Tuesday, June 12, 2007

Airport Influence Area

I ran across this map of the "Airport Influence Area" on the City of Santa Monica website. The purple area is coded as "RPZ". Don't know what that means (Runway Protection Zone?), but it must be the area of greatest impact, not that a lot more isn't seriously affected by airplane noise. I've added the current Santa Monica listings in or next to the RPZ:

1. 2376 Dewey, 3 bed/2 bath, $875K (originally $1,150K, it must be just a sliver of front yard in Santa Monica at the bend of traffic-jammed 23rd St. to Walgrove Ave.)
2. 2224 Navy, 2/1, $1,250K
3. 2128 Navy, 3/1, $1,259K
4. 2202 Marine, 5/4, $1,495K
5. 2025 Dewey, 3/2.5, $1,498K (in escrow)
6. 2222 Marine, 4/4, $1,975K
7. 2223 Marine, 3/2.5, $1,999K

There's another RPZ on the original map, east of Centinela and north of National, in the area the MLS calls West L.A. I haven't followed that area much, largely because of both the airport and Santa Monica Freeway noise.

18 comments:

war chest said...

I played Pen Mar the other day and while driving down 23rd/Walgrove next to the airport, I saw 3 or 4 homes with for sale signs on them that were right on the busy street (which itself is right under the airport). I know this is Santa Monica, but come on...million dollar+ homes in such a crap location. Going to be a tough sell.

war chest said...

Off topic:

Using foreclosure.com and searching zip code 90403 I found 136 Tax Liens (like mostly like condos) and also another 11 preforeclosures, foreclosures, etc...

Again, just think about how high property taxes are on these obscenely over priced properties...wow

Don said...

A good rule-of-thumb estimate for property tax is to take the sale price and divide by 1000. That's the approximate monthly payment for the property tax (assuming an overal rate of roughly 1.2% which seems to be pretty typical in L.A. county). I imagine that there are probably some districts which might have assessments which push it up a bit higher or pull it a big lower, but overall that's going to be about right. Note that prop 13 also restricts the annual increase to 2% (not withstanding additional assessments because of bond measures).

So if you buy a million-dollar home, the property tax bill comes to about $1000/month. If you had a proper down-payment of 10%, you'd have a 900K mortgage which represents roughly $5400 more in mortgage payments (although this is at a lower interest rate than my credit union offers on a jumbo mortgage). By my calculation, this comes out to a requirement of an annual income of $274,285.71 to get in to that million dollar house with the 28% rule.

And that, ladies and gentlemen, is why we will be seeing a significant drop in real estate prices in Los Angeles. There just aren't that many households in Los Angeles with an income high enough to support the number of houses being sold at that price point.

war chest said...

Don,

Agree with you but when I crunch the numbers, it comes out a bit worse...

Assume $1 million purchase price, 10% down, a 30 year fixed mortgage at 7%. Taxes at 1.2%

Mortgage payment would be: 5,988
Taxes = 1,000

Also, with a 10% downpayment, you would either have to get a higher rate second mortgage (to avoid PMI) or pay PMI...so there is an extra few hundred per month there.

So really we can see this comes to $7200/month or so...Now factor in maintenence, cleaning, gardening, fire/earthquake insurance, etc

So at a minimum, I would say you are looking at around $8K per month.

Assume no other debt and use a 33% gross income payment cap means you need to make $290K a year...I guess that isn't far off of your number, but I am being generous (as you were) with the interest rate on the loan and I am ignoring PMI or higher rate on a second...

So maybe you need $300K income, $100K cash down payment, and to be very conservative, a $100K+ emergency/reserve fund.

Oh yea...and then factor in that you can't really buy anything for $1 million that you can really live in!! Maybe a nice 3 bedroom condo...haha

Don said...

Oh, damn, I forgot about the PMI. In my own house-savings spreadsheet, I'm assuming a minimum of a 20% downpayment, although with our household income and prices in the area where we'd like to live, we have to save a lot more than 20% (just did a quick check on the latest spreadsheet numbers and we need to have 41% saved).

Also, while insurance is usually bundled into the monthly housing payment and paid out of escrow (along with the property tax), as I recall, it's not counted in the 28% threshold which is just mortgage payment, taxes and association fees.

My credit union currently offers a jumbo mortgage rate of 6.625% with 1.875 points which gives a $6.40 cost per thousand on the mortgage payment.

So we just keep saving. If house prices stay constant and our savings rate stays constant, we should be able to buy March 2014. I suspect, though that the former will go down and the latter will go up allowing us to buy sooner than that. Ideally, I'd like to have our mortgage under $417K so we can avoid the premium of a jumbo mortgage.

Don said...

What I'd really like to find are some solid income demographics that give a more accurate picture of the break-down of where people's incomes are. Comparing median income to median home price isn't quite right since there will be people who have been in homes for a while and not everyone owns for whatever reason. On the other hand, being able to get a percentage of households which can afford the median home price would be a very useful metric.

Anonymous said...

Buyer beware!!! Here's how you get skyrocketing home prices!!!


One pleads guilty, 5 others indicted in Los Angeles mortgage fraud
Friday, May 25, 2007 at 12:45PM
The Editor - Ian Shuter in Indictments, Flipping, IRS Investigation, California
In the following press release The United States Attorney’s Office for the Central District of California announced that a West Los Angeles mortgage banker has agreed to plead guilty to federal criminal charges in a massive mortgage fraud scam that caused more than $18.5 million in losses to banks, including his former employer. Click here for the press release

This afternoon in United States District Court in Los Angeles, federal prosecutors filed criminal charges against Richard A. Maize, 53, of Beverly Hills. Maize, a co-founder of Americorp Funding, a mortgage banking company with offices in West Los Angeles and Pasadena, was charged with one count of conspiracy to commit bank fraud and loan fraud, three counts of bank fraud and one count of making a false statement on a federal tax return.

In a plea agreement also filed today, Maize agreed to plead guilty to the five felony counts and to cooperate in the government’s ongoing probe of the scheme.

Americorp originated, brokered, funded and sold mortgage loans. Maize was Americorp’s top-producing mortgage banker, closing more than $192 million in loans in 2001 and more than $245 million in loans in 2002. Maize owned 45 percent of Americorp until about December 2000, when he and his partners sold Americorp to Prism Mortgage Company (later known as RBC Mortgage Company). At that time, Maize became the president of the Americorp division of a Prism/RBC subsidiary.

According to court documents, Maize and five others previously charged in the case were involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu.

Five people have previously been charged in the scam. They are:
Charles Elliott Fitzgerald, 47, of Newbury Park
Mark Alan Abrams, 45, of Long Beach
Nicole LaViolette, 37, of Palm Springs
Jamieson Matykowski, 33, of Laguna Niguel
Timothy Holland, 35, of Santa Ana.

Fitzgerald, who is in custody, is scheduled to go on trial on July 31 on a host of federal charges related to the alleged scheme. The other four previously charged have pleaded guilty to charges related to the fraud scheme and are pending sentencing.

According to court documents, in late 1999 or early 2000, Fitzgerald and Abrams started a mortgage brokering company called Desert Pacific Financial, Inc. (DPF). The company sent mortgage loan applications to lenders for review and funding, and received commissions from those lenders when the loans closed. In late 2001, Fitzgerald and Abrams renamed the company Beverly Hills Estates Funding, Inc. (BHEF).

Fitzgerald and Abrams purchased homes at their real market values. Abrams and his associates then recruited “straw borrowers” to obtain the inflated loans that were used to purchase homes from Fitzgerald and Abrams. The straw borrowers allowed the conspirators to use their names and credit to obtain mortgages as part of this “property-flipping” process. Armed with inflated appraisals and other false documentation, the conspirators submitted false and inflated loan application packages. As president of Americorp, Maize had contacts and business relationships with the victim lenders, which he exploited to deceive the victim lenders into approving and funding the inflated loans. He also abused his position as president and defrauded his employer, Prism/RBC, by deceiving the company into funding the inflated loans.

As one example, the case against Maize details the purchase by Fitzgerald and Abrams of a Bel Air home for $735,000. When they flipped the property, they “sold” the residence to a straw borrower for $2.37 million. A bogus loan application package went to Lehman Brothers Bank, and the bank unwittingly funded a loan of more than $1.4 million on the property – nearly double the true $735,000 purchase price – almost all of which ended up in one of the in-house escrow companies controlled by Fitzgerald and Abrams. According to the Maize charges, Lehman Brothers Bank alone was deceived into funding about 40 such inflated loans from March 2000 through July 2002. These 40 loans were for more than $28 million over the true prices of the homes. According to court documents, Maize received hundreds of thousands of dollars in kickbacks for his assistance in getting the loans approved. In 2001, he failed to report more than $175,000 of these kickbacks on his federal tax return.

Maize faces a maximum possible sentence of 98 years in federal prison. In his plea agreement, Maize has agreed to pay $2.75 million in restitution prior to his sentencing, although he may be ordered to pay more at sentencing. The charges against Maize and the others are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation Division.

Article originally appeared on Mortgage Fraud (http://www.mortgagefraud.org/).

War Chest said...

Don,

That rate you quote seems low (especially for a jumbo) and 1.875 points seems high...

Maybe the low and high aspects cancel eachother out...I don't know. However, I would plan on rates being higher in the future than they are today. Rates have moved significantly over the past week alone. Also, what credit union is it?

My guess right now is that a jumbo 30 year fixed would run about 7% with maybe 1.0 points? Sound fair?

Don said...

The rates are low because it's a credit union (the credit standards are also considerably higher as well).

You can see the rates at
http://octfcu.org/re_purc_fix/30fixpurchase.asp

A no-point jumbo is at 7%. For our budgeting, I assume that we get the lowest rate loan and pay the points in cash up front. I've been tracking the rate since the beginning of the year and we've seen 6%/1.75 as their cheapest jumbo for most of the year (there was one month where it was 6.125/1.125). Then in May, it went to 6.25/1.75, at the beginning of this month it was 6.25/2 and now it's 6.625/1.875 It does sometimes randomly jump around though,

Paris2LA said...

These crazy prices make me sad because I lived in a $300/month rent controlled apartment at Ocean Park and 21st for 6 years from 1988-94 and LOVED this neighborhood. The great thing about the area, aside from the spectacular air and physical location was that affordable housing enabled young creative types to pursue their dreams. Thus, while I lived among young writers and artists who felt corporate employment was optional, that soulless part of Sta Monica north of Wilshire was yuppiefied and filled with attorneys and doctors who worried about their BMers. Sunset Park felt like a bit of a Bohemian paradise back then and I spent years honing my craft, traveling around the world, walking to Santa Monica College where I took many great foreign language classes (better than what was offered at my college and graduate school), having access to four libraries and the beach, and just living as a person whose life centered on ideas and creativity, not money. With these prices, I suspect the population that lives there now is all about money. It feels like a great part of my past has died.

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