Timely Real Estate News………………………….15 July 2015
Prices surge upward…volume not so much
It never fails…the law of supply and demand works in real estate as it does in every other economic sector, but this time, sellers on the Westside witnessed a dramatic uptick in home prices that we haven’t seen in a long, long time. Over the past two months in the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City, and Brentwood, we saw large increases in median sales prices in four of these communities For example, Beverly Hills was up 150% in median sales prices for June 2015 over the previous July 2014 period to $7.020 million. Beverly Hills Post Office was up 173% for the same period….Bel-Air was up 69%…and Brentwood was up 54%. Only Westwood/Century City was practically even for 2015 compared to same period in 2014.
But wait, there’s more. In comparing the median sales prices of June 2015 to May 2015 there are some significant differences, just one month ago,. Beverly Hills was up 91%, Beverly Hills Post Office was up 79%, Bel-Air was up 50%, Westwood/Century City was up 18%, and Brentwood was up 54% for comparing June 2015 to May 2015.
“Quite frankly we haven’t seen these median sale prices jump across the board this much in years,,” stated Carole Schiffer. “What we are seeing, of course, is that demand is outpacing inventory, and while it’s great to see prices getting back to their previous highs of 2007, we still need to see more inventory.” As usual there were a number of big sales which contributed to the increase in sales prices which included 17 over $3,000,000 in Beverly Hills vs. 5 last year, 10 in Beverly Hills Post Office vs. 2 last year, 8 in Bel Air vs. 4 last year, 9 in Brentwood vs. 9 last year, and 2 in Westwood/Century City vs. 1 last year. Also, please remember these numbers only reflect those sales that are published in the Multiple Listing Service.
Because of the low inventory we are experiencing, the Los Angeles Company of Coldwell Banker which extends from Santa Barbara to the Orange County border initiated a listing contest. As a result, Carole noted that we reported a 16.21% increase in new listings in May and June 2015. Companywide, the contest generated a total of 1.491 new listings which was an increase of 208 from last year! That’s great news!
Sales volume, however, is challenged again
After experiencing a drop of nearly 10% in May 2015 (compared to a year ago) for total sales activity in these five communities, we had a 17% decline in sales volume through June 2015 — with total sales of $1.327 billion vs. $1.602 billion through June 2014. As a result you can see why prices are moving upward rapidly in a market where the demand is simply outstripping inventory. It is great to see that our company — Coldwell Banker — is aggressive in bringing sellers to the market who have been sitting on the fence. And why not? Buyers are active and taking advantage of continued low interest rates…the Fed is considering (perhaps) a rate increase later in the year….so buyers are locking up low interest loan rates while they can. And with the economy beginning to perk up…and Greece hopefully making their deal, we are entering a more traditional, normal market.
Silicon Beach is going to positively impact Westside sales
We have been touting the benefits of the booming Silicon Beach area which is composed of cities stretching from Santa Monica to Marina del Rey, Venice, Playa del Rey and Culver City. Sales are booming in these areas — volumes are back to the pre-2007 era in Venice, and much of these areas, including the former ghetto in Venice are being gentrified — meaning some of the run down properties that once were part of the culture of the free-spirit of this famous art community are fast changing to neighborhoods of upwardly mobile techies and entrepreneurs (mostly Millennials) who have no hesitation in moving into once-shoddy neighborhoods.
You can’t argue with Silicon Beach’s success so far — high-tech giants from Silicon Valley are planting their flags in what is now called “Silicon Beach — Starting with DirecTV (El Segundo) in the early 1990s, and Beats Electronics (Culver City)
recently acquired by Apple, you will find that Google, Yahoo!, Microsoft and Apple have all established ‘beachheads in the area. Snap chat, which has more than 100 million active users and recently turned down a $3 billion offer from Google, remains dedicated to Silicon Beach, and Santa Monica, a city of eight-square miles, has 1,827 tech businesses. It has another 572 businesses in arts and entertainment, a sector that often feeds into tech. Its largest business employer is video game giant Activision Blizzard.
In other words, Silicon Beach’s location in the middle of the world’s great entertainment center — Los Angeles — explains why the recent expansions clearly demonstrate the reason it is expanding. Young techies, entrepreneurs, and executives are making a big impact on the area’s real estate housing sector. This is all good news.
Crowd funding is now “in” — real estate is thriving in this arena
It was bound to happen: Real estate crowd funding is now one of the fastest growing segments within the alternative lending sector, sometimes called “ marketplace lending” or peer-to-peer lending, which is characterized by transactions occurring online.
One of the major benefits of online real estate investing is that it provides the opportunity to invest in a lucrative asset class and helps diversify an investment portfolio through short-term debt, or long-term equity. The investment yields often provide higher rates of return than other types of investments, especially bonds and certificates of deposit, while being based on a hard, tangible asset. Some investors also enjoy the ability to decide where their money is being allocated, picking their own investments, as opposed to a REIT where an investor has no choice over the investment decisions of the managers, and might feel left in the dark due to a lack of involvement. Overall, the advantages of portfolio diversification, high returns, and transparency have all helped increase the popularity of real estate crowd funding.
Crowd funding in real estate also provides numerous perks for developers looking for consistent and reliable access to capital, in order to fund their projects. In the past, developers had to rely heavily on traditional sources of lending, such as their local banks or hard money lenders. Today’s alternative lending methods offer developers the ability to tap into a large pool of capital stemming from thousands of investors who make up “the crowd.” Ultimately, real estate crowd funding creates a new avenue for professional developers looking for fast and consistent capital to help fund their projects and expand their business.
Where is this happening? Los Angeles is one of the five major cities in the US who are successfully launching real estate crowd funding programs. (The other cities are Jersey City, New Jersey; Boston; Chicago; and Sacramento) There are many luxury and high-end real estate flip opportunities attractive to investors and real estate developers in Los Angeles.
Silicon Beach is attracting entrepreneurs and venture capitalists who are already ‘hip’ to crowd funding — a fund-raising technique popular with high-tech startups. This infusion of high-tech savvy executives is contributing to Los Angeles’ rapid growth and high-end home sales, with the number of Southern California homes bought for $2 million or more being the highest on record in recent months. According to leading real state trackers, Los Angeles proves there are crowd funding real estate opportunities in neighborhoods with all type of income levels.
In sum, real estate crowd funding platforms are making it easier for investors to participate in real estate investment opportunities – online — anywhere in the country, allowing them to earn a lucrative return and diversify their portfolios. In turn, they are able to provide a consistent and reliable source of capital for professional developers looking to scale and grow their businesses. Perhaps the biggest winners are the residents who live within the growing communities that real estate crowd funding is impacting the most. Not only are the conditions of their neighborhoods improving, but they are also benefiting from a stimulated local economy. In the end, real estate crowd funding will continue to thrive in cities throughout the nation because of the positive impact it has for everyone involved.
Home buying myths exist….old advice isn’t always ‘right’
There have been real estate lessons learned from decades of experience that guide many buyers and sellers in how they make home- buying and -selling decisions. For example, “location, location, location” happens to be one that I have always endorsed…and is perhaps the most famous one of all. But there are other perceptions/myths that sound good, but after some thorough research by a national firm, turns out these old refrains are just plain, “old” and don’t work anymore. For example…
Always buy the worst home in the neighborhood.
The common thinking was that you would buy the worst house and, over time, it would become a more typical home in the neighborhood. If it was in the bottom 10 percent when you bought it, somehow, 10 years later it would be closer to the average. If you want to be in the neighborhood and you can’t afford to buy a median priced house, buying the least expensive home is not a bad idea. Just don’t expect it to become something other than the least expensive home. Generally, my advice is to buy the best home you can afford, but not the house that’s the worst in the neighborhood.
Pricing your home to maximize your net profit
Don’t over-price your home. You’ll end up with being stuck on the market because buyers are smarter today with all the tools they need to figure out if the price you have is realistic or not. If you overprice your home, often you end up having to chase the price down, because the longer it stays on the market, the more people think there’s something wrong with it. Homes that were priced pretty correctly sold for about 2 percent more than you would expect.
Stay away from busy commerce areas
This is another myth — don’t buy near businesses or convenience shopping areas. Research has used the Starbucks Method — purchasing home near a walk able Starbucks is probably a smart idea because research has shown that having services like a Starbucks nearby is attractive and actually drives up prices. Why did Starbucks pick that spot in the first place? Because it has customers who live in the neighborhood, and they are only interested in solid, upscale areas that have stability.
There are a lot of other home-buying, home-selling myths we’ll discuss in future SchifferLines. My point is that you really need to have an experienced real estate agent who knows your neighborhood to filter out all of the mis-conceptions of what is going on in the marketplace.
Core Logic reports US home prices moved upward….
Research firm Core Logic reported that home prices ticked up in May 2015 with gains being fairly widely distributed across the country. Home prices were up 6.3 percent from May 2014 through May 2015, the biggest annual gain since July 2014. The continued rise in prices has spurred an increase in construction of new single-family homes. Sales of newly built homes during the first five months of 2015 were up 23 percent from a year ago.
Also of note, the minutes from the June meeting of the Federal Open Market Committee were released and they confirmed that the Fed wants more economic data before determining when they will raise their benchmark Fed Funds Rate. As we head into the second half of this year this remains an important story to watch.
Millennials want to buy…however, this is the hard part
It’s not that Millennials don’t want to own home — nine in ten want to buy one—it’s that they can’t afford them. Harvard’sJoint Center for Housing Studies found that the homeownership rate among adults younger than 35 fell by 12 percent between 2006 and 2011, and 2 million more were living with Mom and Dad.
It’s going to be a while before young people start purchasing homes again. The economic downturn set this generation’s finances back years, and reforms like the Dodd-Frank Act have made it even more difficult for the newly employed to get credit. Now that unemployment is decreasing, working Millennials are still renting before they buy.
How was your 4th of July holiday?
Mine was spectacular! As some of you may know, I own a home in Coronado which is an island just south of San Diego proper. You reach it by a beautiful, and much photographed bridge. I took a very much needed week off to “just chill” and enjoy the beach, pool and “vegging”. From a friend’s apartment we had an amazing view of the fireworks from the Bay, Chula Vista, San Diego Proper and La Jolla. We honestly did not know what to look at first! It was also fun to visit some of my favorite haunts while I was there, and now it is back to work… Sigh!
Please be sure to check out my face book page, www.facebook.com/CaroleSchifferRealtor, and do not forget my very popular program of making a donation in my client’s name at the end of every closed escrow. I would love to have you join the list. For any of your real estate needs, please contact me at 310 442-1384 or Carole@caroleschiffer.com