Timely Real Estate News………………………….1 June 2015
The housing market’s strong spring appears to be rolling on. The National Assn. of Realtors said last week that its index of pending home sales climbed for the fourth straight month to its highest level in nearly nine years in April. The measure of houses that are in contract but not yet closed increased 3.4% for the monthand sits 14% higher than the same month last year, its biggest year-over-year gain since September 2012.
“This is great news for the real estate market,” said Carole Schiffer. “We wanted a strong Spring selling season — and we’re getting it! I know that it is frustrating for buyers who cannot find the homes they want or are in negotiations with intense competition, especially for homes that are properly priced and in good locations.”
This comes despite rising prices, driven by tight supply in many parts of the country. Still, foot traffic at open houses is strong as buyers try to take advantage of low interest rates and an improving job market. “Homeowners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale,” said the Realtors group’s chief economist, Lawrence Yun.
The trade group also released a projection estimating that home prices will climb 8% in the second quarter, up from a 6.5% year-over-year gain in the first quarter. They expect the pace of sales to cool slightly, up 6% compared with 6.2% in the first three months of the year.
Home sales slip across the nation…..
The National Association of Realtors (NAR) reported that the nation’s housing market’s stop-and-start recovery slowed again in April as home sales dipped. Sales of previously owned homes fell 3.3% in the month. The median price climbed 8.9% compared with a year ago, the 38th consecutive month of annual gains.
The Realtors group’s chief economist, Lawrence Yun, pegged the sales dip — which came one month after existing home sales hit their highest level in almost two years — on tight supply in many parts of the country. Homes are selling in an average of 39 days, their fastest clip since June 2013, and that’s driving prices up.
This is to be taken in the context that the U.S. housing market is continuing to facing inventory issues — as is it is in Southern California.
However, Southern California home prices and sales climbed in April
For the second straight month, the price and sales gains in April, recently reported by real estate firm San Diego based Core Logic, followed a long cooling-off period after the torrid price gains of two years ago. This spring’s market appears healthier with prices up a moderate 6.2% from April 2014, to a median of $429,000 across the six-county Los Angeles metropolitan area. Sales volume climbed 8.5%. According to the California Assn. of Realtors those sales are outpacing the number of new listings.
What we see in the national news isn’t necessarily what is tracking here in Southern California or more importantly on the Westside,” Carole Schiffer stated. At the market’s current pace in Los Angeles County, for instance, every home on the market should sell in 3 to 6 months down from a three-year high of 5.2 months in February — which was close to what economists consider a balanced market between buyers and sellers.
Shrinking supply could signal higher prices and fewer sales ahead. “We continue to see the influx of foreign buyers.”I don’t see this trend ending soon. Competition will remain keen throughout the summer.”
Another view of the market is voiced by Selma Hepp, the state association’s senior economist, said of the trend of rising sales. Unless this increase in prices encourages more people to come out and list their home, I don’t see how it continues,”
Interest rates may soon rise, said Steven Thomas, who tracks the Southern California market at Reports on Housing. “There’s a bit of a flock to purchase right now,” he said. “It’s like, ‘Everyone can go to Disneyland!’ But the lines are really long”.” So not everybody gets to ride.”
One traditional solution to tight supply has been new construction, but home builders remain cautious. According to Census Bureau data, permits to build single-family homes fell 12% in Los Angeles and Orange counties in the first three months of the year. And while permits are up 7% in Riverside and San Bernardino counties, they remain far below the pace set during the Inland Empire’s home-building heyday a decade ago.
Those sales are outpacing the number of new listings, according to the California Assn. of Realtors. We will have a full report on sales of existing homes in key Westside communities in our June 15 SchifferLine.
Twice as many people prefer new homes over existing ones
An interesting fact: For the same price, two out of five Americans (41%) strongly or somewhat prefer to buy a newly built home over an existing home. The survey was conducted by the National Association of Realtors (NAR). The survey question explained that “new” means newly built, while “existing” means someone else has lived in it. There was no portion of the survey that dealt with extensive remodeling of homes that had been flipped which is a portion of the current Westside Los Angeles Real Estate Market.
Preferring a new home is one thing; being willing to pay for it is another. How much more do new homes cost? Comparing median prices, a new home typically costs $290,000 according to the US Census – that’s nearly 50% more than existing homes, which typically cost $198,500 according to the NAR.
But that’s not an apples-to-apples comparison. Why? The typical new home is bigger than the typical existing home, which explains much of the difference in median prices. Also, the typical new home tends to be in lower-price-per-square-foot neighborhoods than the typical existing home because the priciest metro and expensive neighborhoods tend to have less single-family home construction. To get a better measure of the true new-home premium, they used all for-sale listings, excluding foreclosures, from January to March 2014, and adjusted for property attributes and location. They found that that new homes (those built in 2013 or 2014) are typically priced 20% higher than older homes with similar attributes (e.g., square footage, bedrooms, bathrooms, etc.) and in the same zip code.
However, among people who strongly prefer a new home, only 46% would pay at least 20% more to buy a new home; and only 36% of people who somewhat preferred a new home would pay it. Taking both the preference and willingness to pay into account, just 17% of people say they prefer a new home (either strongly or somewhat) and would pay at least 20% more for a new home.
The younger buyers are most likely to say they’re willing to pay what it takes to buy a new home. Among people age 18-34, 21% preferred a new home and were willing to pay at least a 20% premium for it compared with just 11% of adults aged 65 and older (and 17% of all adults, as mentioned above). But when reality strikes, they aren’t buying new homes quite as often as older adults are. Census data from 2012 reveals that just 5.5% of adults under 35 who bought a home in the previous year purchased a recently built home, lowest of all age groups (see note). Furthermore, higher-income households are much more likely to choose new homes; 9.4% of recent homebuyers with household incomes over $200,000 bought a new home versus 4.8% of buyers with household incomes under $25,000.
So…..Why do people prefer newer homes over older ones?
For people who strongly prefer a new home, the top reasons are (1) to have modern features (e.g. bigger closets, a kitchen island, open floor plan, walls pre-wired for flat screen TVs, or radiant floor heating); (2) to be able to customize the home before construction is completed; and (3) to spend less on maintenance and repairs.
Fans of existing homes have their reasons, too. Among all adults – not just the 21% who prefer an existing home – the most compelling reason to buy an existing home is to pay less. However, among respondents who strongly prefer an existing home, it’s not primarily about saving money. For them, the top reasons to buy an existing home are (1) to have traditional features (e.g., original wood floors, woodwork, ornate details, or the original character of the home) and (2) to live in a more established neighborhood .Fans of existing homes have their reasons, too. Among all adults – not just the 21% who prefer an existing home – the most compelling reason to buy an existing home is to pay less.
Drought, fire season…and if that isn’t enough, another earthquake movie
Sure, we have a sense of humor. Some of us love to see movies about Los Angeles falling into the San Andreas fault (haven’t seen the movie, and won’t but felt the real thing). The point is that we have weathered (pun intended) many natural disasters in our beautiful Los Angeles before. Earthquakes, droughts, and fires have been here long before we were building on hilltops, in canyons, and on earthquake faults.
So, I need not remind you (right?), to please conserve water….please make sure your homes are fire-protected as best you can….and have emergency supplies in your car, your office and in your home. Unfortunately, we don’t have to go the movies to see some of this stuff, do we? Please be cautious and respect and preserve our natural resources. For those of you who live in Bel Air Crest or Mountaingate both of which have well established Emergency Access Programs, I urge you to participate in their programs, exercises (tests). They are most impressive to see. If you want more information about them, please contact me at 310 442-1384.
Mom’s 93rd birthday!!
My Mom, Kelly turned 93 on the 23rd of May, and we celebrated it in grand style. As some of you may know, my sister lives in Vancouver, BC, Canada and has spent the last 18 months taking her house down to the studs and rebuilding it. Now that it is finished, Mom & I traveled up there to see her house and to celebrate. The house is really beautiful and very special! Our flight up there was amazing. One of our fellow passengers found out about Mom’s special day, and that set off an entire series of celebrations, with the entire plane singing to her, and wishing her a Happy Birthday which continued into the airport terminal
My real estate world
Now that we are fully into the Spring selling season, I too am seeing an increase in personal real estate activity. Because of the limited inventory, and an increased number of buyers, it can be a frustrating process. We are also once again experiencing difficulty with appraisals, sometimes dealing with appraisers not having the ability to keep up with sales prices. Because they can only use closed escrows, sometimes they do not have current comparable sale prices to use, which can make it difficult. It does call for patience and understanding on everyone’s part. Please do check out my web site and look at my two lovely listings in Mountaingate, 2260 The Terrace, a lovely 2 plus den priced at $1,315,000, and my wonderful home at 12547 Promontory priced at $2,690,000. Both are very easy to see.
Please do not forget my program whereby I make a donation in your name for every closed sale transaction. I would love for you to be a part of that program. Please get in touch with me, Carole@caroleschiffer.com, caroleschiffer.com, or 310 442-1384.