Los Alamitos Real Estate News: Distressed sales swamping market?

(8/6/2009, Los Alamitos, by Dave Emerson)  Today I’m taking a break from the political discussion to update another always hot topic:  What’s happening with local real estate.  I hope to get that long awaited recall post up tomorrow or Saturday, and you’re welcome to carry on or join the very interesting discussion on the recall or other issues related to last Monday’s Council meeting, but for today I’m focusing on our housing market for a change.

As you’re probably aware, the first wave of foreclosures hit lower priced “starter neighborhoods in Southern California much harder than it hit Los Alamitos, let alone Rossmoor.  That was largely because very few “sub prime” or no down loans were made in our community during the recent sub prime boom, because most Los Al buyers were moving up from surrounding communities and had ample equity for down payments.

But three years of declining prices have a way of bringing distressed sales to even the nicest neighborhoods, as was clearly revealed in some market research I did today for a long time client who’s now thinking of moving from Los Al to Seal Beach.  (He said it was the cooler weather he was after, but I’m pretty sure it’s really that he’s just so disappointed that I didn’t make it to the City Council. . . .JK!)

Anyway, today I pointed my web browser to the “members only” So Cal Multiple Listing Service website and searched for Los Al and Rossmoor single family homes with at least three bedrooms listed below $750,000.  I was looking for both available listings and homes that have recently gone into escrow.   Here’s what I found:

Los Al & Rossmoor SFRs below $750,000:

Available listings:     12

Homes in escrow:         6

Distressed properties in the mix

In neighboring L.A. County towns like Long Beach and Lakewood, the market has been dominated by distressed properties known as  “REOs” and “short sales.”

• REOs are  bank owned foreclosed homes–Real Estate Owned–by the lender).
• Short sales, which are anything but short, are sales of homes where the owner owns more that she will net from the sale.  That requires the seller’s current lender to take a “short” payoff on their mortgage of less than the actual loan amount.

So I decided to scroll through detailed print-outs of the 18 local listings I had before me to see how many of them would fall into these two distressed categories.  10%?  25%?

No–turns out a whopping 50% of those homes were either REOs or short sales.  Even more surprising, over 80% of the homes actually in escrow were distressed properties!

When I took out the Rossmoor homes the percentage of distressed properties both available and in escrow went up to almost 70%!  The good news for Los Al residents is that 80% of the homes in escrow were Los Al homes.  That’s consistent, however, with the general conclusion–it’s largely the REOs and short sales that are selling.

Why?  Because they’re priced to sell, while many of the non-distressed properties are in no hurry to sell, so their owners are more on a fishing expedition, figuring they’ll wait out the market if they can’t get their price.

What’s that mean to local homeowners?

• If you’re “upside down” on your home or having difficulty making payments, a short sale may be a solution you’d want to explore.
• This may not be a good market to “test” with an overpriced listing for Los Al and Rossmoor homeowners.  (That’s the opposite for lower priced communities like Lakewood, however, which might make it a good time for a Lakewood or Los Altos home owner to explore moving up–if they actually have equity or cash in the bank.)
• Local prices aren’t likely to move up dramatically until next spring at the earliest.  There’s still a substantial amount of distressed properties that need to be worked through.
• This is a tricky market, and you need to look for a local listing agent who knows and understands the local market.  You may fall in love with a move-up home in Laguna Niguel, but you’d better find a Los Al agent if you want your home priced and marketed right.  This is not a good time to call your cousin in La Habra to list your home!
• You also need an experienced agent–preferably one who’s already been through a recession or two!  Fortunately, there are quite a few experienced, ethical and diligent local agents.  There’s no need to settle for anything less.  Just be sure you get all 4 qualities:
  • Experienced
  • Ethical (honest)
  • Diligent
  • Local
• If you’re looking to buy locally, you probably still have time to save up more cash, pay down credit cards, etc.  I think this coming November and December may well be the “sweet spot” for buyers–but buying during the holidays requires amazing preparation and concentration.  Which is why it’s usually a good time to buy.

For more on how to select an agent, check out my “Top 5 ways not to pick a listing agent” at SoCalRealEstateNews.com.    While you’re there, potential sellers might also be interested in “How to sell for top dollar in any market.”

Those are some of my observations on the Los Alamitos and Rossmoor housing market right now, but that’s only one person’s perspective.  I’d love to hear yours, whether you’re an agent or a homeowner.  That’s why we have instant real-time posting of comments in the box below.

Los Alamitos is a very family-friendly community, so please use family friendly language, and a respectful tone is always appreciated.  We welcome all comments, but those from my fellow Realtors might prove especially insightful.  Each of us has a slightly different perspective on today’s market.

Related posts:

1. Los Alamitos Real Estate update
2. What’s up (or down) with Los Alamitos real estate?
3. Real estate update: Return of the Great Recession?
4. More old, bad news from S & P’s Case-Schiller Home Price Index