Timely Real Estate News…………………………………….15 September 2022
Median sales prices still remain higher as Fall arrives
Soon the leaves will turn brown, golden, and football will be in full swing as Fall arrives with good news for homeowners — median sales prices are still rising on the Westside in the communities I report on — Beverly Hills, Bel-Air/Holmby Hills, Westwood/Century City, Brentwood and Santa Monica. Through the first eight months of 2022, Bel-Air/Holmby Hills increased median sales price by 50% to $3.713 million over same period in 2021. Brentwood was up 12% to $2,112 million, Santa Monica was up 13% to $2.858 million, Westwood/Century City climbed 9% to $2.280 million, and Beverly Hills moved up 5% to $3.200 million.
Overall, these communities were seeing top prices in a market that has tightened up considerably — inventory is way down — and the number of listings is really taking a back seat. New listings in Beverly Hills were down 21%, Bel-Air/Holmby Hills listings were down 17%, Westwood/Century City were off 25%, but Santa Monica was down 34% and Brentwood off 32%. What does that tell us: Supply plummets and prices keep rising to record highs.
Compared to August 2021, prices were down
Comparing prices in these communities to where they were a year ago, only Beverly Hills showed a major upswing in median sales prices for August 2022 vs. August 2021, up 31% for median sales price of $3.740 million. All of the other areas were down — with Bel-Air/Holmby Hills off by 30% versus a year ago at this time.
The key trend to watch is ‘year-to-date’ median sales price #s which continue to be strong. So while we are seeing is a rather dramatic reduction of available inventory — which has provoked higher prices from the start of 2022. We are seeing a slowdown in aggressive pricing practices by homeowners who think they can cash in quickly. What is selling are quality homes priced competitively.
Real estate deflation is on the horizon according to some economists. But the good news, our Westside real estate has consistently countered national trends…yes, less inventory, but still strong prices.
In our next issue, we’ll focus on the high-end Westside real estate market for homes selling over $5 million.
Real estate market heats up, but challenges grow
With the stock market feeling the impact of growing inflation and rising mortgage rates, the real estate market is facing continued challenges on many fronts. For us on the Westside, we tend to get the tail-end of negative and positive trends across the country. Now, with inflation continuing to play a major role in our economy, we are seeing inventory continue to drop, median sales prices rising, and with the Fed moving to tack on another rate hike next week, duplicating their 75 point increase last month, we can expect a rise in mortgage rates. Will real estate cost more…that’s the question.
There are plenty of reasons US housing will remain costly according to the Wall Street Journal, and that in turn will contribute to inflation, complicating the Fed’s policy path. The basic supply-and-demand dynamic — with the former squeezed and the latter still strong — means consumers will need to expect to pay more for a place to live. Not only is housing affordability taking a hit now, but rents are also zooming up, especially in major metros like Los Angeles and San Francisco. But there are some signs that it isn’t all bad news.
As real estate strategist Jared Dillian noted…”a tight labor market and rising wages also support home prices. Solid financing, stricter regulation, and “massively deleveraged” consumers with equity-rich properties make the case there won’t be another crisis in residential real estate. With low supply and high demand, homes are selling quicker and close to the original selling price.”
Another example of buyer interest is Google home searches usually moderate during the summer, with potential buyers on vacation, according to UBS’s John Lovallo. But not this year. Search interest for existing homes rose 1.6% and jumped 22% for new homes from the end of May through August versus the average of the same time period over the prior eight years.
On the Westside, lack of quality homes on the market definitely impacts sales volumes and does positively impact home prices and lest we not forget, positively increase home equity. I will keep you posted on local and national trends affecting our real estate market on the Westside.
Mortgage delinquencies drop to 23-year low
Overall mortgage delinquencies and foreclosure rates remained near two-decade lows in June, with home price growth that remains in double digits and a strong U.S. job market helping to keep mortgage performance healthy. Metro areas that rely on the hospitality industry saw particularly large job losses due to the COVID-19 pandemic in 2020, while hurricanes in that same year impacted employment on the Gulf Coast. This naturally resulted in an increase in mortgage delinquencies, but areas of the country that were most impacted are now recovering.
The nation’s overall delinquency rate for June was 2.9%. The rate for early-stage delinquencies – defined as 30 to 59 days past due – was 1.2% in June 2022, up from June 2021. The share of mortgages 60 to 89 days past due was 0.3%, unchanged from June 2021. The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 1.3%, down from 3% in June 2021. As of June 2022, the foreclosure inventory rate was 0.3%, up from June 2021.
Flash: Home equity grew by $3.6 trillion. Feel Better?
If you’re a homeowner, you’ve got be smiling. According to real estate tracker guru, CoreLogic, analysis shows U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of over $3.6 trillion since the second quarter of 2021, a gain of 27.8% year over year. Not too bad.
In the second quarter of 2022, the average homeowner gained approximately $60,200 in equity during the past year. Hawaii, California and Florida experienced the largest average equity gains at $129,800, $117,000 and $100,000 respectively. Washington, D.C. and Iowa experienced the lowest average equity gains in the second quarter of 2022, at $16,900 and $17,600 respectively.
Negative equity has seen a recent decrease across the country. Las Vegas, Los Angeles and San Francisco are the least challenged, with Negative Equity Share of all mortgages at 0.6%.
This is what sets us and the real estate totally apart from the situation in 2008, people have the equity in their homes now, vs then, they had none, and were using their homes as ATM machines. When you consider that in 2010, with the Great Recession coming to final close that saw home equity disappear by the trillions as well, it is nice to see the market having clawed its way back.
The rental gap grows in California…and it is getting worse
Los Angeles, San Diego, San Francisco and three other California cities have some of the biggest millennial renter wage gaps in the country — the gap being the difference between what the typical worker can afford versus the average rental costs.
Of the California cities, Los Angeles has the biggest rent wage gap for millennials, followed by San Diego in third place, San Francisco in fifth, San Jose in seventh, Riverside in eighth and Sacramento in 12th, according to an analysis by the air filter company Filterbuy using data from the U.S. Census Bureau’s 2020 American Community Survey Public Use Microdata Sample.
In Los Angeles, the millennial wage gap was minus 49.5% in 2020, with millennial renters making a median wage of $36,649, according to the analysis. However, renters needed an average wage of $72,560 to pay for a one-bedroom rental. The median rent for a one-bedroom was about $1,814; about 35.6% of millennials in the city were renters. I find this to be very disheartening. I cannot remember facing these challenges as a young lady entering the workforce after graduating from UCLA’s Anderson. How times have changed.
Heat, wind, fire, rain, floods…what’s next?
If you’re worried about climate change, you don’t have to wait long: Our climate has been changing by the minute these past few weeks. From scorching temperatures in three digits across the Southland for days on end…with fires raging to the north….and then the Santa Anas…the rain, which really didn’t hang around long enough, caused flash floods in canyons. We have just pulled about every climate rabbit out of our weather hat…except one. And I will not mention the “E” word.
Suffice to say, we are in still in serious fire danger. We have had some of our most disastrous fires locally in late September and October. So, please be vigilant. As the LA Fire Department has warned us repeatedly — we have a 12-month fire season. All year long!! So please heed their basic warnings: Clear brush around your home, remove clutter, clean your gutters, and always have an escape plan.
Putting things in perspective
The other day I was talking to a friend of mine, and I was complaining about the number of flies in my house (do you know they come into buildings to escape the heat?) Still have not figured out how they are coming into the house, but that is another story. In any case while I was moaning about things that had happened in my life in the recent few weeks, she shared a story about someone close to her who was quite ill and probably would not live much longer. WOW, did that make me think about my life, and appreciate everything I have. Many times, it takes someone else’s stories for us to be GRATEFUL for what we have.
Speaking of being grateful, I want to thank you all for your support, friendship and readership of the Schiffer Line. AND for your business. There is still a lot of real estate business to be done before the end of the year, and I mean to be a part of it with and for you, so please reach out to me Carole Schiffer – caroleschiffer.com – firstname.lastname@example.org – 310 442-1384. Let’s have some fun working together. I am looking forward to it and hope you are also.
Speaking of taking care of business, I want to tip my hat to Queen Elizabeth, for the most part, she was a lady who knew how to take care of business. Rest in Peace Queen Elizabeth