Friday, August 29, 2014

Prominent L.A. developer to build unconventional office at Playa Vista

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Smart companies want innovative space so conventional office is going to have a hard time to compete. These new office spaces will be a magnet for creative firms. Modern buildings with contemporary design is in along with modern everyday conveniences like pet friendly work spaces, cafe, local gym with lots of fitness options for good quality of life. Maguire III a prominent developer is banking on the "fun" factor and it's working.

Prominent L.A. developer to build unconventional office at Playa Vista


The WE3 office planned for Playa Vista will feature vivid colors, concrete floors, operable windows and 14-foot ceilings. (Zoltan E. Pali)

By Roger Vincent - August 28, 2014 ; 5a.m.

Robert F. Maguire III, a prominent developer who helped shape L.A.'s skyline in the 1980s and '90s, is back.

Maguire led development of several of the city's best-known office buildings including U.S. Bank Tower, the tallest structure in Southern California. Now, at 79, Maguire says he is gearing up to develop again.

He plans to build an unconventional office at Playa Vista, the expansive former headquarters site of aviation titan Howard Hughes that has become a magnet for so-called creative firms such as YouTube.

The monolithic granite and glass towers Maguire built for corporate titans of the late 20th century are not attractive to technology, entertainment and digital media firms now leading the region's economic recovery, he says.

"Smart companies want innovative space," he said. "Conventional office space is going to have a hard time competing."

The Playa Vista office market is roaring, in part because the tech-centric Westside, sometimes known as Silicon Beach, is running out of space.

"Santa Monica is full," Maguire said. "The obvious replacement for major tenants is Playa Vista."

His plan is to build an office called WE3, which would be the third building at an office campus called Water's Edge at the intersection of Lincoln and Jefferson boulevards. Maguire has held part interest in Water's Edge since he built it in 2002.
The complex, about a mile from the Pacific Ocean, was intended from the start to be a campus for creative technology types, but the timing was off. The roaring tech boom of the late 1990s was over by the time Water's Edge hit the market and it sat empty until video-game giant Electronic Arts Inc. moved there in 2004.

EA ran into financial challenges and labored to sublease much of its space, but Water's Edge is now at more than 90% occupancy, Maguire said. He plans to sell the complex to an investor willing to become a partner in the development of WE3.

"We are interested in joint venture so we can start the building on spec," he said, meaning that work on the $67-million building would begin before any agreements with tenants have been reached.

The design, by architect Zoltan Pali of Studio Pali Fekete Architects, calls for a vivid blue and red four-story building.

"There is color everywhere, inside and out," Maguire said. "It's in total contrast to conventional office space."

WE3 would have polished concrete floors, operable windows and 14-foot ceilings — about 60% higher than is typical.

Water's Edge already has an LA Fitness gym, a screening room, a cafe, a soccer field, a basketball court, a sand volleyball court and an Olympic-length lap pool.

"This really reflects the way people want to work and what progressive companies like to buy into in terms of space," Maguire said. "It's changed."
Demand has indeed been strong in Playa Vista lately. A former U.S. Postal Service hub on Jefferson Boulevard now called the Reserve leased 380,000 square feet in less than two years to such tenants as Microsoft, entertainment media company TMZ and content delivery network EdgeCast.

Landlords asked for nearly $3.25 a square foot per month in Playa Vista last quarter, according to brokerage Cushman & Wakefield. In downtown Los Angeles landlords asked for less — about $3.04 a foot.

One of Maguire's former partners, Ned Fox, says he didn't see the shift toward unconventional office buildings coming during the construction heyday that lifted the city's skyline.

"Back when we were building high-rises downtown in the late '80s early '90s we were performing research on how tenants were utilizing space," Fox said. "There was a lot of talk about the Information Age, but none of us knew what that really meant. We didn't appreciate that the way people work was going to radically change."

Technological advances eliminated the need for file cabinets, libraries and even offices and assigned desks. Many organizations became less hierarchical, Fox said, and now desire offices that enable managers and staff to quickly cluster in groups as they work on various projects.

"It's getting to the point where companies have learned how to make open space highly collaborative," Fox said, "where you can bring a lot of talent together."

Fox's firm Vantage Property Investors has converted an old Citibank research-and-development plant in Playa Vista into offices for creative firms. Dogs are permitted and tenants take breaks to play with the foosball and pingpong tables.

People don't need a lot of office space, he said, but "they do need breakout and relief space."
Maguire, who was known for his demanding personality in the past, will probably make WE3 work, Fox said.

"His tenacity and creativity may drive a lot of people nuts," Fox said of Maguire, "but he always ends up with something that is different and typically very good."

Maguire said he intends to build more beyond WE3, following the example of his grandfather, who practiced law until the age of 93, and his father, who flew planes until he was 80.

"We are coming up with something that is totally different than we are used to building, which is fun," Maguire said. "When I stop having fun, I won't do it anymore."



Friday, August 22, 2014

Beware the shortcomings of data on home prices and mortgage rates

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Statistics are just that as may have little meaning when related to what's actually happening in a particular neighborhood. There is always a lag between contract and closing which creates an unavoidable minimum two month delay with reporting data. In a nutshell, just take the stats as a grain of salt.

Beware the shortcomings of data on home prices and mortgage rates

- August 21, 2014 9:08am

It has been said that figures lie and liars figure. But even when the numbers are truthful, they often are nearly meaningless.

Take average home prices. They are widely reported by regional and local media, even though they are generally national in nature. Although it's nice to know that housing values throughout the country are up or down — or holding steady — the figures often have little meaning when it comes to what's happening on your block or in your neighborhood.

David Rathgeber, a northern Virginia real estate broker, says home price data are "recreational" rather than actionable. He also rightly points out that the figures quoted are usually old news, as much as four months after the fact, even though they are often mistakenly reported as this month's or last month's numbers.

Why such a delay? A two-month delay is "unavoidable," he says, "due to data collection limitation — the lag between contract and closing — and another month or two for data assembly, review, comment and publication."

Rathgeber also points out that "taking action" based on information that is two to four months old "can be a disaster."

Prices rise or fall in two ways — appreciation or depreciation — and according to the mix of sold houses.

If the trend has resulted from rising prices, sellers might want to hold firm on their asking price, even if the house is currently overpriced. It may be getting only a few showings, or perhaps none at all. But if prices are, indeed, rising, the seller can hold on until values catch up.

And if prices are falling, sellers will have to cut their inflated asking price by a rate greater than that of the overall market decline if they want to attract a buyer.

Buyers, on the other hand, may be willing to pay something above the asking price when home values are rising because they have a reasonable expectation that, in a few months, they will recoup their "loss." If prices are falling, buyers will have no sense of urgency because they expect greater value for their money in the future.

But beware: The average home price can change even when individual values do not.

That's because of the distribution of the properties covered in the price report. If more lower-cost houses than usual are sold in one particular month, the average price will skew lower. Similarly, if more than the usual number of expensive places change hands, the average will swerve higher.

And one more thing: The true average rarely changes more than 1% from one month to the next. So view reports that show values rising or falling more than that with skepticism. In Rathgeber's words, they are "patently meaningless."

Again, what's happening on a national scale usually has little significance to values in your neck of the woods. But even more important to note is that even though averages can be built for any ZIP Code and any month, the sample size is generally not large enough over a short-enough time to have any significance.

Generally, to calculate a meaningful average price for a particular area would require years of data, much of which would be so old that it would no longer be relevant. The actionable information today's buyers and sellers need must be fresh: what went down last week and last month, not years ago.

Although we are debunking myths about prices, let's take a deeper dive into two popular reports covering mortgage rates: one from Freddie Mac, the other from HSH Associates.

Freddie Mac, the huge secondary mortgage market company, publishes a widely quoted monthly report on the average rates for 30-year and 15-year loans. Its survey is an average of the offerings to "prime" borrowers from 125 primary lenders nationwide, large and small, for purchase loans with 20% down.

Even that much information is often more than gets picked up by news organizations. But how many people these days make that large a down payment? And who is a prime borrower? Freddie Mac doesn't have a definition, but reports that it is "not necessarily" someone who has never missed a payment and is always on time.

HSH, the New Jersey mortgage information firm, says its weekly average results from a survey of 600 "active" lenders who are in the market and able to make loans directly to consumers. Here, the survey asks lenders about their pricing for 80% loan-to-value mortgages to someone with a 740 FICO score or better.

This is the "stuff of normal humans," according to the company's Keith Gumbinger. But again, do you fit that bill? If not, you can expect to pay more than what's reported in the media. At the same time, because Freddie Mac's and HSH's numbers are averages, you might be able to find lower rates.

This is not to damn either Freddie's or HSH's surveys — or any of the pricing surveys, for that matter. Rather, the point is this: Take all that's reported with the proverbial grain of salt. Do your own sleuthing and you just might do better.


Thursday, August 14, 2014

Mortgage rates at low for year; 30-year averages 4.12%

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Mortgage rates at lowest level in 2014. Fixed mortgage rates have continued to fall.

Mortgage rates at low for year; 30-year averages 4.12%


A home for sale in Huntington Beach. (Bryan Chan, Los Angeles Times)

The cost of getting a home loan has slipped back to the lowest level of the year, with Freddie Mac pegging the average rate for a 30-year fixed mortgage early this week at 4.12% compared to last week's 4.14%.

The average rate for a 15-year fixed-rate mortgage was 3.24% compared to 3.27% a week ago, according to Freddie Mac's weekly survey of what lenders are offering to low-risk borrowers.

Freddie Mac's report, released Thursday morning, showed the start rates for adjustable mortgages edging slightly higher.

Freddie Mac, the big government-sponsored buyer and guarantor of home loans, surveys lenders across the country each Monday through Wednesday morning, asking them about the terms they are offering on loans to solid borrowers with 20% down payments.

The borrowers in this week's survey would have paid 0.6% of the loan amount in upfront lender fees and discount points to obtain their loans. Paying higher points can lower the interest rate.

Fixed mortgage rates, which started the year at 4.5% with expectations they would rise, have surprised economists by falling instead.

This week's 4.12% for a 30-year loan equals the low recorded for a week in May and then for a week in July, Freddie Mac said.
Borrowers with unblemished credit often pay less than the rate Freddie publishes.

For the past month, these borrowers who pay 1% of the loan amount in upfront points have been getting 30-year fixed loans at 3.875% and 15-year fixed mortgages at 3.125%, said Jeff Lazerson at the Mortgage Grader brokerage in Laguna Niguel.


Wednesday, August 6, 2014

Mortgage lenders may be easing credit score requirements slightly

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Homeownership is now at 64.8%, the lowest level since 1995. This in part due to average credit scores required of borrowers being far above historical norms which is a major hurdle for many first-time, minority and moderate-income buyers. FICO scores averaged a high 755 in June. Higher scores indicate a lower risk of default. The scores play a powerful factor in qualifying to obtain a home loan thus one of the major obstacles for new homebuyers even if they may be creditworthy and should be eligible to buy a home.

Mortgage lenders may be easing credit score requirements slightly

Are mortgage lenders finally loosening up a little on their credit score requirements — opening the door to larger numbers of home buyers this summer and fall?

It depends on what type of loan you're seeking. If it's a Federal Housing Administration-insured mortgage, the answer is a resounding yes. The average FICO credit scores for approved applicants for FHA home purchase loans have been dropping steadily this year, according to new data from Ellie Mae, a Pleasanton, Calif., company whose mortgage origination software is used by most large lenders.
But if you're shopping for financing in the much broader conventional market — where most mortgages are bought or guaranteed by giant investors Fannie Mae and Freddie Mac — scores have not budged for months. FICO scores averaged 755 in June, the same as in January, 4 points below their average for all of 2013. FICO scores run from 300 to 850; higher scores indicate lower risk of default.

Though credit scores represent just one factor that lenders use in determining whether to grant an applicant a mortgage, today's average scores required of borrowers are far above historical norms and represent a high hurdle for many would-be purchasers — especially first-time, minority and moderate-income buyers.
Phil Bracken, a mortgage industry veteran and founder and chairman of America's Homeowner Alliance, a nonprofit group that promotes affordable housing, calls current score levels "serious" contributors to a national problem: Homeownership is now at 64.8%, its lowest level since 1995, in part because so many consumers can't get past lenders' severe underwriting tests. The ownership rate for Americans under 35 is 36.2%, the lowest on record.

"There are lots of people out there who are creditworthy and should be eligible" to buy a home, Bracken says. Scores are not the only obstacle in their way, but they play a powerful role.

Leaders of both of the country's major credit score model developers — FICO and VantageScore Solutions — have confirmed to me that banks could reduce their scoring requirements from today's highs and not materially increase their risk of delinquencies and defaults. In the process, they would increase the volume of mortgages they make, spur more home sales and stimulate employment.

So what's holding them back? Interviews with top officials at lending institutions suggest something that may not be widely understood by consumers: Fear and finger-pointing are gumming up the system.

Lenders fear that big investors such as Fannie Mae and Freddie Mac will force them to buy back loans they make that have below-par scores or underwriting. Both companies have required lenders to repurchase billions of dollars worth of defective mortgages. In the process, they've made banks and mortgage companies hyper-obsessive about delivering pristine loans, even though that means rejecting borrowers they would have funded in the years before the housing boom and bust.
Anthony Hsieh, founder and chief executive of LoanDepot, a Foothill Ranch mortgage company that specializes in conventional loans, says his firm cannot afford the risks of deviating from the Fannie and Freddie guidelines — or even tiptoeing close to the line.

"We have no control over credit scores," he said. "Until [Fannie and Freddie] put out a directive telling us to provide credit to more Americans, our hands are tied."

Spokesmen for Fannie and Freddie say they have tried to ease lenders' fears about overzealous buyback demands and do not require scores to average 755 or anywhere even close. Both companies assess higher fees on loans they buy with credit scores below various thresholds — 740 FICOs and above get the lowest fees — but insist that they do not dictate scores. They also point out that many lenders set their own score thresholds higher than Fannie's or Freddie's, levying "overlays" that increase costs to consumers.

Despite all this, however, there may be glints of hope on the horizon at Fannie and Freddie on credit scores and other fees. Under its new director, Mel Watt, the Federal Housing Finance Agency, which oversees Fannie and Freddie, has reached out to lenders and asked for their advice on where to set some of the fees the two investors charge, including those connected with credit scores.

Though no one can predict whether this will help curtail the finger-pointing and fears that are keeping acceptable scores unnecessarily high, there's a real possibility. And that could be a big deal for buyers in the months ahead.


Friday, August 1, 2014

Million-dollar home sales hit seven-year high in California

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Million-dollar-plus home sales grew at 9.1% statewide compared with last year. Demand for high-end homes is still growing as total overall sales sales fell 7.4%.  Affluent parts of the Bay Area and Southern California especially the coastal areas continues to draw a demand pushing up prices in those areas. Hot technology jobs in these areas also mints additional new millionaires who can afford expensive homes. This market behaves differently as it responds to its own set of criteria as these buyers are less likely to agonize over credit scores, income, job security, mortgage rates and down payments. Looks like the market is still sizzling as price increases grew at 11.6% over the past year.

Million-dollar home sales hit seven-year high in California

Sales of million-dollar-plus homes hit their highest level in seven years in the second quarter. 

Sales of million-dollar-plus homes hit their highest level in seven years in the second quarter. (Tim Rue / Bloomberg)

That’s according to new figures from San Diego-based DataQuick, which tracks local housing markets in the state. They found million-dollar-plus sales grew at a 9.1% clip statewide compared with last year, while sales overall fell 7.4%.

Several factors are driving the high-end liftoff, market-watchers say.

One is the hot technology sector in the Bay Area and some affluent parts of Southern California, which is minting new millionaires who can afford seven-figure homes. Another is the 11.6% price growth in California over the last year, which means a house worth $925,000 last summer may be worth $1,032,300 today. And there’s the influx of international buyers, which is pushing up prices at the high end.

Then there’s that old saw that the rich are just different than you and me, especially in a time when credit is tight and the job market remains soft for many middle-income home buyers.

“It’s always fascinating to watch this part of the real estate market. It behaves differently, responds to its own set of criteria,” said DataQuick analyst Andrew LePage. “These buyers, especially those in the multi-million-dollar market, are less likely to agonize over credit scores, income and job security, down payments and mortgage interest rates.”

Of course, in the most desirable parts of coastal California, a million-dollar home is rather routine. Half of all homes sold in San Francisco County in June exceeded $1 million, according to DataQuick, and parts of Los Angeles and Orange counties regularly cross into seven figures.

The market for even higher-priced homes is even hotter. While there were more million-dollar homes being sold here in the mid-2000s than today, California in the second quarter set all-time records for the number of homes sold for more than $2 million, more than $3 million, more than $4 million and more than $5 million.