sales report on Friday. I’ll be watching closely to see how these reports come in and how they impact the markets.
  • We’ll also get another read on the economic recovery with Wednesday’s Durable Good Orders, which gives us an update on consumer and business buying behavior on big-ticket items.
  • On Thursday, the markets will see the latest report on Gross Domestic Product (GDP) – which is the broadest measure of economic activity.
  • The Jobless Claims report also comes out Thursday. As stated above, the report released last week came in better than expected and the lowest number of unemployment claims in a month. That said, we still have a lot of wood to chop in terms of a labor market recovery – and we all know that this is the key factor to an improving housing market as well.
  • The big news of the week will be released on Friday in the Personal Consumption Expenditures report, which is the Fed’s favorite gauge of inflation. This report is closely watched and could move the markets, especially after the inflation concerns indicated in last week’s release of the Empire State Manufacturing Index.
  • Finally, Friday will also provide a look at reports on Consumer Sentiment, Personal Spending, and Personal Income.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, last week was volatile – with Mortgage Bonds moving up and down before ending the week near unchanged.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday May 20, 2011)
Japanese Candlestick Chart
The Mortgage Market Guide View…
How to Beat Rising Summer Travel Costs

Timing and destination matter if you’re looking to save.

By Cameron Huddleston, Kiplinger.com

Finding travel bargains this summer may be a littler harder. Airfares are expected to rise 15% to $561, on average, from $485 last summer, according to Bing Travel, a Web site that predicts fares. And hotel costs are expected to rise 7% to $242 a night, on average, from $227 in 2010.

However, you still can find deals if you travel at the right time and to the right spots, and book flights as soon as possible, according to the Bing Travel summer forecast.

When to travel. The cheapest week to travel this summer will be May 30 to June 5, when airfares will average $518 for a round trip, according to the Bing forecast. The priciest week will be June 27 to July 3, when airfares will average about $595.

Where to travel. Orlando, Fla., will be among the cheapest destinations, with roundtrip airfare averaging $300 and hotel prices averaging $107 per night. You’ll also find deals on flights to Boston and Denver. Las Vegas has some of the lowest rates on three-star accommodations, and you also can find deals in Miami and San Diego. Hotel prices in Cancun actually are cheaper this year ($145, on average, at three-star hotels), and flights from certain airports (Boston, Dallas and Chicago) to the Mexican city are cheaper. Traveling overseas this summer will be more expensive, with the airfare averaging $1,250, up from $1,100 last summer.

When to book your travel. Book flights as soon as possible. “Travelers who are planning to wait out the rising fares in hopes of finding a deal will likely be disappointed,” says Krista Pappas, global travel industry director at Bing.

More ways to save:

Be flexible. If you don’t need to travel on a specific date, Bing Travel will show you when fares are cheapest to a destination of your choice. The Buzz tool at Kayak.com lets you search for flights that leave within a calendar month so you can find the lowest fare. If you’re looking to get away but don’t have a particular destination in mind, Airfarewatchdog.com will show you the cheapest flights out of the airport nearest to you. You also can save if you’re flexible about which airport you fly out of or into (see How to Save on Last-Minute Flights).

Avoid baggage fees. If saving money by being flexible isn’t an option, at least don’t pay more than you have to when you fly. Only Southwest Airlines lets you check two bags for free. Most of the other airlines charge about $25 for your first checked bag and $35 for a second checked bag. So pack lightly in a carry-on or consider shipping your luggage, especially if you have overweight or oversize bags that will cost significantly less to ship.

Consider Priceline. I save big on hotel rooms whenever I use Priceline’s Name Your Own Price feature. You won’t know which hotel you’re booking until you pay, but you can increase your odds of getting the hotel you want by following these tips.

Consider a vacation rental home, especially for longer stays. Renting an apartment, condo or house can often be cheaper than a hotel room. Plus, you’ll have access to a kitchen, so you won’t have to pay for pricey restaurant meals. Check HomeAway.com or VRBO.com.

For more ways to cut costs, see 20 Secrets to Save on Travel.

Reprinted with permission. All Contents c2011 The Kiplinger Washington Editors. www.kiplinger.com.

Economic Calendar for the Week of May 23-27, 2011

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of May 23 – May 27

Date ET Economic Report For Estimate Actual Prior Impact
Tue. May 24 10:00 New Home Sales Apr NA   300K Moderate
Wed. May 25 08:30 Durable Goods Orders Apr NA   2.9% Moderate
Thu. May 26 08:30 Gross Domestic Product (GDP) Q1 NA   1.8% Moderate
Thu. May 26 08:30 GDP Chain Deflator Q1 NA   1.9% Moderate
Thu. May 26 08:30 Jobless Claims (Initial) 5/21 NA   NA Moderate
Fri. May 27 10:00 Consumer Sentiment Index (UoM) May 72.4   72.4 Moderate
Fri. May 27 08:30 Personal Consumption Expenditures and Core PCE YOY NA   0.9% HIGH
Fri. May 27 08:30 Personal Consumption Expenditures and Core PCE Apr 0.2%   0.1% HIGH
Fri. May 27 08:30 Personal Spending Apr 0.5%   0.6% Moderate
Fri. May 27 08:30 Personal Income Apr 0.4%   0.5% Moderate
Fri. May 27 10:00 Pending Home Sales Mar -1.8%   5.1% Moderate
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
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California Borrowers Eliminating 2nds in Bankruptcy

Increasing use of Chapter 13 plans cited by bankruptcy attorneys

May 18, 2011

By PETE CAREY San Jose Mercury News – McClatchy-Tribune Information Services

 

 

 Bankruptcy lawyers say delinquent borrowers in California are increasingly turning to Chapter 13 bankruptcy to eliminate their second liens while avoiding foreclosure.

Stung by the crash of the housing market, some struggling homeowners are using a little known but increasingly popular provision of the bankruptcy code to eliminate second mortgages and avoid foreclosure.

Statistics are hard to come by, but bankruptcy lawyers say the provision has been used effectively on hundreds, if not thousands, of cases in the San Francisco Bay Area during the past two years.

“It’s a big thing in our valley,” said James “Ike” Shulman, a San Jose bankruptcy lawyer. “But it’s not widely known.”

Shulman, co-founder of the National Association of Consumer Bankruptcy Attorneys, said he has helped a number of clients who have filed for personal bankruptcy use the law to hold on to their houses — including three last week.

Cathy Moran, a Mountain View, Calif., bankruptcy lawyer, said one of her clients had a $132,000 second mortgage voided by the court.

“This is a really big-ticket issue that allows people to keep a home and conform the mortgage to something closer to real value,” Moran said.

Bankruptcy laws prevent borrowers from eliminating the debt of a first mortgage if they plan to stay in their home.

But second mortgages are treated differently. They can be declared unsecured debt when there is no equity to cover them, as is the case for millions of houses that are now worth far less than a few years ago.

When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts — which typically takes three to five years. At that point, the second mortgage is eliminated.

Many of these second mortgages were granted during the housing bubble, when home prices were going in one direction only — up, up and up.

“A lot of these are loans that shouldn’t have been made at all,” said Henry Sommer, editor of Collier on Bankruptcy, a publication on bankruptcy law.

One of Shulman’s clients, Veronica — who asked that her full name not be used — was struggling to keep the San Jose house she bought in 2005 for $612,000.

Her home’s value has dropped to about $367,000 — less than her first mortgage of $489,000 — which allowed her to petition the bankruptcy court to set aside her $122,000 second mortgage. The court granted her motion.

She successfully completed her payment plan for other debts two months ago, and her second mortgage is now eliminated.

“It’s wonderful,” she said. “After almost six years, I am finally able to see the light at the end of the tunnel, and I’m so, so grateful.”

Mortgage bankers don’t like the practice.

It’s “a troublesome phenomenon. It’s one of those things that’s just now developing and bubbling up,” said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. But there is little the mortgage industry can do, aside from seeking to change the law. That could be difficult given the current partisan lineup in Washington.

And there are no complaints from investors in first mortgages, like the pension and retirement funds represented by the Association of Mortgage Investors.

“We think with the right controls, something like this to allow a responsible, distressed homeowner to reorganize their assets, liabilities and cash flows is a very pro-business proposition,” said Chris Katopis, the association’s executive director. “We disagree with what the mortgage bankers associations are saying on this.”

The law has been like this for years, bankruptcy lawyers say. It’s just never been used as much because in the past there was usually enough equity in a home to cover the second mortgage.

“We’re having great results” using the rule, said Brette Evans, a San Jose bankruptcy lawyer. In one recent case, a small-business owner was able to hang on to her home by setting aside a $240,000 second mortgage, she said.

That put the borrower in “a safe zone” where she could work out a modification of her first mortgage, Evans said.

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