Many have been hit with the flu or been sick recently, including myself, and am finally starting to get back to normal. The same cannot be said for the weather, although I am definitely not complaining. 75 and sunny over the weekend in the middle of January? Pretty Nice. Well on the real estate front, not much has changed as far as new inventory, with 42 active listings in all of Manhattan Beach, while there are 41 in escrow. A very staggering number if you take a step back and look at it. 42 listings for sale gives us a 3.5 month of active inventory. In Hermosa Beach, there are only 31 properties for sale, or a 2.5 month of active inventory. 29 properties are in escrow. That’s almost a 1 to 1 active to in escrow. No wonder buyers are going crazy trying to find a property that doesn’t exist!
Next post I will discuss some new construction properties that are going to be coming available in the coming year to next year.
As the real estate market here starts to move in the beginning of the new year, we see our first listing of 2013 go into escrow after just 2 days on the market. 316 27th St. sits on the corner of 27th and Crest with huge ocean views. The word on the street is that they received a full price offer, which doesn’t shock me because of the “potential” it has a new custom home but word was circulating that they were going to remodel. Originally built in the 30′s, this property as had a few remodels since, the best I like from MbConfidential calling it “Art Deco is purely exterior”. The properties floorplan and finishes are not up to the current styles you see these days but the views from the 3rd floor were unobstructed. With 4 beds and just over 2600 sq ft on a 45′ x 60′ corner lot, the value is in the location and land more than the structure.
You might ask what’s so special about a 45×60 lot compared to the standard 30×90? Both equal out to 2700 sq. ft. The answer is in the height of the structure. The way the building codes are set in Manhattan, your layout offers bigger views from the back of the house. Contact me if you want a further explanation. Enjoy the weekend!
Happy New Year to everyone! 2013 brings new hope, a new day and more importantly, a new outlook on everything from business to personal goals to a new start. An overview of 2012 brought us some very unique and first time events. Real estate, particularly Manhattan and Hermosa Beach, experienced a huge spike in demand while a shortage of supply. February through June has historically been the busiest time for real estate transactions. The market is changing for the better. Building came back and the entry level homes, properties that were in the low $800-1 million range are went up 10% and had multiple offers by the first week.
As of today, there are currently 43 properties for sale (SFR, Condos, Townhomes) in Manhattan, of which 14 are over 100 days on the market, and 7 of those over 160 days. In Hermosa, there are 28 active listings, of which 11 are over 100 days and 8 of those over 200 days! The first thing that comes to mind is how low the inventory is across the board. Second is that the properties that are over 100 days, or 1o weeks old, have a price problem or the seller isn’t a realistic seller. Other outlining variables can also affect the long days on the market too. I expect similar scenarios to play out in 2013 as the interest rates stay low, inventory is low, but will see an increase, and the demand for build-able lots will still be high.
As many of you know, this time of year is includes Daylight savings, St. Patrick’s Day, and the NCAA tournament (March Madness), but this term also is indicative of the way the real estate market has been the last 6 weeks in both Manhattan and Hermosa Beach. The emergence of “Off Market” transactions have been something of a phenomenon. You could argue that the off market deals are the “trendy” way to do business. To back this statement up, there are some compelling statistics. As of today, there are currently 91 active listings in all of Manhattan Beach
(SFR and Townhomes) and 86 in Backup/Pending position. This is a staggering statistic and doesn’t even include any off market deals that have transpired. Inventory is low and weak in quality. Properties which posses some sort of premium ie, location, size, style, view, price, have been gobbled up with multiple offers. Only one offer wins, thus all the rest are still looking for that “right” home. Insert “Off Market” deals and a whole new way of satisfying your buyers. Just over the weekend there were five “Off Market” deals done! This is not just a Buyer’s market anymore!
Happy New Year to everyone out there. I hope it was a safe and eventful time. On the real estate front, there was slow activity, as expected during the holiday times. However, as we ascend into Winter, this time tends to produce new listings, new buyers, and a fresh outlook for the real estate market in 2012. Over the past 10 years, the South Bay generally sees an influx of new listings right after the Super Bowl. No one has the right answer as to why this specific time, but it just has worked out that way.
Having said that, currently there are 89 active listings in Manhattan and 54 in Hermosa (SFR, Townhome/Condo). Very low numbers for Manhattan and Hermosa but this is January, and expect there to be more inventory coming back out. A few reasons why Sellers take their property off the market in the Fall/Winter and bring it back out in the new year include the holidays, getting the Days on the Market (DOM) back to zero, a fresh look with either a new price or improvements that they did not make before they listed it.
Buyers are always around, looking for the right property to pull the trigger. Timing is everything and sometimes it takes a buyer to lose out on a property before they realize when it is the right time to buy.
Conventional loan is the most popular loan in the South Bay. These loans are underwritten to Fannie/Freddie guidelines and are up to $625,000. A Borrower needs a minimum credit score of 660, a max debt to income ratio (DTI) of 50%, and a down payment of 5% to 417,000 and 10% down to 625,00. Conventional loans currently have the lowest interest rates of any loan.
FHA loan amounts are up to $729,750. These loans offer low interest rates, however mortgage insurance is very expensive (1% upfront costs and an added 1.10% monthly cost for the life of the loan). Need a minimum credit score of 640 and a max DTI of 50-55%. These loans are primarily issued for first time buyers with a low credit score.
Jumbo loan amounts are up to 5,000,000+. This requires at least 20% with a credit score of 700 and above with a max DTI of 45%. There are no government guarantees. These loans are underwritten to individual investor standards and each bank/investor have different guidelines. High end buyers will typically use a jumbo loan.
In the current real estate market, sellers want qualified buyers. A Seller wants a 20-25% DP buyer rather than a FHA buyer because an FHA buyer is considered risky and ultimately, the deal has a higher probability of falling through.
*This helpful information was provided by Grant Norris of RPM Mortgage.
It’s no surprise around town that the Tree Section is swarming with buyers, from all price ranges, yet the market activity is not showing this trend with sales. Many blame the inventory and how the product is not in correlation with price and quality. However, the pent up demand for Cape Cod is through the roof, and this couldn’t be more true with 800 19th Street. A perfect example of how style of a certain property, along with a competitive price, will yield all those buyers to step up to the plate.
Placing the property on the MLS on a Saturday, having public open houses’ and generating a great response, the listing agent had six offers before the end of the weekend! Being in the know, the property was sold over full price by a local agent, for $1.952 (List Price was $1.899). 800 19th St is on a corner, yet on a busy one (Pacific and 19th) but the orientation of the house minimized the noise from the stop and go traffic. The New-England inspired style homes feature natural colors with simple, subtle exterior elements designed to blend into the landscape. Buyers see Cape Cod and think of warm, inviting, and entertaining lifestyle suitable for family living.
In conclusion, the market inventory is weak with over priced listings and the quality just isn’t what it was in the Spring. This is natural and tends to happen as the holidays are near. However, 800 19th is a great equalizer to this stigma.
This edition of our blog will have nothing to do with real estate. Instead, we are here to promote the most common and most respectable thing you, me or anyone could do; a good deed for someone. I know it’s the classic cliche, “Do unto others as they would to you.” But if you think about it, isn’t that what it’s all about? People can say they don’t have time, or in this economy…, or whatever, but if you just take a few minutes out of your day to do something, anything, that you can think of as a good deed or favor for someone, go ahead and post it at karmaky.com. It only takes a second and trust me, you will feel good about yourself when you are done.
Ever wonder why Hermosa Beach allows for rooftop decks and Manhattan Beach doesn’t? Me too! It seems ridiculous that two cities, merely the same in every way, including building regulations, has this huge flaw. Actually, this is arguably the biggest advantage Hermosa has over Manhattan. Well not anymore! Recently, the MB building code has changed the way builders can construct Townhomes in the Sand Section. Before the change, builders would construct “two on a lot” Townhomes on East-West lots, which run 33′ by 105′. The front unit ranges between 2,200 sq ft to 2,500 sq ft and the back unit between 2,800 sq ft up to 3,300 sq ft. The back unit is more valuable because of the bigger sq. footage. As a result, this would account for either an extra bedroom or a media/den room and views over the front unit. The front unit would have more parking and not be in the back (Ex: Properties on Highland Ave. and Manhattan Ave). Years past, MB wouldn’t allow a roof top deck on the front unit, which would only be accessible to the back unit, because they considered the deck the 4th floor of the front unit. Now, they changed that and I’m sure you can guess how that greatly affects the back unit even more, in a positive way… VIEWS!!!
The hot topic amongst builders is finding these highly sought after “East-West” lots to build. The demand is strong and a perfect example is the project Kim Komick is doing at 2207 Bayview Dr. in Manhattan Beach. Her plan is to build two Townhomes, the front being 2,400 sq. ft and the back 2,800 sq. ft. I believe they will be offered at $2.4 and $2.8 million respectfully. These two town homes will feature the new plan where the front unit has a roof top deck, but the deck is only accessible to the back unit. Imagine the views!!! I have heard they already have offers on the front unit and a lot of activity on the back. Completion in 2012.
Continuing with the 1031 Exchange topic, today we will discuss how to calculate one’s gain from the exchange. Here is the calculation:
Sale Price – Adjusted Basis = Gain
Here is the formula for Adjusted Basis:
Purchase Price + Depreciation + Capital Improvements = Adjusted Basis
Unfortunately, you have to pay 3 different taxes on the gain: 1) 25% Depreciation Recapture Tax. 2) 15% Federal Capital Gains Tax, and 3) 9.3% CA Capital Gains Tax. A general rule of thumb is to take away 1/3 of your gain as taxes.
There are tax deductions for individuals and married couples to help lessen the tax burden. The best deduction is the Section 121 Homeowner Exemption. To qualify, the property you are exchanging has to be your primary residence, meaning you must have lived in the property for 2 out of the last 5 years. An individual will receive a $250,000 tax exempt gain and a married couple will receive a $500,000 tax exempt gain for the exchange. Thank you IRS!
Reminder: flipping a property will NOT grant you the homeowners exemption because you are not the primary resident of the property and the government will treat the property as personal inventory
A savvy 1031 exchange investor would tell you the best way to delay paying taxes on an exchange is to “Defer, Defer, Die” by continuing to defer taxes by rolling the gain into new property after new property until your death! This is the best way to avoid paying taxes, and to leave your heirs with no tax burden.
For example: You sold a property for $10 million and the adjusted basis was $2.5 million, leaving you with a $7.5 million gain and a $2.5 million tax. Now if you passed away and left the property with your heirs, the adjusted basis can be increased to match the sale price of the property. As a result, your heirs will pay zero taxes!
If you decide to stop rolling each gain into a new property and pull out the money for other purposes, then you must pay taxes on all of the gains combined!
For further information regarding 1031 exchanges and other tax benefits, please visit Leonard Spoto’s Asset Exchange Company
Have you ever read an article, overheard a conversation or just plain curious about what a 1031 exchange is all about? Well today’s blog, which is in two parts, will give you a simple explanation of what it means and how you can benefit from it. Essentially, a 1031 is the name of the tax code for tax deferral relating to property. There are 4 basic requirements:
2.Tax Deferral Requirements
The Property qualifications states the exchange property must be used for productive use in trade or business or for investment purposes. The other qualification is the property must be “like kind”. For example, a “like kind” property for a SFR can be exchanged for a commercial/office building or even an empty land lot. Foreign property is NOT like kind, meaning you cannot exchange a property in Arizona to one in California.
Tax deferral requirements include reinvesting all of your cash and the purchase price of your property is of equal to or greater than the replacement property sale value. If you buy a house for $500k and sell it 5 years later for $1,000,000, you would be paying taxes on $5ook profit. If you do not touch that profit and reinvest it, you will not be subject to pay taxes on it at the time of sale. The same goes for selling your house and then finding your upleg for the same price or greater value.
The third requirement is the timeline. You have 180 days from the time you close escrow on your property to defer your money or until your taxes are due for that year. An important fact you need to be aware of is that if you plan on doing a 1031 exchange, you must initiate this before your escrow closes. Within that 180 days after you close escrow, you have 45 days to locate a property. If you close escrow after October 17th, you must file for an extension.
The last requirement is the 3 property rule and 200%. Within the 45 days, you need to locate three properties to exchange into. Once you locate three, you cannot change it. If all of them sell and you aren’t one of the buyers, then the exchange cannot take place. The other option is that you can exchange into more than one property, but it cannot be more than 200% value of your property that was just sold. An example would be selling your home for $1 million and then exchanging into 4 properties of $500,000 each.
Knowing these qualifications in advance can help you make more efficient decisions when considering buying and selling property. As you know, time is money! Our next blog will discuss how to calculate a gain from a 1031 exchange and possible methods to avoid paying any taxes!
As we come into the Fall here in Manhattan Beach, the mentality among the public is that the market is starting to slow down as inventory is not coming on the market as frequently as it does in the beginning of the spring. This theory does hold some weight but there is an underlying factor that might not be popping out to potential Buyers and Sellers. As of today, there are a total of 129 properties that are active and 45 in pending or in backup position in all of Manhattan Beach. That is roughly a 2.8 month of inventory. Not a high number, right? A big reason for this is because properties that have come out and have been on the market for over 3 weeks become stale in the eye of the public. Many factors can contribute to this including price, location, floor plan, not enough bedrooms, telephone poles distracting from the view, etc. If buyers don’t see past these issues, the only realistic way for a Seller to make up for that is by lowering the price. This brings me to my next point.
Within the last two weeks, going back to September 25th, there have been 7 properties that have gone into back up or pending position, and 5 out of those 7 had been listed for under 3 weeks. Two reasons for the quick sale: 1. PRICE!! Buyer(s) see the value in the property at a competitive price and have made a strong offer. 2. QUALITY!! Buyer(s) see the correlation between the price and the value of the property. Bottom line, quality properties, priced at market or just below, are seeing a lot of action with multiple offers within the first few weeks. Take 1312 Pine Ave. for example. This 4 bedroom, 4 bath, 2800 sq. ft. corner listing in the Tree Section was offered at $1.445. Just 6 days later, there were multiple offers and it went into escrow over list price. A perfect example of a property having the right combination of competitive pricing and a quality property.
Today we are going to take a look at the market activity of September 2011, and compare it to the five previous Septembers from 2006-2010. To preface, September is generally a time where children head back to school, vacations are wrapping up, and the market sees it’s “Summer activity” slow down as the Fall approaches (Our data includes SFR, Townhomes and Condos). Going back to 2006, the height of our market, we saw a whopping 21 homes sell in the month of September. Those were the days when you could buy a house with 0% down!!
The next year saw that number shrink to 11, ten houses less than a year ago but we still considered 2007 to be in the “bubble era” in the South Bay. In ’08, we saw a total of 13 sales close. Strange to see the number jump up 3 considering the Global Real Estate market started it’s decline. However, the downturn did not affect our area until the middle to end of October of 2008. In ’09, 12 homes sold, last year nine and this year nine.
One conclusion to take away from this data is that over the last five Septembers, we have been pretty consistent with our activity, excluding the bubble year of 2006, which happened to be the peak of our market. Currently, 21 homes are active on the market, while three are in Pending position and nine are in Backup.
In addition, these stats do not include deals done off market. Lately, there has been an increase in deals done off market as well as a boom on the rental side of things. Needless to say, our market has been fairly consistent over the last half decade and that’s a good thing for homeowners.
A very common question buyers ask agents is, “How much is the price per square foot (PPSF) of this property?” In many instances, this is a big determining factor when contemplating the purchase of a home. A property that shows $300 ppsf seems to be more valuable than a property that shows $200 ppsf. Today, I am here to tell you why in the South Bay, specifically Manhattan Beach, this factor is just one of many that determines value.
The NUMBER 1 reason why ppsf is NOT the determining factor in pricing here in the beach is because no structure is worth the land it sits on. Period!! Because of this fact, the South Bay has created it’s own “Bubble” for home prices and why we seem to not have as many issues as other outlying areas, such as Riverside or Palmdale. Let’s look at a few examples, 440 7th St and 128 6th St in Manhattan. Both wonderful locations, built by two of the top builders in the area, Matt Morris & Dennis Maloney. Both builders build around the same dollar/sq ft construction costs (hard construction cost, which are actual costs to build the house and soft construction costs, which are plans, permits, building fees, contractor costs, etc). Both are new construction with very similar floor plans and square footage but one is located on the 100 block “view” walk street and the other is on the “child friendly” 400 block flat walk street. 440 7th St sold in construction for $3.660 million while 128 6th St. sold for $5.595 million in 2011. Having said that, let’s look at the PPSF for each. 440 7th shows $915 PPSF while 128 6th shows $1,390.75. A difference of $475.75 PPSF! So at $475.75 and only 23 sq ft. difference of the two properties, $10,942.25 more is what 128 6th St. should cost than 440 7th if you went on the PPSF indicator.
But it didn’t sell for only a mere $10,942.25. Rather, it sold for a significant $1.935 million more. But how could it be worth that much more when the specs were roughly identical? In this particular example, the 100 block location is far more expensive than the 400 block because of the view aspect. As I mentioned earlier, NO STRUCTURE IS WORTH THE LAND IT SITS ON!! The land at 128 6th is far more valuable than the land at 440 7th St. Those are just two factors why PPSF is NOT the best indicator of value in Manhattan Beach.
For a first time buyer looking to purchase a home, it can be quite confusing to understand the real estate terms and lingo when searching for property. This is where the Altamuras come in handy! Our blog for today will focus on basic real estate terms and some useful jargon to help the novice buyer comprehend the real estate vocabulary.
We will start with the different types of baths. A 1/4 bath implies the bathroom only has a toilet. A 1/2 bath, also known as a “powder room” refers to a bathroom with a toilet and sink. Powder rooms can be found next to the kitchen, living room, and family room for guests. A 3/4 bath refers to a toilet, sink and a shower, which is common in all bathrooms of a home. A (1) full bath, which is commonly found in the master bedroom, contains a toilet, sink, shower, and a bath tub.
All Tonwhomes are Condos, but down here in the South bay we have a slight difference between the two. A Townhome is a multi-level condo with direct garage access. A Condo has subterranean parking with no direct garage access. When you purchase either a Townhome or a Condo, they are always a part of an association called the Homeowners Association (HOA). The HOA is a legal association that collects monthly fees from each property owner. The fees pay for day to day maintenance of exteriors and common areas as well as utilities and insurance.
Lastly, we will explain DOM v. CDOM. Days on Market (DOM) refers to the amount of days a property has been active on the market. Cumulative Days on Market (CDOM) indicates the total days on the market should the property have been removed temporarily from the market and put back on. In other words, it keeps a running tally of the DOM while on and off the market.
For example: A property was on the market for 30 days, then taken off the market for 2 weeks and was re-listed for another 30 days before selling, the DOM market statistic would be 30 days, while the CDOM statistic would show the full 60 days the property was on the market. To reset CDM to zero, the property needs to be taken off the market for 90 days. CDOM will make it clearer to perspective buyers and agents how “fresh” a listing is and it will also give a better indication of average marketing times when used to analyze the market as a whole.
Recently, an incident that took place in the Real Estate market which happens from time to time but never to this extent. He was a walk in at a local Real Estate office in downtown Hermosa a few weeks ago just looking for a rental. After deciding to see some property to buy instead, he pulled the trigger and wrote on a tear down on The Strand. This buyer, or lack there of, was from out of the country and didn’t have any idea of the South Bay but did like the atmosphere and vibe it presented. He made the deal for just over $3 million but was still stuck with the issue of finding a place to live. Fortunately for him, the Listing Agent had a rental unit above his garage that he had for when his extended family or any guests were in town. Moreover, the Listing Agent was also a builder and was working on terms to have the new buyer use him to build him a custom home. This couldn’t of worked out any better, right? Here is where it gets interesting. The buyer, from Oslo Norway, had a complete set of bank statements and wire transfer statements that showed his legitimacy to all parties. Once the deal was consummated, and in escrow, the buyer was apprehended by the Hermosa Beach Police Department for Fraud, including scamming banks, car dealerships and now property owners. More of this story can be seen from the Beach Reporter September 1, 2011 issue
There is not much out there right now for buyers to choose from who are looking in the Sand Section for a Single Family under $1.4 million. 5 active listings to be honest, but only 2 have 3 bedrooms, at least 2.5 baths and at least 1500 sq ft of living space. BUT only 1 has ocean views and is not in El Porto. Look no further than 320 31st St! Recently remodeled last year, this converted duplex offers a plethora of amenities for the buyer who is trying to be close to the beach, keep the budget tight and a short walk to the up and coming North end of town. The owners have done everything for you with new exterior and interior paint, new copper plumbing throughout, new bamboo flooring throughout the main living area, kitchen and master bedroom. Kitchen has been completely restored and features granite counter tops and top of the line stainless steel appliances. Next to the kitchen is the main living area with a newly constructed fireplace that boasts tremendous travertine tile all along the exterior. Plus, the upstairs has a renovated deck with spectacular ocean views. There is a full 2 car garage with 2 parking spots in the driveway to solve all your parking problems. 320 31st St. is open this weekend from 1-4pm on both Saturday and Sunday.
Here we are towards the end of August, Summer is winding down and kids are getting ready to start school again. This time of year is also one where the market
tends to slow down as families wrap up their end of the summer trips. A quick look into the Tree Section shows an interesting stat that cannot be overlooked. To start, families who are growing in size typically like to move from the Sand Section towards the Trees. In addition, families that want to move closer to the beach and downtown move West from the other side of Sepulveda. Having said this, North of Valley in the Tree Section has been in a little lull this past season. Part of that is because of price. Doesn’t it always seem to come down to that?! Recent stats show that number of Tree Section sales for more than $2m, less than 3400 sq. ft., in all of 2011 come out to Two!! Both great houses, in average to above average locations, respectfully. (2100 Pine Ave. and 3005 Poinsettia Ave.). Hopefully this trend doesn’t last for the owners North of Valley in the Tree Section.
Rumors were going around that an agent was working a deal in which a Townhome, West of Highland, was in negotiations to sell over $3 million. Most people gawked the idea that such a high number could be attained for a home that wasn’t a Single Family. After speculation, and a little time, the rumor was made public. Down by Bruce’s Beach, a nice, modern remodeled Townhouse that felt like a Single Family went on the MLS for comp purposes only. Indeed, it did sell for over $3 million. In fact, it went for $3,125,000. Was 305 27th St. an anomaly? Some might agree. I’d have to say lets look at the specs and break it down:
- 3 bed
- 2.5 baths
- 2867 sq ft
- West of Highland on a North Corner with unobstructed huge views to the South FOREVER
Being on the North end of town, you can generate huge views because of the slope of the lots. Traditionally, there is a 3 foot decrease from lot to lot on a view walk street. On the North end of town, it can be 4-5 feet difference. These kinds of properties are rare, very seldom do they come up for sale and in this case, 305 27th St. didn’t and was sold privately off market.
Welcome to The Altamura’s Blog Section!
I would like to start off with some recent news in the market. There has been a lot of activity lately which tends to point that the market in the South Bay is holding steady. Recent sales prove this theory. 523 14th St, and 401 2nd St. in Manhattan Beach are two big ones just to name a few. Both listed for $3,399,000 and $3,999,000 respectively. In a matter of a 9 days, 14th St. sold and in 1 day, 2nd St. sold. Both for over full price and both had multiple offers ($3.505 and $4.150). Some might argue the buyer’s for both overpaid, I say the market determines value and right now, the market said that the value was over those list prices respectfully.
402 2nd St, Manhattan Beach