Good Schools equal Property Value and Stability

Palos Verdes Peninsula Unified and our excellent South Bay Beach Cities school districts failed to get a shout-out in this article, but we all know the significance of good schools and their correlation to property value and stability…

Good Schools, Bad Real Estate
Despite the housing slump, house hunting in good school districts frustrates parents who often have to settle for less house.

The Wall Street Journal
June 25, 2010 by Sarah Max

Oh, the sacrifices parents make.

Kiely and John Adams began their house hunt this spring with grand plans to upgrade from their small home in Cary, N.C., to a larger, four-bedroom house—preferably with an office and a bonus room—about 25 miles away in Chapel Hill, where Kiely plans on starting a Ph.D. program next fall.

They could have gotten all that and more for their $415,000 budget if they kept their search on the outskirts of Chapel Hill. But, determined to stay within the boundaries of Chapel Hill’s highly-regarded school district, the parents of 5-year-old twins, Megan and Bevin, and 4-year-old Sean trudged ahead in what they dubbed “an exercise in compromise.” Even when they did find a house that showed promise, it was usually snapped up before they could take a closer look. “Most houses seemed to come and go, come and go,” Mr. Adams says.

It’s supposed to be a buyer’s market. Yet, for parents determined to buy in areas associated with top schools, those bargains may be harder to come by. When housing markets go south, “areas with exceptional schools tend to hold their value better than the market overall,” says Michael Sklarz, president of Collateral Analytics, a Honolulu-based firm that specializes in real estate data analysis.

In Chapel Hill, where the Adams family was looking, the average single-family home price, based on price per square foot, has declined about 4.8% since the market peaked in 2007, according to Collateral Analytics, but houses there still command about a 48% premium, per square foot, to homes in the Raleigh-Cary metro area.

In other parts the country, home prices have dropped in areas with good schools, but the declines are typically nowhere near the levels in their surrounding metro areas. In Irvine, Calif., a city that regularly gets national attention for its quality schools, average price per square foot has fallen 18% since its 2006 peak, but prices in the greater metro area surrounding Irvine fell 33%. The same goes for Edina, Minn., where prices per square foot are down about 14% since their peak, versus 27% for the greater Minneapolis area. And in the brainy town of Andover, Mass., prices are down just 4%, versus more than 16% for the Boston metro division.

There are several factors at play, says Mr. Sklarz. Areas with good schools tend to be more affluent and were less susceptible to the sub-prime mortgage debacle so saw fewer foreclosures. What’s more, homes associated with great schools generally sell faster, in good markets and bad.

All of this comes as no surprise to the real estate agents who work with education-obsessed parents. “Schools have a huge impact on home values,” says Kathy Beacham, a real estate broker in Raleigh. When schools in her own well-to-do neighborhood were redistricted three years ago, the value of her million-dollar home dropped more than $150,000. “A good education has always been important but I don’t remember looking at the numbers like parents do today,” she says.

Then again, the numbers have never been so widely available. State assessments, independent ratings from websites like GreatSchools and Education.com and annual magazine rankings of America’s top high schools have not only made it easy for parents to factor school test scores and parent-teacher ratios into their buying decisions, they’ve cemented the relationship between home prices and school quality.

When Florida rolled out its statewide grading system in 1999, the real estate market took note. According to research by David Figlio, who is now a professor of education, social policy and economics at Northwestern University, an A-rated school in Gainesville added about $10,000 to the value of a home there versus a B school.

Once a school is graded, the gap often grows. Strong ratings lead to better community support, which in turn leads to better schools. Today, the difference between an A school and B school might easily be $50,000 on a $300,000 house, he says.

That phenomenon isn’t lost on residents of Bellevue, Wash., a Seattle suburb that is home to some of the best schools in the state. “I don’t think there’s ever been a school levy on the ballot here that’s been turned down,” says broker Michael Orbino. Even residents who don’t have school-age children tend to stand behind the schools. It’s not altruism; it’s economics. All things being equal, homes in the Bellevue school district fetch as much as a 15% premium to those just outside of it, he says.

“But there’s more to it than that,” says Mr. Orbino. “Because the land is worth so much more in Bellevue, builders tend to build more expensive homes here,” making the school district that much more expensive to begin with. By Mr. Orbino’s estimate, the prices for single-family homes are down about 10% since the market peak. “But it isn’t a catch-all,” he says. Prices for ultra-luxury homes and condos, which generally aren’t influenced by schools, are down 30% to 40%, he says. So while prices per square foot in Bellevue have fallen slightly more than the Seattle market overall, prices for more family-friendly abodes haven’t necessarily seen the same declines.

The stabilizing effect of good schools is welcome news for those who already own property in school boundaries, but it makes it tough for parents to trade up to better homes. John and Kiely Adams considered themselves lucky to have found a three-bedroom home in a Chapel Hill neighborhood they liked and at a price in their budget. But, alas, they were forced to back out of the deal when their current home came up short in the appraisal. With their daughters’ first day of kindergarten fast approaching, the couple will stay put for now and start the process over again next spring. “We don’t want them to start kindergarten only to yank them out two months later,” says Mr. Adams.

Left with few other options, some parents get creative. Bellevue school administrators have seen all kinds of tactics for skirting the district’s policy that students spend at least four nights a week within boundary lines. Common ploys include using a family member’s address or taking over a resident’s utility bill, one of the documents used as proof of residency. The school district has uncovered 35 cases of enrollment fraud this year alone. Other families jump school boundaries by spending four nights a week in a small apartment and going home to a bigger house in another town for the weekends.

Two years ago, Daniel and Dee Shin used an inheritance from Mr. Shin’s father to pay $410,000 for the “cheapest house they could afford” in Bellevue for the sole purpose of securing a spot in the school district for their then 11-year-old daughter, Kayla. The 900-square-foot circa-1955 rambler is “beat up and not insulated very well,” says Mr. Shin, adding that he assumed that paying property taxes on the house would be enough to satisfy the school district’s residency requirements even if the family actually resided in a 2,326-square-foot, four-bedroom home in the nearby town of Renton. Their new neighbors in Bellevue, evidently, didn’t see it that way. They reported the Shins to the school district, and the district gave them an ultimatum: move into the Bellevue district by the time Kayla registers for high school in February, or start the following school year in another district.

The decision was clear for the Shins. They plan to spend the summer insulating the Bellevue home and doing their best to make it livable. Come January, they’ll move into that house, and their extended family will move into the house in Renton.

The Shins considered just sending Kayla to a private school, but Mr. Shins says that suggestion triggered “on demand tears” from Kayla, who doesn’t relish the idea of going to a different high school than her middle-school pals. After all the trouble the couple went through to get Kayla into Bellevue schools, they’re determined to see her graduate from Newport High School, which, Mr. Shin is quick to point out, is consistently ranked among the best in the country.

As the father of three children ages 11, 14 and 16, Northwestern’s Mr. Figlio understands the dilemma parents face. When he and his family relocated from Gainesville, Fla., to Evanston, Ill., in 2008, Mr. Figlio vetted the middle schools before making a decision about where exactly he and his family would live. For parents struggling with how to get their kids into the “best” schools at a price they can afford, he recommends considering test scores, state ratings and the like—but not getting too hung up on enrolling your child in an A+ school at all costs when a B+ school might actually be a better fit, academically and financially.

Source: The Wall Street Journal, view online at Good Schools, Bad Real Estate

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

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Rate on 5-year ARM falls to record low

Interest rates continue to be the best single reason to be in the housing market. Whether you’re buying or need to sell, historically low financing is a huge benefit…

Rate on 5-year ARM falls to record low
But mortgage rates’ weekly move proves minimal: Freddie Mac
MarketWatch June 18, 2010
By Amy Hoak , Real Estate writer

Mortgage rates changed little this week, but the 5-year adjustable-rate mortgage managed to slide enough to break its record low, according to Freddie Mac’s weekly survey of conforming mortgage rates, released on Thursday.

Five-year Treasury-indexed hybrid ARMs averaged 3.89% for the week ended June 17, down from 3.92% last week and 4.97% a year ago. It’s the lowest the ARM has been since Freddie Mac started tracking it in January 2005.

One-year Treasury-indexed ARMs also fell, averaging 3.82%, down from 3.91% last week and 4.95% a year ago. It’s the lowest that the ARM has been since the week ended May 6, 2004, when it averaged 3.76%.

But fixed-rate mortgages inched up this week, with the 30-year fixed-rate mortgage averaging 4.75%, up from 4.72% last week; it averaged 5.38% a year ago. And the 15-year fixed-rate mortgage averaged 4.20%, up from 4.17% last week; it averaged 4.89% a year ago.

To obtain the rates, the fixed-rate mortgages and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Mortgage rates were little changed this week amid preliminary signs that the expiration of the home-buyer tax credit in April may have led to a slowdown in new construction,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.

“Starts on single-family homes fell 17% to an annualized pace of 468,000 units in May from April’s 20-month high. In addition, permits on one-unit homes fell to the slowest pace since May 2009,” he noted. Read story about housing starts.

“Finally, builders became more pessimistic in their near-term outlook in June, according to the National Association of Home Builders/Wells Fargo Housing,” he said. Read about builder pessimism.

But Nothaft added that household balance sheets have been improving over the last year: “In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve.

“In addition, homeowners have regained $1.1 trillion in home equity over the same time period,” he said

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

More on the Home Buyer Tax Credit Deadline Extension

More details of the extended tax credit for first-time and move-up home buyers deadline that the Senate voted to extend to SEPTEMBER 30, 2010.

As part of its plan to stimulate the U.S. housing market, Congress last fall approved the Extended Home Buyer Tax Credit. This extended the deadline for the First-Time Home Buyer Tax Credit from Nov. 30, 2009, to April 30, 2010, and NOW potentially until SEPTEMBER 30, 2010. It was also expanded it to include repeat buyers.

Home buyers may get more time to claim tax credit
MarketWatch June 18, 2010
By Amy Hoak , Real Estate writer

For some people angling to claim the home-buyer tax credit, hiccups in getting to the closing table are threatening to disqualify them from getting the incentive. But a Senate amendment to the American Jobs and Closing Tax Loopholes Act of 2010 would give them more time to finalize the sale.

To qualify for the credit, buyers had to be under contract for a purchase by April 30. But under current law they have until June 30 to close on the sale.

Under the amendment, they would get an extra three months to close — useful for those who are experiencing delays in getting their mortgages approved or are somehow being affected by the many other issues that can arise and prevent a closing from occurring on time. The amendment would apply solely to buyers who entered a purchase contract by April 30.

“Because of this program’s popularity and the time it takes to complete transactions such as short sales, I led the effort today to extend the closing deadline for this tax credit through September of this year — allowing lenders more time to clear a backlog of 180,000 potential home buyers nationwide,” said Senate Majority Leader Harry Reid, in a news release after the amendment passed in the Senate this week.

Still, the measure is only one part of a wide-ranging jobs and tax bill that still needs to be voted on by both chambers of Congress before it would become law.

Many in the industry are concerned that some buyers won’t make the current deadline, especially due to the extra time it takes to get a final mortgage approval these days, combined with the high volume of loan applications in process for purchase and refinance mortgages, due to low interest rates.

According to the National Association of Realtors, as many as one-third of qualified home buyers have been told by their lenders their mortgages won’t close before June 30 because of the volume of applications being processed.

“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a work-flow jam with the lenders or other delays and might not be able to complete the purchase of their homes,” said Vicki Cox Golder, NAR’s president, in a news release. “Since these applications were already in the pipeline and figured into the program’s cost, the extension of the closing deadline should not incur any further government costs.”

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

Homebuyer Tax Credits Extended to Sept. 30th

The Senate on Wednesday approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.

The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The proposal, approved by a 60-37 vote, would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.

Reid, D-Nev., added the proposal to a bill extending jobless benefits through the end of November. Nevada has the nation’s highest foreclosure rate, and Reid is facing a tough re-election campaign.

The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.

“If Congress fails to act promptly, then prospective homebuyers might not get the benefit of the homebuyer tax credit, even though they have completed contracts,” the Realtors said a a letter to lawmakers.

First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.

The $140 million cost of the measure would be financed by denying businesses the ability to deduct from their taxes punitive damages paid when losing lawsuits or judgments.

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

South Bay Home Sales/Prices April 2009 to 2010

No doubt it is difficult to be too serious about the percentage of loss/gain when looking at such a limited number of sales (per city), as one high or low number can dramatically influence the overall. The devil, as they say is in the details…

Below are numbers (from DataQuick) on April 2010 home sales as compared to April 2009. Data includes homes sold and the percentage of change based on median price 2009 vs 2010. Unfortunately there were no numbers in the report for Palos Verdes Estates, Rolling Hills or Rolling Hills Estates.

Entire report at DQNews – California Home Sale Price Medians by County and City, Home Sales Recorded in April 2010

Los Angeles County  6,334  +9.00%

El Segundo  15  +12.46%
Gardena  31  +10.29%
Harbor City  18  +21.20%
Hawthorne  37  +15.24%
Hermosa Bch  18  -26.54%
Lomita  11  -3.87%
Manhattan Bch  40  +11.72%
Rancho PV  39  +4.38%
Redondo Bch  77  +1.98%
Torrance  106  +18.41%

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

New location: RE/MAX Palos Verdes (Silver Spur)

I’ve recently moved from our Redondo Beach office in the Hollywood Riviera to the office on Silver Spur Road across from the Promenade on the Peninsula in Rolling Hill Estates. Due to the recent acquisition by RE/MAX Palos Verdes & Execs of six new RE/MAX offices (Manhattan Beach, El Segundo, Marina Del Rey/Venice, Santa Monica, West LA and Beverly Hills) there been a lot agents moving within our organization and for me this is a far more convenient location.

Updated contact info:

450 Silver Spur Road
Rolling Hills Estates, CA 90274
Direct (310) 703-1848
Cell (310) 750-5751
info@robertdixon.net

Palos Verdes – South Bay: Distressed Sales verses Standard Sales

156 / 824 – The number Distressed Sales verses Standard Sales closed since January 1, 2010
86 / 715 – The number Distressed Sales verses Standard Sales currently listed (Active) on the MLS
Areas covered: El Segundo, Manhattan Beach, Hermosa Beach, North and South Redondo Beach, Walteria, Hollywood Riviera, West and South Torrance, Southwood and the Palos Verdes Peninsula.
Source: Multiple Listing Service (MLS). Distressed Property defined as properties: In Foreclosure, Notice of Default (NOD), Real Estate Owned (REO), Short Sale or Short Pay or Auction