Timely Real Estate News………………………………..15 September 2016
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Silver lining? Earnings boost helps US economy
We’ve been facing less-than-spectacular growth for some time, but according to the Census Bureau this week, steady job growth and the biggest earnings boost on record helped sharply lower the nation’s poverty level and finally provided relief to the long-running stagnant incomes. “This could be the silver lining we’ve been looking for,” stated Carole Schiffer.

In its annual report on income and poverty, the Census Bureau reported that the share of people in the U.S. living in poverty dropped to 13.5% in 2015, marking one of the biggest annual declines in decades. That was down from 14.8% in the prior year, but still considerably higher than the 12.3% poverty rate in 2006, the year before the Great Recession began, and the 40-year low of 11.3% in the year 2000.

The report also provided some encouraging news for a change on average American incomes. The median household income — the point at which half make more and half less — was $56,500 last year. That was up a substantial 5.2% from $53,700 in 2014, after adjusting for inflation.

American families still have a way to go….” we’re not there yet” the report stated, but we may have turned the corner. The bureau also reported that the number of people in the U.S. without health insurance fell further last year to 9.1% from 10.4% in 2014. The drop was expected, thanks mostly to the Affordable Care Act, also known as Obamacare, which saw its second full year of impact in 2015.

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Are you tired of treading water? Sales volume doesn’t move needle
I’m sorry I can’t report that the sales needle made any great moves in August, traditionally one of the hottest sales periods for any real estate year. Sales through August 2016 vs. August 2015 remained 4.5% behind last year’s total for the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City, and Brentwood.

Sales for these five communities were $2.108 billion through the first eight months of this year compared to $2.208 billion to same period last year. While the margin is narrow ($100 million), based on our last quarter’s sales performance we are likely to see a bump and may surpass last year’s total by year’s end. We did see the sale of the Playboy Mansion for $100 million which closed escrow in August 2016. It was originally listed at $207 million. The seller, Hugh Hefner is able to stay in the house for the rest of his lifetime, and the buyer lives next door.

In another hot real estate market on the Westside, the Venice-Playa Vista-Playa del Rey area experienced a 6% sales increase in volume, from $295 million in 2015 through August to $313 million for this year. “Silicon Beach, our technology answer to Silicon Valley, is spurring real estate activity, especially among the new techies moving into the area,” Carole Schiffer stated.

Median sales prices up, down, and around…..As I have always said, watch the median sales prices for the year, not the month. We’re now entering our Fall selling season, which actually caps off the summer season as sales reports are of escrows closing in September but were executed in July and August, the busiest time of year. Median sales prices year to date included: Beverly Hills which continues its upward movement, plus 7% over previous eight months in 2015, with median sales at $5.370 million vs. $5.000 million a year ago. Beverly Hills Post Office was up 2% for the year, settling in at $2.492 million, Westwood/Century City was also up — 11% for the year at $1.800 million. Bel-air was down 5% at $2.257 million and Brentwood was off 3% at $2.65.

Median sales prices for Venice were up 2% at $1.900 million; Playa del Rey was down 11% at $1.487 million; and Playa Vista was off 4% for the first eight months.

Just looking at August’s numbers, Beverly Hills had a whopping 100% increase in median sales prices, from $3.020 million in 2015 to $6.050 in 2016, which elevated it’s year-to-date median sales average. Comparing and Brentwood was down 16%.

Remember — median sales prices reflect the “middle number” of prices for homes sold — not the standard average. Half of the homes are below the middle # and half above — so it’s not about throwing in a large $100 million sale that is going to skew the median sales price. Helps volume, of course. So, please be patient as we track all of the areas on a monthly basis, and now we are seeing a majority of 2016 playing out before us, Carole noted.

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Six ways to sabotage your mortgage approval
Perhaps you’re one of the lucky ones who has avoided mistakes in processing a mortgage loan application. It can be a frightening experience — a slip here, a missed # there. And let’s not forget the stress of waiting for the email, letter or phone call — “you’re approved.”

Executives with Chicago Financial have taken the time to make a list of the six common mistakes to avoid in applying for a mortgage loan: 1) Don’t close your credit accounts — you will need two current lines of credit; 2) Pay down balances — don’t eliminate them — Get your ‘credit utilization’ # under 50%; 3) Don’t take out a major loan while applying for a mortgage —this can hamper your debt-to-income ratio, and you don’t want to do that! This means things like buying/leasing a car, making any major purchase (furniture/appliances, etc.) and that includes writing a check for them as well as putting that transaction on a credit card. 4) Don’t pay off old debts if you don’t have to — look at your state’s statues on time limits to collect old debts — old debts outside of the time limit will not hurt your credit score. But check this out; 5) Don’t go on commission from salary — it’s easier to verify income with a salary than with commission income; and 6) Waiting to cash in investments — don’t be too anxious to convert investments during this loan approval process. Beef up your cash reserves, and if you have to sell, sell your securities before you seek pre-approval.

Loans continue to be available at their lowest rates in years, but the loan process has become more rigorous and demanding. If you want help during this process, please call Carole Schiffer at 310-442-1384. Thanks.

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Is it worth buying a fixer-upper? Maybe yes, maybe no.
It depends on where you live and the “as is” price vs. the potential to add real value. Actually, the thought of ‘finding a bargain’ crosses most home buyers’ minds at one time or another, but in checking on the findings of a national survey conducted by Zillow of “fixer-upper” discounts from the median priced home, the average is 7.6% or in $11,000 to break even.

According to this new analysis, national trends show home listings that require serious improvement might not be financially worth it for homebuyers. Compared to the market value, fixer-upper homes — which, for this purpose, have keywords like “good bones,” “TLC” and “fixer-upper” in their listing description — list for 7.6 percent less. For the median priced fixer-upper, that’s a savings of $11,000.

While $11,000 can be a serious chunk of change, it wouldn’t cover major renovations like a kitchen over-haul or projects that cover a home’s structural integrity. And, naturally, the savings are hugely dependent on a home’s location.

The study covered 70,000 listings throughout the nation, comparing their estimated values based on whether the home is considered to be a fixer-upper or a move-in ready home. San Francisco, already one of the nation’s highest-priced markets, would provide the highest value of finding a fixer upper, saving buyers 9.5%, which would give them $54,000 for renovation.

Where can you find fixer-upper opportunity? Look east — Chicago, Baltimore, Cincinnati, Pittsburgh, St. Louis, and Philadelphia. In major urban cities like Los Angeles, New York and Washington D.C., the survey pointed out that the margins are too low to count on making a profit from purchasing a fixer-upper.

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Keep your home in top shape….here are four handy tips
We average 14.93 inches of annual rain fall in Los Angeles, which isn’t going to move the weather needle — after all, that’s why we live here. Yes, occasionally we have earthquakes (seldom), floods (think mountains), and certainly fires (think mountains again).

Keeping your home in shape depends on some rather simple tasks — and here are four handy tips that are easy to do: 1) Service your garbage disposal by grinding several cups of ice cubes — 2) Examine, repair and replace caulk and grout around your kitchen and bathroom sinks, bathtubs and showers. 3) Pour one gallon of water down unused drains….and 4) Check your fire extinguisher. Refill or replace as needed.

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Luxury real estate — it starts here
Driven by the entertainment and media industries in Los Angeles, the Westside has always enjoyed the fame and fortune of luxury real estate as seen by others around the globe. The signature Bel-Air, Beverly Hills and Rodeo Drive brands attract the rich and famous, and in real estate, we have seen the mega estates that create headlines when they come on the market and sell.

As the leading real estate company in Southern California in residential housing, we at Coldwell Banker keep track of all of these sales, starting with homes in the $5 million-plus category, the starting point what one might call the “luxury market”. According to latest compilation of high-end sales (over $5 million) on the Westside of Los Angeles, the market continues to produce strong sales reports in some of the lower-priced categories.

For example, in last months ‘report, there were 326 closed sales of $5 million-plus homes this year, vs. 324 sales at this time last year, which has been about the norm in our market over the past several years.

There were 88 closed sales of homes in the $10 million-plus category vs. 90 sales last year, just slightly lower than the previous year. But in the $20 million-plus area, there have been 15 sales this year vs. 28 homes last year, and 5 sales of homes $30 million-plus vs. 12 homes last year.

Future of luxury real estate…In a recent article in an International Real Estate survey, certain wealthy groups including “millenipreneurs” (affluent millennial entrepreneurs) and high-income workers from the growing tech industry will continue to impact the high-end real estate market. There will always be revolving factors that influence housing prices, inventory and sales.

One thing is certain in the luxury sector, despite fluctuating stock markets, exchange rates, regulatory issues and financial and political concerns as well as instability within one global region, UHNW (ultra-high net worth) individuals continue to be active in the luxury real estate market.

The expansion of the high-end real estate market is an overall promising sign for the industry. Obviously, investors can and should be prepared for short-term challenges, but they are willing to meet them with a long-term goal in mind.

The survey noted that the wealthy will continue to invest in luxury real estate, well, because it works. When compared to the ups/downs of the financial markets, it remains one of the safest investments. The stability of the American economy remains an anchor in investment strategies, and real estate, especially on the Westside, attracts the investors who see a secure future in our communities.

The international luxury market is a complicated but evolving sector. There are countless factors at play in the current international marketplace such as global influences and buyers who have ever-changing financial goals, diverse lifestyles and different preferences in property than investors from a few years ago.
The investment opportunity and opulent lifestyle that accompanies luxury homeownership encourages foreign buyers as well as U.S. purchasers. When cities are home to new industries and a general upbeat economy, they always attract interest from affluent buyers. That is what is happening in Southern California with the emerging Silicon Beach, attracted first by the burgeoning entertainment industry. This is an area that as a Previews Director for Coldwell Banker, I am very well versed in dealing with and working in this arena!

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Editorial Correction
The information I shared with you in the last Schiffer Line regarding the new Federal government guidelines pertaining to all cash transactions was not totally correct. These guidelines pertain ONLY to transactions where an LLC is involved. Any other all cash transactions are not impacted. Sorry for any misunderstanding and wrong information.

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Fun and play in Coronado for Labor Day
I was very lucky to spend the Labor Day holiday in Coronado with my Mother, Sister and Brother in Law who live in Vancouver. British Columbia. While we were there, we were able to celebrate my Brother in Law’s birthday, and visit with a new member of our family, “Peg Leg” the seagull! It seems that this handsome guy who is missing one part of one his legs, likes to come and visit with us on one of the ledges of our condo and eats any extra chicken, and ONLY chicken we have. He is a picky guy, in the past I have tried to give him pieces of bread, and he really squawked and let me know that was not acceptable!

There was also a new event at the World Famous Hotel Del. They held Polo Pony races on the beach. For both Saturday and Sunday, these fund raisers were held. It was really fun to watch.

 

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COUNT ON CAROLE

Creativity Counts  I market for my clients the way I market for my business…always facing challenges, and always finding solutions. It’s about market knowledge, financing, networking, and having the experience to ‘find a way’ – regardless of the challenge. Yes, creativity counts. Carole Schiffer. The Westside Expert

Timely Real Estate News……………………………..1 September 2016
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Clarity on cash transactions
On August 28th 2016 the second phase of a program launched by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (Fin CEN) went into effect. The program was created to identify anonymous individuals who tried to bypass the law, cover up their identities or assets and buy property through shell companies in an effort to skate on financial sanctions and taxes. .Fin Cen will use Geographic Targeting Orders (GTOs), which mandates that all domestic banks, other financial institutions, trading companies and related businesses, document and report any transaction of $2 million or more (this amount varies in different parts of the country). By following these steps, one can eliminate any problems.

1. Don’t use a shell company. Buyers need to use a legitimate company to avoid the appearance of money laundering.
2. Document cash flow, and keep excellent records. The GTOs require reporting on transactions conducted in part through currency, money orders and cashiers, certified or traveler’s checks. However, Fin CEN does not require real estate transactions conducted entirely through wire transfers to be subject to GTO requirements because they tend to be more transparent than cash transactions.

3. Follow legal requirements. The title insurance company must name each owner, including the person’s passport or driver’s license, and report the identity of these individuals to Fin CEN within a month of closing. The title insurance companies must keep related records for 60 months and provide them to Fin CEN and to any other government agencies.
4. When in doubt, get professional advice. Some exemptions and loopholes in the Fin CEN requirements could allow real estate purchasers to buy property with cash with almost no obstacles. Buyers should not proceed without making sure that everything is done correctly and that the right documentation is in order.

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Home prices continue gains
According to S&P’s CoreLogic Case-Shiller Index, it is no surprise that US home prices continued to make strong gains in June 2016. The home price Index rose <5.1% but affordability challenges persist and put a ‘damper’ on demand. The Index covers the 12 months that ended in June, which is identical to the increase reported in May.
Price growth did show some sign of slowing in the country’s largest cities. The 10-city index, which includes some of the country’s largest cities, gained 4.3% from a year earlier, down slightly from 4.4% last month. The 20-city index gained 5.1% year-over-year, down from a 5.3% increase in May.

Economists said the “market remains challenging for buyers, and as Carole Schiffer has noted, “we’re seeing price increases across the Westside, which we know has crimped the market for first-time buyers. After all,” she stated, “we’re in one of the most expensive housing markets in the U.S.”

In their national report, CoreLogic noted that after years of volatility, home prices have grown at a rate of around 5% for two years. That is roughly twice the rate at which incomes have been growing. Price increases, on the other hand, have scared off some buyers, especially in pricier markets like West Los Angeles, and led to a slowdown in the pace of sales.
Please look for the September 15 edition of The SchifferLine for the most up-to-date market news for your area.

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Home sales declin nationally….higher prices cool market
While prices are rising (above), home sales (units) are not. The National Association of Realtors also reported home sales are cooling, largely due to affordability concerns on the part of buyers. Nationally, the pace of existing-home sales fell 3.2% last month from June to a seasonally adjusted annual rate of 5.39 million. Some of the country’s most expensive markets, from California to Denver, have seen some of the steepest declines in sales activity.

Economists expect demand to continue cooling heading into the second half of 2016, which eventually is likely to lead to a slowdown in price growth. Demand for homes in July was down 14% from the same month last year, the sixth consecutive month of year-over-year declines in buyer demand according to a national reporting service.

The Federal Reserve indicated that they were holding off on any rate increase until later this fall. Once again, we are in the waiting mode to see where Fed Chairwoman Janet Yellen takes us next. The last rate increase was in December 2015. Meanwhile, mortgage rates remain low and job growth has picked up steam this summer. The 3rd quarter GDP figures will factor in a potential rate hike come October. Time will tell.

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Consumer confidence up — an 11-month high
U.S. consumer confidence rose to an 11-month high in August, with households more upbeat about the labor market, in a further sign that the economy was regaining steam after faltering in the first half of the year.

While other data showed a moderation in house prices in June (see above story), the gains most likely remain sufficient to boost household wealth and continue to support consumer spending, as well as make home purchasing affordable for first-time buyers.

Economist point to this increased confidence that the economy may be stronger than the weak signals sent out in the first two quarter where GDP growth was anemic, and revised downward to 1.1% in the last quarter. The Conference Board said its consumer confidence index increased 4.4 points to 101.1 this month, the highest reading since September 2015. Consumers’ assessment of both current business and labor market conditions improved sharply in August.
The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the most favorable since January 2008.

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Let’s take a walk….the non-LA story
Remember in Steve Martin’s movie “LA Story” — where he jumps into his car and drives about 20 yards down the street, stopping and jumping out….proving the point, Los Angelenos do not like to walk. We drive everywhere. But recent research is showing something else: Many people want to walk and will pay more to live in more walkable neighborhoods where they can stroll to work, shops and restaurants from home. It’s a rare luxury in most metropolitan areas and one worth thousands of dollars on average, according to new research.

Home workers are willing to pay $3,260 — or nearly a percent more — for a little extra walkability than they would for the same home in a less pedestrian-friendly neighborhood. When evaluating homes, buyers today are scanning neighborhoods for their potential routes — not driving to/from home, but walking routes. What landscape and environment are we moving into? Is the neighborhood safe? Are there interesting sites and scenes along the pathway? Are there special pathways created by the community or city to encourage walking? What is the “walking culture” for our new home?

More than half of millennials and 46% of baby boomers say they want pedestrian pathways where they live. And whether you own a Fitbit or iPhone or Apple Watch, the focus is on “steps” and keeping track of your walking and exercise. “Heart Healthy” has become a community “thing” — it’s ‘in’ to be counting your steps these days. And on the Westside, it’s the most popular activity for residents…just look at San Vicente Boulevard or Ocean Avenue, or the hikers using the trails in Bel Air Crest and Mountaingate — it’s “Walk City”.

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High rise residential is barely making a dent in LA housing
Drive around LA….what do you see? Cranes and construction everywhere, but according to an analysis at the state level it is not nearly enough. California will have to build substantially more housing, build denser and build in the desirable urban coastal areas (including Los Angeles) in order to make a dent in fixing the affordability problem.

In its report last year, the Legislative Analyst’s Office noted the great need for more housing. It said that in L.A. County alone, about a million more new homes should have been built since the 1980s in order to keep pace with demand. This demand is expected to continue for the foreseeable future. According to some housing affordability statistics, Los Angeles is only bringing about a third of the number of units onto the market annually that are necessary to mitigate the housing affordability problem.

One major obstacle to building new residential housing units is the role local residents may play. Their resistance to new development has increased especially in Coastal California and it is slowing down the ability of developers to build more housing to alleviate the stress on limited supply.

Tech companies are fueling new growth….Many of the new tech companies are concentrated in Downtown L.A., and the L.A. Westside area, nicknamed “Silicon Beach,” (the area encompassing the area from Santa Monica to El Segundo.) Millennial tech professionals are creating demand for production of residential units equipped with the latest technology and other high end amenities in hip urban neighborhoods.

Also expected to be desirable are locations close to the new public transit lines. There is an abundance of new projects — but as noted above, it’s not nearly enough to handle LA’s needs for new housing. Local, area residents are working with the city regarding some local development hurdles, land availability, time and money.” I will keep you posted.

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Chinese cash making a “bang” in US real estate
The Chinese have been prominent real estate investors in the U.S. for years — this isn’t news. What is news is that Chinese investors are ratcheting up their investments into the multi-billions, making a splash on cityscapes everywhere.

Over the past three years, Chinese investors have placed money into some of the highest-profile developments in the U.S. Besides growing investments in Los Angeles, other cities with projects under way or in the pipeline include New York, Boston, Chicago, and Miami. These projects, all mixed use (retail, residential, office) will only attract high-end buyers. The Chinese have focused their real estate investments in high-profile, high-rise developments.

The flow of cash from China into U.S. commercial property is continuing unabated as companies seek to diversify outside of China at a time when confidence is fading in their local real-estate markets, real-estate executives say.
President Xi Jinxing’s anti-corruption campaign has also compelled Chinese investors to seek projects abroad as a way to hedge against a possible crackdown to their business at home. Officials have blocked property sales and detained companies’ executives during investigations.

According to data tracker Real Capital Analytics Inc., in the first half of 2016 completed U.S. commercial property purchases by China-based investors were up 19% over a year earlier to $5 billion. Including transactions under contract that haven’t been finished, Chinese investors have committed $12.9 billion this year, nearly matching the $14 billion in all of 2015. The rate of increase does appear to be slower this year, given that in 2014 there was just $3.4 billion in sales to Chinese investors. A giant cluster of new high-rise mixed-use office towers in downtown Los Angeles are underway and new projects by Chinese investors are planning more for 2020 and beyond.

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My world and welcome to it! A few weeks ago I attended a 3 days conference in Las Vegas with my real estate coach, Tom Ferry (boy was it hot – 111degrees outside). Not only did I learn a lot, which I will be sharing with you, I also attended a fun lunch in the middle of the Sea Reef Aquarium in the Mandalay Beach Hotel complex. It was an amazing experience having lunch with the sharks! One of the most important themes of the event was the mantra “model, mindset and marketing”. This is something that I know I can use in every aspect of my life. For those of you who are Bel Air Crest residents, I remind you to join us at the first Bel Air Crest Movie night on Saturday the 10th of Sept., please call the manager’s office to make your reservation.

As always, I invite you to visit my web site, Caroleschiffer.com, and my Facebook and linked in pages. I look forward to hearing from you as to how I can assist you in any of your real estate needs,