Timely Real Estate News……………………15 February 2016
Sales kicks off with a bang in January…..prices not so much
If you own a house that is listed for sale on the Westside, most likely someone has come by and made an offer you couldn’t refuse. Sold! That’s what is happening in the five communities I report on each month in the SchifferLine. Sales for the month of January 2016 were over $211 million compared to $186 million a year ago, a 13.4% increase. Last year at this time, sales were down just 4% from 2014…so we’re making progress. Volumes are up.
On the other hand, compared same period a year ago, median sales prices were flopping like fish just plucked from the water – Beverly Hills Post Office was up an impressive 43% for January but Bel-Air was down 22%. Beverly Hills, always the big kid on the block was up 15% for January but Brentwood was down 18%. Compared to a year ago, Westwood/Century was down 3%, but Malibu (which I am covering this issue) was up 25%. You get my point: Median sales prices seemed to show no consistency on the Westside — and they never really do. Some cities go up one month, down the next — as buyers are grazing the hills and canyons of the Westside, moving quickly on homes that are competitively priced. Only Bel-Air showed a dramatic drop on the selling price vs. the original listing price at 77%. The other communities were selling near 97% of original listing price.
Median sales prices continue to be the benchmark
I won’t kid you — the gut meter always reacts quickly to the median sales prices because that’s where trends are made. Of course one month does not a trend make, so January saw the following median sales prices….Beverly Hills was $4.250 million, BHPO was $4.135 million (both ahead of last year)….Bel-Air was $2.300 million, Westwood/Century City was at $1.800 million, and Brentwood came in at $2.208 million. Malibu’s median sales price was reflected in one recorded sale via the MLS — $2.500 million, behind last year.
A point to remember…There are many private sales occurring on the Westside each month that you won’t see here, so please understand that these #s reflect what is publicly available at time of publication for The SchifferLine. All private sales eventually come out of the closet and I report on these each quarter in my Quarterly Update. You can see all of the information on my web site, caroleschiffer.com
California housing is perking up….that’s good news
Lower interest rates and entry level home prices combined to perk up California housing affordability in the fourth quarter of 2015, compared to the previous quarter, the California Association of Realtors reported last week. Affordability, however, was down when compared to the previous year.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in fourth-quarter 2015 ticked up to 30% from the 29% recorded in the third quarter of 2015 but was down from 31% in fourth-quarter 2014, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the 11th consecutive quarter that the index has been below 40% and is near the mid-2008 low level of 29%. California’s housing affordability index hit a peak of 56% in the first quarter of 2012.
CAR’s Index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.
With the expected 20% down payment and an effective composite interest rate of 4.07% the monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,420, The effective composite interest rate in the third-quarter 2015 was 4.16% and 4.20% in the fourth quarter of 2014.
Home prices kept rising….sellers happy during last 3 months of 2015.
According to the National Association of Realtors (NAR), the moderating pace of sales had little impact on the trajectory of home prices during the final three months, which picked up speed and showed continued growth in most of the U.S.
The median existing single-family home price increased in 81% of measured markets, with 145 out of 179 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2014. Thirty-four areas (19%) recorded lower median prices from a year earlier.
There were slightly fewer rising markets in the fourth quarter compared to the third quarter, when price gains were recorded in 87% of metro areas. Thirty metro areas in the fourth quarter (17%) experienced double-digit increases, a jump from the 20 metro areas in the third quarter. Twenty-two metro areas (12%) experienced double-digit increases in the fourth quarter of 2014.
For all of 2015, an average of 89% of measured metro areas saw increasing home prices, up from the averages in 2014 (83%) and 2013 (88%).
Lawrence Yun, our friendly NAR chief economist, says faster price growth reawakened in the final months of 2015 despite the pace of sales slowing from earlier in the year. “Even with slightly cooling demand, the unshakeable trend of inadequate supply in relation to the overall pool of prospective buyers inflicted upward pressure on home prices in several metro areas,” he said. “As a result, homeownership continues to be out of reach for a number of qualified buyers in the top job producing, but costliest, parts of the country – especially on the West Coast and parts of the South.”
The national median existing single-family home price in the fourth quarter was $222,700, up 6.9% from the fourth quarter of 2014 ($208,400). The median price during the third quarter of 2015 increased 5.4% from the third quarter of 2014. Total existing-home sales, including single family and condo, declined 5.4% to a seasonally adjusted annual rate of 5.18 million in the fourth quarter from 5.48 million in the third quarter, but are 2.4% higher than the 5.06 million pace during the fourth quarter of 2014.
Here’s one: Yellen is ‘thinking” about raising rates in March. Don’t count on it.
Thinking is not doing….but Yellen keeps her options open. What to do? The economy is sluggish, oil prices are plunging, and unemployment remains constant, and guess what? Mortgage rates are falling. Wait! That’s not what was supposed to happen — we were expecting rates to climb after the Fed raised their rates in December, but instead, rates have tumbled to their lowest rates in the past 10 months.
Big fear is that oil companies, who plowed investments into new wells and were enjoying cresting oil prices (and profits) just two years ago, are now facing possible bankruptcies — certainly not the big ones, but ‘recession’ talk on Wall Street has picked up. So, we’ll wait for Fed Chairman Yellen to greet us next month with eithera “thumbs up or down” on interest rates. This is a great time for any of you who are looking to buy a home — this is a great time to lock in low interest rates. Call Carole at 310-442-1384….I’ll get you that house you’ve always wanted.
1031 Exchanges is a smart move to make….call me
1031 exchanges are not that well known, but for investors who need to defer capital gain taxes, this is your ticket. Thanks to IRC Section 1031, a properly structured 1031 exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer some capital gain taxes. IRC Section 1031 (a)(1) states: “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”. The expression like for like is the term we all know. It means an income generating property can be exchanged for another like for like, and that term can be applied to a number of different types of property.
To understand the powerful protection a 1031 exchange offers, consider the following example: An investor has a $200,000 capital gain and incurs a tax liability of approximately $70,000 in combined taxes (depreciation recapture, federal and state capital gain taxes) when the property is sold. Only $130,000 remains to reinvest in another property.
Assuming a 25% down payment and a 75% loan-to-value ratio, the seller would only be able to purchase a $520,000 new property. If the same investor chose to exchange, however, he or she would be able to reinvest the entire $200,000 of equity in the purchase of $800,000 in real estate, assuming the same down payment and loan-to-value ratios.
If you need some help in arranging to take advantage of the 1031 Exchange, please contact me. I have done many of these, and I can help you facilitate this quickly and efficiently.
More hot areas to consider…..inexpensive they’re not!
Last issue we told you about the hottest real estate zip codes on the Westside as compiled by the Los Angeles Times. Here are three more ‘hot spots’ for your consideration — but let me warn you: they’re not cheap!
Here are the hottest neighborhoods for 2016: Larchmont This Larchmont Village-adjacent area has a median price of $884,500 and average sales of 100.1% of asking price. The median number of days on the market for a home here is 36. Adams Square. This community in Glendale has a reasonable median price of $620,000. Sellers get, on average, 101.2% of what they’re asking. Listings only last a median 26 days before sale. Mt. Washington. Here’s a bargain $699,000. Median listing time is 18 days. Sellers are getting 103.7% of their asking price.
A quickie….A mixed-use project envisioned as Playa Vista’s downtown has been sold to a Dallas investment firm for a reported $475 million, cementing the master-planned community’s rise as a residential neighborhood and technology hub. The steep price for Runway Playa Vista — a retail, residential and office development that cost about $300 million to develop — shows what can happen when tech giants like Face book, YouTube and Microsoft come to town. Investors are banking on those companies luring highly educated and highly paid workers to the burgeoning community as it nears completion.
So far, about 4,500 homes have been completed in Playa Vista, with most of the remaining units under construction. Local developer estimates that 9,000 people will eventually work at Playa Vista while 11,000 residents will call it home. Please call Carole Schiffer to help you find a property in Playa Vista and its environs 310 442-138.
Back to work news….. My lovely listing at 2260 The Terrace in Mountaingate which we had sold and was to close escrow early in January, unfortunately fell out of escrow at the 11th hour because the buyer was unable to obtain their loan went back on the market and the amount of activity we have had has been a great look into the quality of the local real estate market. In a word… STRONG! In fact, it appears that we may be getting some offers this coming week!