Timely Real Estate News…………………………………..I August 2017
No Surprise…SoCal home prices zoom
It is no surprise that Southern California home prices are moving rapidly upward. Home prices in parts of Southern California are at record highs — and keep rising. In Los Angeles County for example, the median price in June jumped 7.4 percent from a year earlier to $569,000, surpassing the previous record set in May.
In Orange County, the median was up 6.1 percent from 2016 and tied a record reached the previous month at $695,000. And across the six-county region, the median price — the point where half the homes sold for more and half for less — rose 7.5% from a year earlier and is now just 1% off of its all-time high of $505,000 which was reached in 2007, according to a report from CoreLogic last week.
The price increase was even greater than the 7.1% rise recorded in May, and some agents say there are no signs of a slowdown in the Southern California market. However, remember, you have to take into consideration a 11 percent inflation factor since 2007.
Home prices have now been rising for more than five years, the result of a growing economy, rock-bottom mortgage rates and a shortage of homes on the market. Those factors have led to a surge in prices nationally as well.
What about the future?
Economists attributed these increases to the absence of a recession and an increase in mortgage rates. It is anticipated that California home prices could keep rising at 5 percent a year for the foreseeable future. And that’s faster than the long-term average of 3 percent nationwide. Richard Green, director of USC’s Lusk Center for Real Estate, indicated that this trend could go on for another four or five years.
The price surge, while helping many homeowners recover their lost equity – is going to cause other issues such as affordability. Richard Green, indicated that this trend could go on for another four or five years. It is interesting to note that as of 2015, approximately one-third of the homeowners paid housing costs that were deemed unaffordable. With the price of housing skyrocketing throughout the State, renters are facing the potential of suffering even more with more than half paying more than 30 percent of their income on housing costs.
Are we in a crisis?
Many agree we are. Housing experts and economists blame all this on the mismatch of supply and demand….developers in California have failed to build enough homes for all the people “who want to live in the State.” Housing faces a steep uphill battle even with the same party supermajorities in both houses, as well as a Democratic and supportive governor. Politicians are wary of asking Californians to pay more to subsidize housing, especially after voting to increase gas taxes and reauthorize the cap-and-trade program. According to a recent CoreLogic report, a number of politicians are concerned about sidestepping the environment to allow developers to build more quickly. Thus — we are dealing with a housing impasse that isn’t going to end any time soon.
Walkability is “in” for older Americans
Millennials and Gen Xers are going to be surprised: According to national survey by A Place for Mom released last week, people love to walk, and they are placing a higher value on living in “walkable urban centers” A majority of respondents surveyed said it was “very important” or “somewhat important” to live in a walkable neighborhood. They also sought neighborhoods with low crime and those that are close to family.
It comes as no surprise as many of my clients always seek out ‘paths to take our walks’. The survey pointed out that it’s important for developers to consider creating multigenerational communities in suburban centers that place an emphasis on “walkability.” One senior community developer, Bill Pettit, president of R. D. Merrill Co, said that “we assumed that seniors wanted to be surrounded by their peers. And what we found that those seniors were increasingly being bussed to other locations that generate that ‘inter generational connectivity.’
High walkability scores are a plus for selecting new senior living centers in urban areas. “When you can walk to shopping or cross the street to a park, it gives seniors a ‘lift’ rather than sitting and playing bingo during the day,” he said. When I was in China a few years ago, it was amazing for me to see the number of older people (their mandatory retirement age is 55!) in the park, fairly in the morning, dancing, taking Tai Chi classes and being part of a choir. A wonderful life affirming event!
The Federal Reserve left interest rates unchanged last week but conveyed more concern about recent inflation trends, which clouds prospects for when the next rate hike might occur. But at the same time, the central bank indicated that economic conditions looked good, with job growth solid and consumer and business spending continuing to expand.
Inflation is a key issue when it comes to whether rates rise or fall and during the last three months, the Fed’s 2 percent growth target was slipping even though a tightening in the labor market should be pushing up wages and inflation. Fed Chairwoman Janet Yellen regarded the resent softening in inflation as mostly a blip.
Economists aren’t sure why inflation has lagged because “a little inflation can help boost wages and company profits…while low inflation can spell trouble. At this point, the Fed believes with most economists that inflation is signaling problems ahead.
Five costly insurance mistakes homeowners make…
Here are a few pitfalls homebuyers can avoid when purchasing or renewing their homeowner’s insurance;
1. Don’t underinsure your home. Falling to purchase and/or have enough insurance could leave you exposed with thousands of dollars in uncovered damages and losses. Consider all of the outside structures and personal property in the home including jewelry, cameras, computers, and expensive antiques…get appraisals, take pictures & video and document everything;
2. Make sure your deductibles are fixed. Most homeowners think their deductibles are fixed in all cases — not always, especially in cases of weather events such as windstorms and or earthquakes.
3. Don’t assume flood insurance is included. If you live in canyon areas or the flat areas where runoffs have occurred after heavy rains, flood insurance is a must…it’s very affordable.
4. Mold and sewage backup is not normally included. These items are not normally covered either in a standard homeowner’s policy. This can be easily added to your policy…it isn’t that expensive.
5. Earthquake insurance is better today than it has been in a long time. Not every homeowner buys earthquake insurance — only 17 percent of Californians have it. Most homeowners are doing a ‘roll of the dice’ on this one. But when the big one strikes, it’s a “nice-to-have” policy. The rates have continued to go down as well as the deductibles.
Conduct a thorough review of all of your ‘move-in- issues and focus on your “must have” coverage in your ‘neck of the woods.”
Why aren’t there more homes on the market?
Seriously, what’s going on? Obviously housing demand is there. The lack of supply has been thoroughly discussed in the Schiffer Line as well as all the national and social media, but after much research that was conducted by Trulia, it was found that the five factors affecting the lack of homes on the market is the lack of homebuilding. Developers are simply not building enough new homes. Period.
I know this sounds somewhat simplistic but the study found that new home construction was strongly related to inventory. A minor increase of 1 percent in inventory would show an increase of a net 1,300 homes. However, when you look at the County where the net increase in population was nearly 63,000 in 2016 (after subtracting deaths and move-outs), Los Angeles County is getting more behind all of the time. We don’t seem to be able to catch our breathe.
A surprise finding was that the share of owner-occupied homes owned by baby boomers is actually positively correlated with inventory. Everyone percentage point increase in the housing stock owned by those aged 55 and over is, on average, correlated with inventory that is 3.6 percent higher. Baby boomers’ decision to “live in place” or move to a retirement home could have a significant impact on future housing availability.
The solar eclipse…’path of totality’
With more than 12 million people living in the so-called path of totality, and millions more traveling to see the historic August 21st solar eclipse, companies and enterprising individuals are sensing opportunity. Hotels have been sold out for years. Eclipse viewing glasses are back-ordered on Amazon. People are charging thousands for a one-night stay in their homes. There are T-shirts, mugs, posters, books, iPhone cases, pillows, and leggings.
Economists say it is difficult to gauge how much revenue will be generated from the eclipse because it is such a rare event — it’s the first total solar eclipse to traverse America in 99 years, and the first time the path of totality will eclipse only over the contiguous U.S. Cities from coast to coast are expected to create a windfall of business for hotels, restaurants, gas stations and retailers — even Porta-Potty rental companies.
One the most desirable places to view the total eclipse is north of Bend, Oregon in Madras which is about 45 minutes away. The eclipse begins at 10:15 am approximately on the 21st. I envy my daughter Melanie who lives in Bend! You will need to hike in some 15 miles to camp and there is no water, electricity, or bathrooms. You bring it all with you and pack out with the trash when you leave. Some Airbnb properties are going for as much as $7,500/night…and residents are renting out their backyards for $150/night. Newport, Oregon is also a very popular site on the Oregon coast. The weather forecast for the Oregon Coast is for a clear weather. We won’t see much of this in Los Angeles…but you can depend on plenty of TV coverage.
Doing good deeds and having fun at the same time
A few days ago, a numb r of agents in my office organized and participated in a fun fundraising event for the Coldwell Banker Community Foundation. We all played games at a restaurant in West Hollywood and the monies we raised will go to my office being able to donate money through the Foundation to various charities such as the American Cancer Society, the Ocean Park Community Center, and Children’s Hospital.
My Real Estate World and Welcome to it!
Like most of my fellow agents, I am caught up with having a pool of buyers and no product to show them. It is frustrating and painful for all involved. When we do find something that works for them/they we get involved with the emotions of finding a house they want to buy, writing their offer, only to find they are one of possible 3 -5 other offers. One of the advantages my clients who are not all cash buyers has is the program that our lender, First Capital has which is called “Advance Review”. With this program, buyers are totally pre-qualified and approved for their purchase, so that the only remaining item is the appraisal of the property which is done within 2 -3 days. With this program, they are presented as strong as any all cash buyer, and have been able to prevail in those “pesky” multiple offers which is great for all. Please contact me so that I can assist you in finding you the special property and to utilize this program for you. It may take a few days longer to get that approval, but once you are, you can make your offer, knowing that you can compete with an all cash offer. It really helps if you do this before we start shopping so that you can “jump” when you find your new dream property.