Timely Real Estate News……………………………..1 December 2018
Fires affect home price growth in September
Home price gains slowed to 5.5% in September, year-over-year, according to the latest S&P CoreLogic Case-Shiller National Index. Year-over-year growth was down from 5.7% last month and the second time in 12 months price gains fell under 6 percent.
Supply and demand are falling into balance in the housing market according to Ralph McLaughlin, deputy chief economist and executive of research and insights for CoreLogic. “On the supply side, slow but steady growth in inventory is providing relief to homebuyers. On the demand side, years of price growth outpacing income growth, as well as rising mortgage rates, is making the cost of buying homes increasingly expensive.”
The western region led the way in gains, with Las Vegas up 13.5% year-over-year price, followed by San Francisco with a 9.9% increase and Seattle with an 8.4% percent increase. This is the second straight month where price gains in Seattle fell below 10% after years of leading price growth among the cities tracked. September marked the seventh month of flat or decelerating home price growth as the housing market settles into a slowdown.
Women ahead in battling for home ownership
Women appear to be winning the battle with men as to who wants to own a home the most. According to Bank of America’s latest homebuyer insight report, women are “out-buying men”.
Single females not only value homeownership more than single males — 73% to 65% — they also place a higher priority on saving for a down payment — 65 % to 55%, according to the report’s spotlight on single female buyers. They also prioritize improving their credit scores more than unattached men, 49% to 42%.
Single women are confident in their abilities, but they are still having a tough time saving for a down payment. Nearly half haven’t taken the leap into ownership because they haven’t put away enough money. Another factor delaying their move: They are more likely to feel overwhelmed by the prospect of ownership than single males, 40% to 30 %.
Nearly 60% of future buyers are now planning to hold off until prices subside. Even those folks who want to move up from one house to another are waiting for “a meaningful correction,” the survey found. And 14% said they’d drop out of the market altogether if a correction fails to materialize.
Homebuyers making compromises….
We don’t always get what we want in life as it is in real estate. In California’s competitive housing market, homebuyers are making compromises in their home purchases including price, size, location, and school quality according to the latest survey by the California Association of Realtors.
CAR examined the attitudes and behaviors of real estate consumers, revealing 44% of buyers bought a more expensive home than they wanted, 33% purchased a smaller home than desired, 36% purchased a home further from school/work than wished, and 30% purchased in an area where schools were of lesser quality.
According to CAR, well-qualified home buyers “understand that buying a home can be challenging in a competitive housing market environment and they may not be able to buy the ideal home they want.”
Surprisingly, buyers were not deterred by higher home prices and tight housing supply conditions but waited until their financial situations improved or to save for a down payment. Depending on the region where they live and the prices of the homes in that area, buyers typically saved for five years, and nearly a quarter of those who purchased a home priced $1 million or higher saved more than 10 years.
The source of down payment for the majority of home buyers was their personal savings. Boomers were more likely to use the proceeds from the sale of a previous home since many were repeat buyers. Millennials were significantly more likely than Gen Xers or boomers to use funds received from parents or family or a gift.
Apartments getting smaller, costing more
Surprise, surprise, surprise! Apartments are springing up everywhere, but they’re smaller than before and cost renters more. The average size of newly built apartments in 2018 is 941 square feet, which is 5% smaller than it was a decade ago. For studio apartments, the change is more pronounced — they’re 10% smaller. Rents, on the other hand, have jumped 28% during the same time period, according to RENTCafe, a nationwide apartment search website.
Changes in renters’ living habits are literally redrawing floor plans according to the survey. The largest share of apartment dwellers, Millennials, prefer living in locations close to restaurants and entertainment, rather than having a large kitchen or living room to cook in or to entertain at home. This comes as no surprise in the Los Angeles area, where housing prices have kept most Millennials out of the home-buying market.
Higher rental costs today, however, have millennials looking for savings by renting smaller units, and developers are clearly responding. Micro-units are becoming more popular, following on the tiny-house trend, as millennials tend to be more environmentally conscious than previous generations. Apartment developers are supplementing the smaller units by adding more common area spaces to their buildings, in which residents can both work and entertain.
Feds significantly expand probes into all-cash deals
It was bound to happen — the federal government is expanding its investigations of all-cash real estate transactions. Title insurance companies in 12 of the nation’s largest markets, including Los Angeles, will now have to provide federal authorities with substantial details on all real estate transactions of $300,000 or more if the buyer is paying all cash.
The requirement comes at the hands of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which is pushing investigations into whether foreign buyers are using shell companies to buy U.S. real estate in order to launder money.
The investigation has been going on for almost three years and has been expanded several times. The results of that initial investigation showed more than 25% of transactions covered in the initial inquiry involved a “beneficial owner” who is also the subject of a “suspicious activity report,” which is an indication of possible criminal activity.
The initial investigation also led FinCEN to expand the probe to include all of New York City, Los Angeles, San Francisco and several other areas. The investigation was later expanded again to include wire transfers. Going forward, title companies in Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle will all be required to report on the person behind shell companies on all-cash transactions of $300,000 or more.
CA wildfires bring big changes to real estate
The effects from the recent Camp Fire and Woolsey Fire extend far beyond the severe damages inflicted on more than the loss of life, property, and much valued forestry and natural habitat. Here are five challenges California’s housing market is facing now. 1) Deepening housing crisis continues in both Northern and Southern California. The state has fallen short with 80,000 new housing units each year as supply has not kept up with demand…and the displacement of families resulting from nearly 14,000 homes lost in the last two months just exacerbates the crisis. There are no simple solutions, and many are being forced to leave the state altogether. 2) Diverting labor required for new housing. Another severe impact will be longer term. Skilled labor continues to be an urgent need for California’s housing industry. Many skilled workers are moving out, and with areas such as Santa Rosa and Paradise facing a minimum of 10 years of rebuilding, labor is going to be short supply. This diversion from new housing will be felt for some time. 3) Increased building costs. Everything is going up — lumber, concrete, and materials needed for building or rebuilding homes is affected. Costs-per-square foot after the Wine Country fire jumped dramatically. And insurance companies didn’t always cover the higher costs of rebuilding. 4) Challenging insurance companies. Insurance companies have one goal – minimize risks and payouts. Expect major policy changes (read the fine print at renewal time) and premium increases that are here permanently. Already, many insurance companies are pulling out of these disaster areas and/or California. This is a state-wide problem. 5) Changing future building codes. Many argue for severe restrictions on approving building in known fire or flood zones, and some go as far as wanting a ban on housing in fire prone areas. Those cities affected are already the questions of what do we next to prevent the severe loss of property and life?
All of these challenges are sitting in our lap right now. It’s going to take time, patience and innovative planning to deal with these crises, which we seem to face every year. These recent fires are, indeed, permanently reshaping the face of real estate in California and in the rest of the U.S as well!
Make sure you have the proper mask….
One of the realities many of us have faced with the horrible fires in Los Angeles & Ventura Counties, has been how to deal with not only the fires, but the smoke and bad air quality throughout the blaze and afterward.
The Woolsey fire, which consumed more than 98,000 acres, causing 3 deaths, and 1,500 structures having been destroyed, generated air quality warnings across Southern California. Smoke and bad air from the Camp Fire in Paradise, CA, has been traveling across the US and reaching the East Coast.
Residents scrambled to get masks to avoid inhaling toxic pollutants in the air during and after the Woolsey fire, and the fact is that health professionals and firefighters were fitted for the right mask, but the general public was not. Bottom line: You need the right mask.
The California Governor’s Office of Emergency Services and the California Department of Public Health recommend N95 respirators or P100 masks, both of which are approved by the National Institute for Occupational Safety and Health for use by healthcare workers and firefighters.
Some health experts recommend N95 respirator masks to help protect against wildfire smoke. Simple dust or surgical masks do not offer the same kind of protection. Many locations quickly sold out of the N95 mask after the Woolsey fire started…best you get one for each family member now — Home Depot, Amazon.com, CVS, Walgreen’s are some of the more accessible store locations. They cost from $8 to $16. There are also many concerns about the search for lost items as there are many toxins in the charred items that are being moved around in the search for lost items.
Santa came early to Wall Street
Not many were expecting Santa to deliver a present for Wall Street this early, but Fed Chairman Jerome Powell apparently placed one under the tree by calming the market’s fears of more interest rate hikes. Powell was mostly upbeat about the U.S. economy, forecasting continued solid growth, low unemployment, and inflation near the Fed’s 2% annual target.
A slight indication was given by Powell that interest-rate hikes were not necessarily coming in December, stating that there is a great deal to like about the outlook for the economy. And he, and other Fed officials indicated there was no pre-set policy path. Although Powell didn’t exactly state there were not going to more Fed hikes, investors took his remarks as good news. Powell stated the Fed will wait to see the data.
Another component of the good news, is that the Federal Housing Finance Agency gives 2019 homebuyers a break with a 6.9 percent increase in the max loan amount Fannie Mae and Freddie Mac can purchase. Homebuyers will be able to afford a little more house at a slightly cheaper rate next year thanks to the boost.
I have a number of buyers for homes in both Bel Air Crest and homes in Mountaingate. One Mountaingate buyer is very specific in that he wants a golf course view, specifically the south course view. Another Bel Air Crest buyer wants/needs to have a home with an elevator (Canyon home only) All of these buyers are currently renting, and have nothing to sell, so if you are at all thinking of selling your home, and don’t want the hassle of the tradition open houses, etc., please let me know and perhaps we can make a happy marriage.
How was your Thanksgiving? Mine was somewhat on the quiet side as I primarily spent it with my Mom and got some much-needed sleep. It seems I have been on a treadmill the last few weeks and I was soooo very tired, my bags had bags! My sister & her family are coming for the Christmas holiday and I am very much looking forward to seeing them all and spending time with them.
With the horrible events of November hopefully behind us, and now we are dealing with the rains and hopes that there is no more damage because of the burn scars, I am so very grateful for all that is my life,, my family, friends, colleagues, business and its associates.
Please do not forget to check out my free app if you are curious to know what the house next door is selling for or you just want to keep track of what’s going on in your neighborhood
I hope you have a great holiday celebration starting with Hanukkah this coming Monday.