Timely Real Estate News…………………………..1 August 2018
Prices set record, again, as sales head south
There was good news and bad news. The good news for homeowners is that prices set another record for Southern California, hitting an all-time high of $536,250 for June, a jump of 7.5% from a year earlier.
Here’s the bad news — sales plunged over the same time period, indicating sky-high housing costs could be burning out many home shoppers. The six-county median — the point at which half the homes sold for more and half for less — hit $536,250, real estate data firm CoreLogic stated last week. That’s up $6,250 from the previous record high, reached in May.
Sales dropped to 22,706 units, down nearly 12% from June 2017. It was the lowest number of closed sales for June in four years. The drop-off may signal people are increasingly priced out of the market or simply unwilling to pay an exorbitant amount for a home. Real estate professionals said many of their clients are worried about purchasing at the top of the market.
We are witnessing bidding wars, even though that number has lessened in the $2 million-plus range, so it’s not a lack of financing, it’s the lack of available, quality listings. We’re seeing homes that are not priced competitively sitting, as homeowners look at the record price increases and think it applies to their own home. It doesn’t always translate. As I have said many, many times it is a proven fact that if a home comes on the market too high and the price is not adjusted quickly, it will ultimately for less that it would have had it been priced correctly from the get go. I was just speaking with one of my colleagues today about one of her listings that had fallen out of escrow. It originally came out too high, they lowered the price, sold it with the seller thinking they were giving the house away, the buyer changed their mind as they are wont to do, and now they have another offer and might take it that is even lower than their accepted offer a few weeks ago!
Sales fell in all six counties, with the declines ranging from 8.5% in Orange County to 19.8% in Ventura County.
CoreLogic analyst Andrew LePage noted that would-be buyers are also facing higher mortgage rates. The average rate on a 30-year fixed mortgage was 4.52% last week, up from 3.96% a year earlier, according to Freddie Mac. In June, when accounting for the rise in mortgage payments over the year, payments on a median-price home rose more than twice as quickly as the median price, LePage said.
Despite the high prices, the $536,250 median, after adjusting for inflation, remains 9.5% below the bubble-era high reached in 2007. So, we’re not really back to where we were, but this inflation difference is better than it was several months ago.
Economists also note that if buyers can qualify for a loan, their monthly mortgage payments would be more affordable
than in the mid-2000s because the cost of borrowing is still historically low. So, this is good news.
Luxury housing market is ‘burning up’
Like our weather, high-end home prices are “hot”, surging even though sales are lagging. The “law of supply and demand” is playing out as inventory drops but demand for luxury housing just doesn’t stop. The median sales price for a single-family luxury home grew 5.3% in the second quarter compared to the same period last year, to $10 million, according to the recent published report. What constitutes a “luxury” home you might ask, any home with a sale price in the upper 10% of all the listings in that particular market, which as you can imagine varies from market to market.
More specifically for our market, the number of closed sales from April through June dropped 6.2% year over year, to 91 homes in L.A.’s luxury market.
GDP up to 4.1%…. Best pace in four years
According to the Commerce Department, the gross national product grew at a solid 4.1% pace in the second quarter, its best pace since 2014, boosting hopes that the economy is ready to break out of its decade-long slumber. That’s the fastest rate of the growth since the 4.9% in the third quarter of 2014 and the third-best growth rate since the Great Recession. In addition to the strong second quarter, the Commerce Department revised its first-quarter reading up from 2% to 2.2%.
How will this affect our real estate market? A hot economy brings inflation and in the real estate market, that means inflated home values, already bursting at the seams. So, if a booming economy is going to be positive, it has to also stimulate home building, increasing inventories, and affordability. Affordability, especially for the largest home-buying generation in America — the Millennials, is their biggest challenge.
Not everyone is happy with the rapid rise of home prices, and the question many homeowners have: Where do we go from here? I have clients who want to put their homes on the market now, but they’re trying to finding a solution on the other end.
Some 500,000 have left California since the first of the year, because of its high cost, high taxes and resettling in nearby Arizona, Nevada, Oregon or moving to Texas.
We want and need happy endings…let’s hope the strong economy delivers for all of us.
You can’t ignore them…they were supposed to be the largest home-buying generation in America today. They aren’t. Millennials should be making a sizable stamp in homeownership, but they have been largely absent from the housing space.
Why is it that the largest generation in U.S. history isn’t participating in real estate as heavily as its predecessors? There are many difficulties standing in their way according to new research.
A recent report by the Urban Institute on millennial homeownership, delves deeper into the generational home-buying gap to assess the factors that are holding millennials back from their homeownership goals. When looking at the 25-34 age group, millennials are behind Gen Xers and baby boomers in homeownership rates by 8-9 % points, according to the report. When comparing overall homeownership rates in 2015, millennials were behind baby boomers at 42.8% and Gen Xers by 28.2%.
Parental wealth and creditworthiness all play a role, but the biggest factor is that millennials are delaying major life events such as marriage and childbearing, hence no need for a home. The fact is — marriage and children raise homeownership by 18% and 6.2% respectively. And millennials — 36% — have a much high student loan debt compared to GenXers at 18% and Baby Boomers at 4.1%.
Caution signs: Many millennials who want to buy homes are exhibiting risky behavior when coming up with a down payment to buy a home, with about 1 in 3 (29%) saying they raided their 401(k) or IRA or borrowed against their retirement accounts according to a Bank of the West report This is a move personal finance pros say could hurt their financial well-being. Still, 92% of millennials who don’t currently own homes said they would like to buy one someday, according to the survey of 609 millennials between ages 21 and 34 conducted in November 2017.
Recycling nightmare…how to handle?
According to recycling experts, Californians like to “feel good” about their recycling contributions. They believe they’re helping the environment by dumping just about everything that they believe is “recyclable” into the blue trash container. Unfortunately, that is not the way it works.
Much of the stuff that goes into the blue bin is headed to the landfill, not for the recycling plant. That is because there’s no longer a recycling market for a lot of the paper, cardboard, plastic and other junk that’s left curbside. Moreover, people are tossing garbage into those blue bins that they shouldn’t be. It just gums up the process.
According to a recent article in the Los Angeles Times, the public is engaged in “wish recycling” — they think this should be recycled, and “I’m going to put it in the bin.” It’s amazing what people put in the recycling bin according to recycling experts— dirty diapers. broken crockery, old garden hoses, and the worst offenders, old batteries. The list goes on — pizza boxes, unclean jelly jars, broken glass, newspaper from bird cages —all items that just foul up the process.
I will be covering this recycling story in the next Schiffer Line also. It’s an important topic us to pay attention to make sure we are doing it right. Also, please do not forget about the safe recycling center on the UCLA campus. Their address is 550 Charles E Young Drive, West (just up the street from the UCLA Hospital). Their hours are Thursday & Friday 8-2 for Hazardous Waste ONLY, and on Sat from 9-3 for both Hazardous and Electric Waste. It is such a feel-good thing to do and quite easy!
Los Angeles mourns loss of Jonathan Gold
Without question, Jonathan Gold represented all the best of this City and its environs. It was so sad to learn of his passing…it broke my heart because I read his columns religiously…. not so much about trying to follow his restaurant recommendations, but more from the perspective of the joie de vivre that he had and that his writing represented. It wasn’t always about the best, most expensive restaurants in Los Angeles or anywhere, it was always about the food, the people who made the food, and the impact the food had on him and all of us. His musical background was/is also something that made him a very special person. What most people don’t know is the before food there was music. A lot of music. An accomplished cellist and conductor, Jonathan Gold offered up two wildly different personalities — loving classical and heavy metal. He was a celebrity… as a friend described whims a “combo of Falstaff and Custer.” He was credited, or blamed, for inventing the term “gangsta rap”. Jonathan Gold won the Pulitzer Prize while working as the Los Angeles Times restaurant critic. Although he appreciated and wrote beautifully about fine dining, he revered the taco truck more than the tasting menu.
He truly was one of the icons of our city.
My Speakers Corner
While I must admit the heat takes some of my “stuffing out”, I continue to be busy working in this crazy business called Real Estate. I love it because it is always different. Everyone has a story and being a “people person” it is fun to meet and get to know different people all of the time.
My two listings, one in Mountaingate on Promontory and the other on Coquette Place in the hills of Tarzana are both waiting for their new owners to come and claim them and to make them theirs. Promontory is open almost every Sunday, so if you have yet to see it, please stop. Coming up soon are two Canyon homes for sale in Bel Air Crest, and a lease or two as well. Also, keep your eyes peeled for my new free app.. Carole Schiffer. It should be up and running in about a week or two and you will be able to get a ton of informatioon real estate, inventory, etc. I am very excited about it and hope you will enjoy using it.
In the meantime, please continue to visit, my Facebook page http://www.facebook.com/CaroleSchifferRealtor, my Lindekin page http://www.linkedin.com/in/caroleschiffer and @caroleschifferrealtor on Instagram.
Also, I would love to meet with you for just a cup of something cold to drink (I am not a coffee lover).
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