SchifferLine 15 June 2018

Timely Real Estate News………………………15 June 2018
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Treading water…. maybe it’s the weather?
It’s almost Summer…and with it, perhaps we will get more clarity about our real estate market, which has been treading water since the first of the year. Sales volumes are meandering around last year’s levels, and while median sales prices are bumping up (and down) in every community, we are still fighting low inventories. Open houses remain robust because demand is far exceeding supply in every community, and buyers are scrambling now to lock up financing as the Fed marches on with new rate increases (see below).

In the five communities I report on each month — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood— the total sales volume for these markets is slightly down for the year…. going from $1.516 billion in May 2017 to $1.499 billion for May 2018. That is not a big drop, for sure, but usually by this time in the Spring selling season, we are seeing more aggressive numbers, which tells me that we may well just be treading water a bit longer in 2018.

The culprit of course, is inventory. More inventory, more sales….and median prices are fluctuating as they always do. For example, Beverly Hills leads the market, of course, with a median sales price through the first five months of 2018 at $6.120 million, but just a 2% increase over 2017. Bel-Air/Holmby Hills was up 25%, going from $2.084 million to $2.670 million. And Westwood/Century City was positive at 8% up over last year, with a median sales price of $2.268 million. Beverly Hills Post office was down 10%, Brentwood was down 1%, and Marina del Rey was up 2% over 2017. Marina del Rey’s median sales price is $1.500 million through May and Marina del Rey’s total sales for the first five months of 2018 was $51 million vs. $48 million last year at this time.

There were some notable sales in May…two homes in Bel-Air/Holmby Hills were sold for $56 million and $68 million respectively, not unusual in our market. Beverly Hills, BHPO, and Brentwood all had sales of $10 million plus. I must share with you…as has been usual, not all of the high-end sales are listed with the Multiple Listing Service but are handled as private or “pocket sales”. There were 6 homes over $20 million that were not listed with the MLS last April and are not reflected in our total sales numbers. This occurs every month and is not unusual as many buyers simply want to go “off line” and not make their transactions immediately public. As I have pointed out in the past, one big risk a seller takes when marketing/selling their property in this manner, is that by not exposing their home to the open market, they may end of getting a lower price.

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May sales…. a mixed bag
May sales, compared to last year, were uneven throughout these communities. Beverly Hills median sales price for May was $5.625 million, down 13% from a year ago. Beverly Hills Post Office, however, was up 35%, at $4 million. Westwood/Century City was up 10% at $2.330 million for May, but Bel-Air/Holmby Hills was down 32% to $2.527 million…Brentwood was also down 12% at $3.163 million…and Marina del Rey was off 6% at $1.021 million.

You can see that for the most part, we’re treading water — not sinking, but not making much progress in one direction or another. That’s OK…because that’s the nature of our real estate market. Keep your life preserver handy.

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Fire season is here to stay…please get prepared.
According to the Los Angeles Fire Department, we are in a year-round fire season in Southern California. The lack of rainfall this year has left many areas vulnerable again…and the fire that erupted in Benedict Canyon recently is a critical reminder that you have to get your property in shape to protect your home and possessions….and keep it that way…12 months a year. It’s non-stop for homeowner protection.

The “villain” in this fire, which covered 35 + acres, was a “Weed Wacker” that ignited the blaze, which quickly ran up the hillside, threatening nearby homes and neighborhoods. Los Angeles fire officials urge us to use licensed contractors who follow safety rules – such as avoiding metal blades and carrying fire extinguishers. The irony of this is that the “Weed Wacker” was being used to clear brush

The LAFD’s quick action prevented a major fire running up the Canyon, and it serves all of us as an urgent reminder to keep our property clear of clutter, unnecessary brush, and making sure you have your home and yourself properly prepared — inside and out. Please see the LAFD web site for more information on this critical issue: https://www.lafd.org/fire-prevention/brush

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Taking it a step further
I recently received a vehicle disaster supply kit for any kind of emergency. I thought I would share some of the key items with you: First aid kit, Clothing – blanket(s), jacket, comfortable walking shoes, gloves & extra socks, Tools – batteries, flashlight(s) radio, tarp, Specialty Items – whistle, insurance papers, important phone numbers, CASH, Food – canned food &juice with an opener, plastic utensils and cups. For a complete list and more information, please go to

http//www.fema.gov/areyouready/assemble_disaster_supplies_kit.shtm.

Not sure about you. But I think we all will need to have SUV’s for all of this plus the everyday things we keep in our cars!

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Federal Reserve kicks it up a notch…. more rate hikes coming
As expected, the Federal Reserve raised its benchmark short-term interest rate but it also upgraded its forecast from a total of three hikes this year to four amid an improving economy, falling unemployment rates and slightly stronger inflation. The move is expected to cascade through the economy, in particular nudging up rates for variable-rate consumer loans such as credit cards and adjustable-rate mortgages.

This has been anticipated since their last meeting. It’s also likely to push up bank savings rates for Americans, who are finally realizing higher returns on CDs, bonds and other fixed-income assets after years of meager yields. As noted in the Fed’s monthly statement, the main takeaway is that the economy is doing very well, and “most people who are looking for a job, can find one,” according to Fed Chairman Jerome Powell.

The Central Bank lifted its federal fund rate — which is what banks charge each other for overnight loans — by a quarter % point to a range of 1.75% to 2%. That’s within shouting distance of its longer-run forecast of 2.9%. It’s the second rate hike this year and the seventh since the Fed began bumping up rates amid an improving economy in late 2015.

For the years after the Great Recession of 2007-09, the Fed kept its key rate near zero to stimulate sluggish growth.

In perhaps a telling sign, the Fed removed its previous assertion that its key rate “is likely to remain, for some time, below levels that are expected to prevail in the longer run.” That suggests the Fed could push up rates more rapidly. Powell, however, said it simply means rates are getting closer to normal levels.
In talking with my mortgage lender contact, this may have some dampening effect on loans, but with the economy booming as it is now, and with the stock market more up than down, higher-income buyers are not going to be hampered by modest loan increases. Affordability for first-time buyers will be impacted more, as there is just a very limited inventory of houses (including condos) available to this market.

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Will California split into three states?
This is your chance to “leave” California as you know it. Placed on the November ballot is another proposal to split California into ‘like-minded areas that would become official if voters approve and the State Legislature (both houses) approve it, essentially putting them out of a job. Then Congress has to approve it as well. Let’s forget the sure-to-come lawsuits that will spring forth if it somehow passes.

According to the Los Angeles Times, “California’s 168-year run as a single entity, hugging the continent’s edge for hundreds of miles and sprawling east across mountains and desert, could come to an end next year — as a controversial plan to split the Golden State into three new jurisdictions qualified Tuesday for the Nov. 6 ballot.”

It’s been tried before…. but if a majority of voters agree, a long and contentious process would begin for three separate states to take the place of California, with one primarily centered around Los Angeles and the other two divvying up the counties to the north and south. Completion of the radical plan — far from certain, given its many hurdles at judicial, state and federal levels — would make history.

If this happens, it would be the first division of an existing U.S. state since the creation of West Virginia in 1863.

One of the many issues facing such an event would be whether this could be legal via a ballot initiative, contrary to California’s state constitution. In the already ‘war of words’ engendered by this ballot initiative, the debate rages around the legality of the whole initiative process, and there is no assurance of the outcome with respect to who would end up in power in each of the newly created states. Critics cite the aversion of seated politicians risking their place in the state legislature or Congress to approve their job elimination under such a plan.

It will be fascinating to see this going on over the next five months…Did you see the movie…” La La Land”? Only in California.

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$1.5 trillion student loan debts aren’t going away easily
Yes, “trillion”! Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. And it’s not going away easily.
According to a national report from “Make Lemonade”, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. The average student in the Class of 2016 has $37,172 in student loan debt. This is crimping mostly the lifestyle and home-purchasing desires of millennials, the largest single home-buying group in the U.S. today.

The latest student loan debt statistics for 2018 show how serious the student loan debt crisis has become – for borrowers across all demographics and age groups. This is one of the main reasons that millennials are moving back home with their parents — nearly 34% of this generation are living at home, trying to save money and eliminate their student loan debts.

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Do home prices influence birth rates? You bet they do!
Economists don’t miss a trick when it comes to figuring out future home-buying trends. Inventory, lack of supply and demand, price growth, foreclosure rates, mortgage rates — these all play a role in their ability to determine the future of the housing market.According to a recent national analysis, birth rates among 25- to 29-year-old women decreased in counties with the fastest home-price appreciation. On average, a 10 %-point rise in home values correlates with a 1.5 %-point drop in birth rates.

The trend is most noticeable in Los Angeles County where home values increased 31% from 2010 to 2016. During the same time period, birth rates fell 17%. That means there were 2,588 fewer babies than would otherwise be expected, noted the report.
Young couples said financial stability, or the lack of it, is an important factor in their decision to have children. But true financial stability may be out of reach for most as home prices continue to rise, the report said.

At the end of the day, millennials in particular are much more cautious about making a move to purchase their ‘dream home’, with a third staying home with parents until they can afford the move. That includes, obviously, the decision to start a family when living with mom and dad.

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My Real Estate Perspective
The inventory woes definitely impact my business. I have about 10- 15 buyers, some with more specific needs or requirements than others, and it is very difficult to find available properties for them to purchase (both listed and privately available). I have written to a number of you asking if you are considering selling your properties, with a very low response. Once again, if you are at all considering selling your property, please let me know as it might work for one of my clients.

In the meantime, please do not forget my lovely listing a 12547 Promontory in Mountaingate. We recently reduced it by $90,000 to $2,450,000 and currently are working with one or two buyers who are interested in it. In addition to showing it by appointment, I am there on Sunday, so please stop by and say “hello”.

 

I also just listed a wonderful home in the hills of Tarzana, 4311 Coquette Place, located on a cul-de-sac, this single story 6/6.5 home is being offered at $1,825,000. You can preview of them on my web site www.CaroleSchiffer.com.

 

 

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