Timely Real Estate News……………….15 November 2015
The “state” of real estate is a mixed bag, but mostly good….
We’ve learned in recent years, news comes to us as a mixed bag of good and bad, and sometimes, like in October, it was mostly good but nothing to write home about unless you were the seller of the $32 million property in Beverly Hills Post Office. That’s a nice round number…but what is also good to know is we are keeping ahead of the pace in terms of sales volume in the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City and Brentwood. Sales through the end of the last reporting month of October 2015 were $2.723 billion vs. $2.647 billion in October 2014, a 2.8% increase.
In a somewhat static market, we are seeing sales in Beverly Hills leading the way in activity with $120 million net gain through the first 10 months of this year — for a total of $840 million vs. $718 million for the a comparative period in 2014. Large transactions drove the increases in Beverly Hills during the summer months, but sales activity has leveled off most everywhere else. So the gains we are seeing in sales activity have been largely concentrated in Beverly Hills and BHPO.
Median sale prices continue solid across the board….
Of course, the bellwether for measuring how we’re doing has always been the median sale prices within any given area. Because of the vagaries of transaction size averages, there tends to be impressive (off the charts impressive) in such cities as Beverly Hills and Bel-Air. For example, in September 2015, the median sales price was $9.150 million, more than $4 million over its year-to-date median sales price of $5 million through October 2015. Still, Beverly Hills was 16% ahead of its median sales prices for the year, while Beverly Hills Post Office was 1% ahead, Bel-Air was 8% ahead and Brentwood was 1% positive through October 31, 2015. Only Westwood/Century City was down 2% for its median sale prices, but ironically, its sales price to the original listing price was 109%, one of the largest increases in this category for the year. Most SP/OLP’s tend to hover in the mid-90s, so we can see there is strong demand for properties in this cities.
In looking at comparing October 2015 and October 2014, Beverly Hills Post Office gained 20% over a year ago in median sales price….Beverly Hills gained 2%….Bel-Air was down 9%….Westwood/Century City was up 9%…and Brentwood was up 1% from a year ago. So, depending on where you live, you can see median sales prices remain somewhat consistent as you have seen above in “year-to-date” numbers. It’s rare when you get such a huge increase as we had in Beverly Hills in September.
In the “broken-record-department”, median sales prices for the year, especially in November, are a truer reflection of where we stand. I must say that I am very gratified that we are holding our prices and sales volume ahead of 2014. It beats going the other way, doesn’t it?
“Hi, mom….do you think I can have my old room back?”
Perhaps you’ve heard that question before. What is happening across America is that young women are living with their parents or relatives at a rate not seen since 1940 as more millennial women put off marriage, attend college and face high living expenses.
A Pew Research Center analysis of U.S. Census Bureau data found that 36.4% of women age 18 to 34 lived with parents or relatives in 2014, the most since at least 1940, when 36.2% lived with family. It is a very different world for women now, though, despite the “return to the past, statistically speaking,” says Richard Fry, a senior economist at Pew.
Fry says young women are staying home now because they are half as likely to be married as they were in 1940 and much more likely to be college-educated. Economic forces such as increasing student debt, higher living costs and economic uncertainty are also playing a role.
Young men have historically lived with parents at higher rates than young women, and similar economic and cultural forces are keeping an increasing number of men at home too in recent years. But the rate young men are staying home with their parents and relatives, 42.8%, remains below the 47.5% level for men in 1940.
The percentage of young men and women living with family fell after the 1940s as more women joined the workforce, the overall workforce expanded, and marriage rates increased.
Marriage was once the life event that triggered a move out of the family home, but it is now coming later with each generation, if it comes at all. The median age of marriage for women is now 27, up from 21.5 in 1940. For men, it is 29.3, up from 24.3 in 1940. Young women and men began staying home or returning there at a more rapid rate after 2000, a trend that sharply increased with the economic uncertainty brought on by the housing collapse and recession in the late 2000s.
Although the retreat home for young adults is also clearly a result of economic pressures, it is not, according to Fry, an employment issue. For example, more young adults are living with their family now than in 2010, even though the job market has improved since then. “The job market has gotten significantly better” for this group, Fry says. “Unemployment has come down, more have jobs and some are even getting paid a bit more.”
If you haven’t seen “Failure to Launch”, it might be a fun movie to watch!
Existing home sales slowed but at a “healthier pace”….
Let’s be honest — we’ve been on a roller coaster since the beginning of the “great recession” in 2007…seeing home prices dive only to slowly climb their way back up. We’re not “there” yet — where we were before 2007, but we’re getting closer.
In latest quarterly report from the National Association of Realtors (NAR), the national median existing single–family home price increased in 87 percent of measured markets, with 154 out of 178 metropolitan statistical areas showing gains based on closings in the third quarter compared with the third quarter of 2014. Twenty–four areas (13 percent) recorded lower median prices from a year earlier.
There were slightly fewer rising markets in the third quarter compared to the second quarter, when price gains were recorded in 93 percent of metro areas. Twenty–one metro areas in the third quarter (12 percent) experienced double–digit increases, a decline from the 34 metro areas in the second quarter. Sixteen metro areas (9 percent) experienced double–digit increases in the third quarter of 2014.
According to Lawrence Yun, chief economist for NAR, “the demand for buying picked up speed in many metro areas during the summer as more households entered the market, encouraged by favorable mortgage rates and improving local economies,” he said. “While price growth still teetered near or above unhealthy levels in some markets, the good news is that there was some moderation despite the stronger pace of sales.”
The national median existing single–family home price in the third quarter was $229,000, up 5.5 percent from the third quarter of 2014 ($217,100). The median price during the second quarter of this year increased 8.2 percent from a year earlier.
Total existing–home sales, including single family and condo, increased 3.4 percent to a seasonally adjusted annual rate of 5.48 million in the third quarter from 5.30 million in the second quarter, and are 8.3 percent higher than the 5.06 million pace during the third quarter of 2014.
“One of the major issues we’re facing in Los Angeles,” stated Carole Schiffer “was the continued downward pressure on jobs and slower income growth compared to the rest of the country. However, we are seeing strong sales and activity as a result of Silicon Beach and the companies moving here to take advantage of the ‘Hollywood connection.”
According to the Federal Reserve’s “second-in-command” to Chairperson Janet Yellen, U.S. inflation should rebound next year as pressures related to the strong dollar and low energy prices fade — providing the economy has done well reasonably and to a delay in raising interest rates.
Fed Vice Chairman Stanley Fischer, reinforcing previously stated confidence that more inflation was around the corner, said he expects the central bank’s preferred measure to rebound to 1.5 percent next year and to hit a 2.0 percent goal in the “medium term.”
“Some of the forces holding down inflation in 2015, particularly those due to a stronger dollar and lower energy prices, will begin to fade next year,” he told a conference of researchers and market participants at the Fed Board last week. “While the dollar’s appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well, notwithstanding their large effects on certain sectors of the economy heavily exposed to international trade.”
The rate hike — which was anticipated for September then by the end of the year — has been stymied in part by low inflation that continues to run below the Federal Reserve’s 2 percent target rate, and some policymakers have advocated waiting for more signs that inflation will rise before embarking on a path of monetary tightening.
So, we’ll see what happens come January. On the mortgage lending side, local lenders to Coldwell Banker do not expect any major jump in interest rates even if the Fed does increase its rate in January….”it will be gradual no matter what,” stated a prominent local lender according to Carole Schiffer.
New disclosure rules goes into effect — you should know!
The “Know Before You Owe” rule, championed by the Consumer Financial Protection Bureau (CFPB), officially went into effect October 3. The rule requires specific timeframes for consumers to receive and review their Loan Estimate and Closing Disclosures, and provides streamlined forms explaining monthly payments, costs of getting a mortgage, the costs to close the loan and other information about the loan. While the rule is good for homebuyers, any changes during the home loan process due to inspections, contingencies or final walk-throughs could delay closing to meet timing requirements. “We are working through it because we had a lot training as to how to work with the requirements,” according to Carole Schiffer.
There’s more evidence we are gaining back home equity….
Well, guess what? We are making some real headway. One of the nation’s largest and most respected real estate research companies stated in their 3rd Quarterly 2015 U.S. Home Sales Report that “homeowners who sold their homes during the third quarter realized an average price gain of $40,658 (17 percent) from the purchase price of their property, the highest average price gain for home sellers since the third quarter of 2007. The report also showed home sellers in the third quarter on average had owned their home for 6.72 years when they sold.
This is good news. The eight-year high in average price gains for home sellers in the third quarter came despite slowing home price appreciation. The average sale price of single family homes and condos nationwide during the quarter was $263,976, up 0.2 percent from the previous quarter and up 2.4 percent from the third quarter of 2014 — the slowest year-over-year price appreciation in any quarter since home prices bottomed out in the first quarter of 2012.
The report also shows 2,487,664 existing single family and condo sales through the first three quarters of 2015, the highest level for the first nine months of a year since 2006 — a nine-year high. Millennials and first-time homebuyers are taking advantage of low interest rates and loosening financing options according to Realty Trac’s report.
What is interesting in the report is many areas have seen a strong influx of parents buying ‘kiddies condos’ for their children to live in while attending college. Parents seem to be choosing this path as both an investment, but also to ensure their child lives in a well-kept property that meets their expectations.
Share of first-time buyers declines slightly, 2nd lowest level since 1981…The National Association of Realtors revealed in their annual survey the share of first–time buyers declined for the third consecutive year and remained at its lowest point in nearly three decades as the overall strengthening pace of home sales over the past year was driven more by repeat buyers with dual incomes.
In this year’s survey, the share of first–time buyers declined to 32 percent (33 percent a year ago), which is the second–lowest share since the survey’s inception (1981) and the lowest since 1987 (30 percent). Historically, the long–term average shows that nearly 40 percent of primary purchases are from first–time home buyers.
According to the report, there are several reasons why there should be more first–time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college–educated, and the fact that renting is becoming more unaffordable in many areas. The report noted that rents and home prices are impeding their ability to save for a down payment, there’s scarce inventory for new and existing–homes in their price range, and it’s still too difficult for some to get a mortgage.
According to the survey, buyers continue to view buying a home as a good financial investment. Up from last year (79 percent), 80 percent of recent buyers said it was a good investment, and 43 percent believe it’s better than stocks. Looking ahead, first–time buyers plan to stay in their home for 10 years and repeat buyers plan to hold their property for 15 years.
The Army is coming….and it’s a good thing
U.S. Army researchers are moving into Los Angeles’ sprouting technology hub in Playa Vista, aiming to make what will become their largest outpost outside Maryland into a key source of ideas on data analysis, robotics and virtual reality. The U.S. Army Research Laboratory office will be at USC’s Institute for Creative Technologies, which the Army kick started with funding at the height of the dot-com boom. Now, the Army group will maintain up to 70 researchers there starting next year.
Under new Defense Secretary Ashton Carter, the Pentagon has sought a deeper relationship with the technology industry in hopes of harnessing new technology faster. Earlier this year, Carter announced the opening of an innovation center in Silicon Valley and a $75 million-investment into a consortium of 100 companies working on wearable electronics.
The USC deal is part of an Army initiative launched last year known as Open Campus, which provides academic researchers access to unclassified information and unique problems. But rather than provide funding upfront, the Army is looking to jointly develop technology and potentially pay for it afterward.
The old patterns have changed
In talking to my fellow agents, many of whom I have known and worked with for years, we are all saying the same thing. For some of us the past quarter has been a little slower than we would have liked it to be, but now heading into the holiday season, we are so busy, we hardly see straight ( and that is a good thing – thank you Martha Stewart!). Normally it gets a little quieter, but not this year. It makes for a fun and exciting prospect for the first quarter of the New Year. I imagine that with the possibility of an interest rate increase somewhere soon on the horizon, this is partially stimulating the activity. I personally have witnessed an increase in open house activity for the past month. It is going to be interesting to see how/if this continues, but in the mean time it is fun to be a part of the energy! I have a wonderful new listing at 10377 Tennessee in Westwood.. Located just a few blocks from Rancho Park, and close to Century City this lovely 4 3.5 bath with an open floor plan, move in condition, pool is priced to sell at $1,799,000. Please give me a call to come and see it .Because this is such a desirable neighbor hood, it should not last long!
After a number of months, working on it, I have launched my new web site… Caroleschiffer.com. I would really appreciate your checking it out and letting me know what you think.