Timely Real Estate News……………………………….15 January 2017
State of the Market….Entering 2017’s unchartered waters
As we look forward to the new year, we face prospects that some might say are positive, some might say are negative. Forecasts from a body of economists predict that the US economy will move slightly ahead of 2016’s GDP growth to 2.1%, and that the housing market will continue to fight inventory and rising prices, the Fed will increase rates but by minimal amounts this year, and unemployment will remain low. Job growth will be a challenge in California as UCLA has continually pointed out.
We’ve all seen how the market flirted with the 20,000 Dow mark, and it reached historic highs during the post-election period. And, really, how can anyone predict what the Trump presidency will mean to all of this. Indeed, unchartered waters lie ahead.
Our local real estate market…getting stronger
It’s been 10 years since we entered the “great recession”, and while there are cities in Southern California that have climbed back to their original equity values of that last decade, other areas have not. But we’re making progress, largely due to decreased inventories and what has been an explosive demand for properties in the five communities I report on each month — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood. These five communities continue to demonstrate their true value to buyers from around the world who recognize the across-the-board quality in our neighborhoods, schools, shopping and dining offerings, cultural assets, and our always constant, unbelievable weather. We’re the center for the entertainment world and our growing technology industry as found in burgeoning Silicon Beach points to a dynamic fusion of technology and creative forces. With these attributes, which are only getting stronger and better, I am confident that our real estate markets both residential and commercial are going to continue to improve.
Sales volume exceeds last year….
Of course, two mega sales of $100 million each helped volume, but the reality is that we have had many large estate sales practically every year — perhaps not $100 million but many in the plus-$20 – $50 million multiple times. Sales for 2016 ended at $3.424 billion vs. $3.288 billion, a 4% jump. Beverly Hills was the leader with $926 million in sales for the year, followed by Brentwood, $888 million; Bel-Air/Holmby Hills at $698 million; Beverly Hills Post Office as at $485 million; and Westwood/Century City at $425 million. Pacific Palisades, one of my favorite areas in West Los Angeles, was at $887 million for 2016. The reality is that if we dropped out the two $100 million sales for 2016, we would be pretty much even with 2015.
Median sales prices up and down….
As we have seen every month, some communities are up, some down, and for the year ending December 31, only Westwood/Century City’s median sales prices ended up for last year at $1.885 million, up 11%…. all the other communities were down: Beverly Hills was down 6% at $4.860 million; BHPO was down 2% at $2.537 million; Bel-Air/Holmby Hills was down 10% at $2.120 million; and Brentwood was only down 2% at $2.806 million. These numbers reflect what has been going on in Southern California for the past several months — with inventories down, buyers are not always getting the choices they’d like and decide to wait, which is reflected in the decline median sales prices. One the other side of the coin, with the increase in interest rates, buyers are motivated to make a move as well as some sellers in putting off the sale of their properties. In talking to other agents about the inventory issue, we all feel the same way… the homes that have sat on the market for a long time without selling, are being recycled from one agent to the other, with the listing price not changing much if at all, which doesn’t help anyone.
For example, for most of this past year, all of my communities have been fairly strong on getting their asking or near-asking prices but as inventory slacked and buyers were frustrated, houses sat on the market longer than normal. In fact, at the beginning of last year, there was heavy competition for quality listings and multiple offers were the norm. Now, not so much. When you compare the actual selling price to the original listing price, every community was under 100%, with only Westwood/Century City reached a high of 99%, but Beverly Hills was at 86%, BHPO was at 87%, Bel-Air/Holmby Hills was at 89%, and Brentwood was at 95%. One can easily see that the more expensive areas (BH, Bel-Air/HH, BHPO) were markets that experienced larger discounts from the original listing price because of their higher prices.
Steep drops in median sales prices in year-over-year
Several communities experienced deep drops in median sales prices in comparing December 2016 to December 2015…for example, BHPO was down 34% for last month when matched against December 2015; Bel-Air/Holmby Hills was down 34% as well, and Brentwood was down 47%. Beverly Hills was up 13%, and Pacific Palisades was up 5%. These #s compare with the movement of median sales prices when you compare November 2016 to December 2016 — only Beverly Hills and Bel-Air Holmby Hills showed an increase from November 2016 to December 2016.
Is this the trend for 2017? I don’t believe so. We have had these same dynamics every month period. Also, please do not forget these numbers do not reflect any private sales that might have taken place and are only those as reported through the multiple listing service. As I have said so many times, the only solid comparison should come from the year-end median sales prices that calculate all sales for a 12-month period…not for one month. Our sales volume is healthy, but we need more quality, well priced inventory which will attract more competition and help us attain a more normal market.
Bottom line, the stock market has shown a positive turn in its reaction to the election of President-elect Trump…economists believe there can be a positive impact with reduced taxes and more job creation, and while the Fed is poised to increase the rate at least three more times in 2017, I would embrace the cautioned optimism of the UCLA Anderson Forecast that this year will eventually turn out OK. Have a great 2017, Carole Schiffer!
George Lucas’s Museum of Narrative Art headed for Los Angeles
For months, Los Angeles held its breath to see if would be awarded George Lucas’ Museum of Narrative Art, hoping to beat out our friendly northern competitor San Francisco. And we did!
Lucas’ personal collection of fine and popular art, including ephemera related to his “Star Wars” franchise, will fill a futuristic-looking new museum planned for L.A.’s Exposition Park, which beat out a competing design for Treasure Island in San Francisco Bay. The rivalry had pitted the two cities in the competition not only for Lucas’ collection and the tourism it will bring, but also for the thousands of jobs that backers said the project will create.
Lucas has said he will fund the project to the tune of about $1 billion, including building costs, his art and an endowment of at least $400 million. Ma Yansong’s Exposition Park design for the Lucas Museum of Narrative Art would have parkland at the museum’s feet. (Lucas Museum of Narrative Art)
Lucas, 72, has spent years trying to erect a museum for his art collection, which consists of about 10,000 paintings and illustrations including works by Rockwell, N.C. Wyeth, and R. Crumb, along with Hollywood memorabilia from films such as “Star Wars” and “The Ten Commandments.” In 2009 he set his sights near his home turf in San Francisco but faced community opposition from the city’s Presidio Trust about building in the historic park. Lucas then aimed for Chicago, Hobson’s hometown, but encountered resistance from Friends of the Parks about a downtown site along Lake Michigan.
It might be added that Lucas’ alma mater is USC…”that didn’t hurt in the decision process I’m sure. This is one of the most exciting new events for our City and cultural landscape, even though I am a UCLA alum,” Carole Schiffer stated.
Millennials….what are we going to do with them?
It’s ‘them’ again. For some of us, these are our sons, daughters or grandchildren and we worry about their future. One thing we do know, they tend to prefer to rent rather than purchase a home. The absence of Millennial homebuyers is a big story for the economy, because housing sales and construction are big drivers of jobs. But it’s also an equally big story for the personal finances of Millennials, who are missing out on the real estate wealth that bolstered the balance sheets of previous generations. Millennials are moving increasingly to renting versus purchasing a home, even though over time, it’s far more economical and more beneficial to own rather than rent.
The last 10 years have seen an increase of almost 5 million people in the 20-29 age group, the most likely to want urban rentals. The number of empty-nesters, ages 55-64, has gone up by more than 10 million.
According the National Association of Realtors’ chief economist, Lawrence Yun, Millennials are not moving into home ownership like previous generations. Yun points out that financing today is really quite affordable. “The new FHA mortgage products require only 3.5% down, just $8,750 payment toward a $250,000 mortgage, as well as interest rates near historic lows that reduce the cost of borrowing significantly over time.”
It’s not too late for Millennials to get started in home ownership. “If young homebuyers embrace the idea of a “starter home” the way previous generations have instead of simply lamenting how their dream home is out of reach, they often will have ample opportunity to enter the market, Yun said.
It’s not always about the economics
One of the major factors affecting Millennials decisions on what and where to buy is the availability of choices: Construction started on 386,000 new apartments last year, according to census data, the highest number since 1987. Apartments, defined as housing units in buildings with five or more units, made up 35 percent of all home construction last year, the highest share since 1973.
Forty-seven states saw construction shift from houses toward apartments, as measured by approval of permits, between 2005 and 2014, the most recent complete year of census data. The shift was especially dramatic in western states such as Colorado, where multifamily units made up 38 percent of new construction permits in 2014, up from just 10 percent in 2005
Choosing a lifestyle…..For many Millennials, the attraction of an urban lifestyle is far more vibrant and interactive than living in the suburbs…they love the density of choices bound up in local neighborhoods, and are willing to rent to enjoy that lifestyle. So, in many ways, it’s not a matter of economics. It’s a matter of lifestyle.
Los Angeles had a record year in real estate….
Los Angeles’ set a record year of real estate included more than just two $100-million sales. Last year, L.A. County saw $19.8 billion in sales volume, a 7% increase from November 2015 through November 2016, according to the Multiple Listing Service.
Despite the uptick in sales volume, the average sale price trended downward in certain high-end sectors. For home sales in the $3-million-to-$5-million range, the average price dropped about $5,000 compared with the previous year’s. The average price for home sales of $5 million or more was $8.963 million, down from $9.12 million in 2015. For homes sold in the $1-million-to-$3-million range, the average price increased by $10,500.
Fear not! A list of homebuyers and seller fears….
It’s always nice to have someone prepare a list of do’s and don’ts…now here is a list of what homebuyers and sellers fear most. It might come in handy some day:
A group at Inman Consulting thought they would create the buyers/sellers “Fear List” for you…Here is what buyers fear most: 1) Price — Are you overpaying or should you wait until the price drops or will you miss out completely; 2) Buying a money pit — Just what are we getting ourselves into? Is this going to turn out like that Tom Hanks movie? What if we renovate…what are we going to find? Are we doing the right thing? 3) Neighbors and Neighborhoods — Just who are these people? What if they’re strange or unfriendly? How can we avoid really bad neighbors? 4) Interest rates — Did we lock in our interest rates? Did we get the lowest rate possible? Have we’ve got the best deal possible? 5) The house is not what it seemed — Buyer’s remorse seeps into the brain…did we get the right house? Are we missing something? Do we have enough storage? Can we grow into the house? Should we keep looking?
And here’s what sellers fear most….1) Selling too low — We left money on the table. We should have raised our price. We should have taken the first offer! 2) How will the market respond to my home? — What if nobody shows up for our open house? What if we don’t get offers immediately? What if buyers are low-balling our price? What if buyers really don’t appreciate all the love and attention we have put into this home? 3) What if the buyer can’t move forward? — What if the buyer ‘goes away’ after we have signed contract? What if he loses his financing? What if he loses his job? 4) What will buyer’s inspection find? Did we cover all our bases in fixing the things that needed to be fixed? What if we fail the inspection, will we lose the buyer? 5) Showings but no offers — How many showings does it take to make an offer? Too many low offers. Will we have to lower our price to move the house? What if we can’t afford to do that?
“These are just some of the day-to-day issues that arise with every client,” Carole Schiffer said. “These are normal considerations and feelings one has in going through in either selling or buying a home. We all go through it. That’s why I’m here…to help!”
How were your holidays? Mine were great and a lot of fun! There were the eight of us in Coronado and we had some fun adventures. My family has a tradition of all wearing fun crazy hats on Christmas as we open our gifts, and this year, and this year was no exception. I added to the tradition by sporting an Ugly Christmas Sweater… … it was Santa Claus with blinking lights. I had also purchased a Karaoke machine, and a group of songs with some classics (Beatles, Elvis, Country Classics, you name it). It was amazing to see everyone really let loose and dance including my 94-year Mom!
But back to work and reality…. The tenant has moved out of my great lease listing on Thurston and it is looking good. It is a 4 bedroom, 4.5 bath house with a spa like back yard, asking $12.500 a month. I have a few other listings coming on the market, both for sale & lease and will give you more information as soon as we have them ready. In the meantime, please do not hesitate to let me know how I might assist you with any and all of your real estate needs, and please look for me in the March issue of Angeleno Magazine where I will be among 23 other “Living Legacies”! I am very proud to have selected to be part of this august group of Angelenos! Please make sure to check. . Please do not forget to visit my web site, Caroleschiffer.com, http://www.facebook.com/CaroleSchifferRealtor and Instagram at caroleschifferrealtor.
COUNT ON CAROLE
Negotiating Skills Count
I’ve learned from the toughest in the industry. Someone once wrote, “…real estate is not a team sport”…but I have learned to overcome tough challenges by never having to stop selling or never stop negotiating. Whatever it takes. That’s when my negotiating skills come to play. Yes, negotiating skills count!
Carole Schiffer. The Westside Expert