Timely Real Estate News………………………..1 June 2016
Confusion reigns in housing market…no surprise
Conflicting news about homes sales falling and rising pending home sales demonstrate the confusion reigning within the housing industry. In housing news, April housing starts jumped 6.6 percent from March, above expectations. However, year-over-year housing starts were down 1.7 percent from April 2015. Last month, I reported that CoreLogic, a respected real estate data tracking firm, stated that home sales fell for April in Southern California, but prices rose. No surprise there. And not surprising for this time of year, building permits, always a sign for future construction, increased 3.6 percent, not what was expected, but it still rose to an annual rate of 1.11 million.
According to the California Association of Realtors last week, statewide pending home sales rose in April on an annual basis and had one of the strongest monthly increases this year in the state on an annual average that hasn’t been seen since 2012. Nationally, the National Association of Realtors reported that pending homes sales in the US rose to its highest level since 2006. “Perhaps a trend is emerging in that we are going to soon see a solid increase in homes sold,” Carole Schiffer stated.
Federal Reserve watchers, however, believe the economy is still a question- – for example, manufacturing is still muddling along. This is according to key regional manufacturing reports out of Philadelphia and New York, which were worse than expected. A stronger dollar has been blamed for the manufacturing slump, but the problems may be a bit deeper than just currency. With a marginal increase in the Consumer Price Index, inflation isn’t a factor…yet, but there are worries that inflation could creep into the mainstream and the Fed will respond with rate hikes in their June 14-15 meetings. Of course, mortgage bonds are intimately connected to Fed rates, and any raise in rates could portend some volatility in the market.
“In these times, there is always some confusion when comparing our Regional or State sales results to a national market,” Carole Schiffer stated, “but we have always maintained that what happens in the Westside Los Angeles area remains somewhat detached from national trends. The fact that sales are down and prices are up here,” she stated, “is really a factor of not enough homes and choices on the market. We’re already seeing signs that inventory is slowing increasing.”
“Mom…would you mind if I stayed with you a bit longer?”
Stop me if you have heard that one. According to an analysis of census data by Pew Research, Millennials are either not moving or coming back home to roost and for the first time on record, are living with parents which has become the most common arrangement for people ages 18-34.
Nearly one-third of millennials live with their parents, slightly more than the proportion who live with a spouse or partner. It’s the first time that living at home has outpaced living with a spouse for this age group since such record-keeping began in 1880. The remaining young adults are living alone, with other relatives, in college dorms, as roommates or under other circumstances.
Amplified by the economic upheavals of the Great Recession, the sharp shift reflects a long-running decline in marriage, a trend that has been particularly evident among Americans who lack a college degree.
The pattern may be a contributing factor to the sluggish growth of the U.S. economy, which depends heavily on consumer spending. With more young people living with their parents rather than on their own, fewer people need to buy appliances, furniture or cable subscriptions. The recovery from the 2008-09 recession has also been hobbled by historically low levels of home construction and home ownership.
“When you think about it,” Carole Schiffer said, “it can be nice to still have your old room and not have a mortgage or rent payment to make each month.” This factor is certainly affecting the housing market as millennials are the most prolific market segment in home sales.
One mystery that has confounded analysts since housing began to recover in 2012 is why there aren’t more homes for sale. The lack of available houses has driven up prices and made it less affordable for many would-be purchasers to buy homes. Another mystery is that when the economy started to improve, economists predicted millennials would move out and buy a home….that didn’t happen. In speaking with my niece (26) and nephew (24) this past weekend, both of whom do not live at home, most of their friends do still live at home. My nephew Connor who is currently living in Montreal while he finishes college, is very clear in that since he has lived on his own for the last four years, he clearly has no intention should be return home to Vancouver rather than staying in Montreal! Morgan who lives in Vancouver with her boyfriend has lived outside of her parents’ house for three years.
Housing is never far away from politics….
With fast-rising home prices a ‘fact of life’ in California, combined with a lack of housing to meet even minimal demand levels, the high cost of housing has emerged as a growing political issue in Sacramento. Critics have cited the high housing costs are a reason for moving operations outside the state. The owner of Jamba Juice, for example, announced last month it would move its corporate headquarters from Emeryville in the Bay Area to outside Dallas, in part because of Texas’ “attractive cost of living.”
Academics and economists have blamed an underproduction of housing in the state, relative to population growth, as a major culprit in widening the gap between California home prices and the rest of the nation. For example, home prices in coastal California are more than three times more expensive than the rest of the country, compared with only about 50% more pricey in the 1970s, according to a report last year from the state’s independent Legislative Analyst’s Office.
In a bid to ease the state’s housing crunch, Governor Jerry Brown proposed to streamline the permitting process for developers who include below-market units in their projects. Though fewer Californians were willing to commit to a home purchase in April, steady job growth and historically low mortgage rates mean there is still enough demand to send values higher.
The median price rose in all six counties tracked by CoreLogic: Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego. In L.A. County, it climbed 7.3% from a year earlier to $520,000, while in Orange County it jumped 7.5% to $645,000.
Credit scores can range all over the map…. So you think your …..Wait a minute. If you dig deeper, you’ll probably discoveryou have more than one FICO score — they are not “absolute” according to experts. Based on their programming, some FICO scores used by lenders will vary. Like most computer users, the most up-to-date version of a credit score reporting system may not be used by one vendor, but used by others. One will generate a different outcome than the competitor’s.
Who’s right? You generally can’t predict which scores a lender will use. Not only are there different name brands, but FICO offers versions customized for certain types of lending. The scores typically used by credit card issuers are different from the ones used by auto lenders, for example. These industry-specific FICO scores are on a 250-to-900 scale, rather than the 300-to-850 scale used by other FICO scores.
Mortgage lenders, in particular, use relatively old versions of FICO. That’s because the agencies that buy most home loans — Fannie Mae and Freddie Mac — haven’t updated their requirements so that lenders can use newer versions. Some credit card companies offer their customers free FICO scores, typically from one bureau.
Home ownership…how does $1 million sound?
You don’t have to be a millionaire to live in a million-dollar home. Home buyers are finding out that homes now valued at $1 million or more have grown by double digits in some neighborhoods. “And on the Westside,” Carole Schiffer stated, “we’ve surpassed that threshold already in most neighborhoods.”
It’s called the “Million Dollar Creep”, a trend that is taking place in pockets of growing affluence all over the United States, and especially in California. Homes in such places at Atwater, Eagle Rock, and near the Coliseum are seeing these $1 million break-throughs happening in neighborhood after neighborhood.
For example, of the 100 largest metropolitan areas in the U.S., home prices in the extended commuting range of Silicon Valley, buoyed by lofty tech industry salaries, have inflated the most. San Francisco, San Jose and Oakland, respectively, had the largest increases by percentage of $1 million-and-up homes. In San Francisco, where the number of seven-figure homes was already the highest in the country at 20 percent in 2012, the number today is a staggering 57 percent.
“Homes that were selling in the mid-$600,000s two years ago near Silicon Beach, are now pushing $1 million or more,” according Carole. “Lack of inventory, of course, has a lot to do with this, and clients are scrambling 24/7 to search for neighborhoods they can afford. It’s not getting any easier.”
What a surprise she had! We scheduled the arrivals of my family from Canada over three days, so that every time Mom turned around, someone else was showing up. It was great fun, and a lot of happy tears were shed. I had a great time visiting with the kids who I had not seen since Christmas. They are totally grown up and are not kids anymore.
As a reminder I am here to celebrate all of your real estate needs.
Just a reminder we are having a special day at the Brentwood California Pizza Kitchen. (See link) Any food eaten in the store, ordered on line or take out will effect a 20% donation through the Coldwell Banker Community Foundation to the Children’s Hospital of Los Angeles. Just bring in the flyer and yourself.