The SchifferLine
Timely Real Estate News……………………………1 March 2022
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Pre-owned homes sales surged last month
The surge in sales of previously owned homes last month reported by the National Association of Realtors last Friday reflected buyers are rushing into close contracts in anticipation of mortgage rates rising further. Investors made up the largest share of transactions in six years last month.
Mortgage rates have climbed to levels not seen since 2019 as the Federal Reserve is expected to start increasing interest rates next month to tame soaring inflation. Economists are anticipating as many as seven rate hikes this year.
“This is the rush to get in before borrowing costs move higher,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “Unfortunately, first-timers are being priced out of the increasingly expensive purchase.”
Existing home sales jumped 6.7% to a seasonally adjusted annual rate of 6.50 million units last month. Sales rose in all four regions, with strong gains in the Midwest, the most affordable region. Sales soared 9.3% in the densely populated South, which is experiencing an influx of residents from other regions as companies embrace remote work.
Economists polled by Reuters had forecast sales decreasing 1.0% to a rate of 6.10 million units. And home resales, which account for the bulk of U.S. home sales, fell 2.3% on a year-on-year basis.
Strong demand for housing against the backdrop of a strengthening labor market and massive savings is outstripping supply, curbing sales. Builders have been unable to significantly ramp up construction because of shortages and higher prices for inputs like softwood lumber for framing as well as cabinets, garage doors, countertops and appliances.
According to a report from the National Association of Homebuilders, delivery of these products was taking “months,” raising construction costs and delaying projects started raced to a record in January.
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War in Ukraine could force Fed raising rates
We are all connected, and the Federal Reserve is taking notice of the war in Ukraine as it could have an impact on inflation pressures already being felt in the U.S. The war in Ukraine is not likely to prevent the Federal Reserve from raising interest rates next month, but any worsening of inflation pressures could force the central bank to tighten policy even more aggressively than already hinted by senior officials. All of this circles back to mortgage rates which are trending upward since January.
In public comments and interviews last week, Fed officials endorsed plans to lift rates at their March 15-16 meeting.
They said it was too soon to tell how the war will affect the economic outlook, but they are monitoring developments carefully.
Their problem is that they had anticipated U.S. inflation, now running at a 40-year high to peak this quarter. Geopolitical developments that push up prices through the spring, particularly for energy and commodities, could force the Fed to accelerate rate increases this summer, which would raise the risk of a recession next year.
During geopolitical shocks, the Fed generally avoids taking steps that increase uncertainty. But with inflation running far above its 2% target and the Ukrainian crisis threatening to push prices even higher, the Fed could face considerable urgency to continue with planned rate rises.The global economy has been recovering from a series of “supply shocks” in which shortages of goods or services drive up their prices. Textbooks call for central banks not to react to one-off increases in prices that result from temporary factors, such as natural disasters, and to instead focus on broader underlying inflation pressures.
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Climbing mortgage rates hurt potential homebuyers, re-fi markets
Rising mortgage rates are hitting both potential homebuyers and refinance candidates. Total mortgage applications decreased 13.1% last week to the lowest level since December 2019, according to the Mortgage Bankers Association. Applications to refinance dropped 15% weekly and were 56% lower than one year ago.
“Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.06% from 4.05%, with points rising to 0.48 from 0.45 (including the origination fee) for loans with a 20% down payment.
Those higher mortgage rates combined with high prices and low inventory pushed applications to purchase a home down 10% weekly and 6% lower than one year ago. This was the third straight week of declines for purchase applications.
The average purchase loan size in the MBA weekly survey did not increase, but at $450,200, it stayed very close to the survey’s record high of $453,000, which was hit the week ended Feb. 11.
Home prices have been climbing steadily and did not let up in 2021. The S&P CoreLogic Case-Shiller Home Price Index was released last Tuesday, and 2021 registered the highest calendar-year increase in 34 years, according to Craig J. Lazzara, managing director at S&P DJI. Prices nationally were up 18.8% in 2021 versus a 10.4% gain in 2020.
Rising mortgage rates will pose a challenge for some buyers, likely leading to less demand. Lazzara predicts that price growth will soon slow in reaction to higher rates.
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Home prices slowed in 4th Quarter, albeit still moving upward
The fourth quarter of 2021, much like the third quarter, saw home prices continue to increase, although at a slower pace. Fewer markets in the last quarter experienced double-digit price gains.
According to the latest quarterly data, out of 183 measured markets, 67% of the metros reached double-digit price appreciation compared to 78% in the prior quarter. Nationally, the median single-family existing-home price rose at a slower rate of 14.6% year-over-year to $361,700 compared to the year-over-year pace in the previous quarter (15.9%).
While the third quarter of 2021 witnessed all regions achieve double-digit price gains, the fourth quarter saw only
the South experience double-digit price appreciation (17.9%), and single-digit price gains in the Northeast (6.8%), Midwest (8.6%), and the West (7.7%).
California led the way with five metros in the top 10, along with five other areas, including: San Jose-Sunnyvale-Sta. Clara, Calif. ($1,675,000; 19.6%); San Francisco-Oakland-Hayward, Calif. ($1,310,000; 14.9%); Anaheim-Santa Ana-Irvine, Calif. ($1,150,000; 23%); San Diego-Carlsbad, Calif. ($845,000; 14.2%); Los Angeles-Long Beach-Glendale, Calif. ($797,900; 15.9%).
“Homebuyers in the last quarter saw little relief as home prices continued to climb, albeit not as fast as earlier in the year,” said Lawrence Yun, NAR chief economist. “The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply.”
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Homeownership climbed in US to 65.5%
In a report just released by the National Association of Realtors, U.S. homeownership rate climbed to 65.5% in 2020, up 1.3% from 2019 and the largest annual increase on record.
More Americans are likely to own a home now than during any year following the Great Recession (65.4% homeownership rate in 2010); however, Black Americans continue to face significant obstacles along the path to 
homeownership, according to the NAR. The homeownership rate for Black Americans – 43.4% – trails behind that of a decade ago (44.2% in 2010). Conversely, White Americans (72.1%), Asian Americans (61.7%) and Hispanic Americans (51.1%) all achieved decadelong highs in homeownership in 2020, with the rate for Hispanic Americans setting a record and reaching above 50% for the first time.
NAR’s report examines homeownership trends and challenges by race and location to explain current racial disparities in the housing market. Using data from the 2021 Profile of Home Buyers and Sellers, the report looks at the characteristics of who purchases homes, why they purchase, what they purchase and the financial background for buyers based on race.
“As the gap in homeownership rates for Black and White Americans has widened, it is important to understand the unique challenges that minority home buyers face,” said Jessica Lautz, NAR vice president of demographics and behavioral insights. “Housing affordability and low inventory has made it even more challenging for all buyers to enter into homeownership, but even more so for Black Americans.”
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Guess who is grabbing land near big cities. Self-driving trucks!
The prospect of self-driving trucks could further intensify a land grab near big cities, one that is already fueled in part by the increase in long-haul trucking during the pandemic.
Alterra Property Group, a real-estate investor based in Philadelphia, said last week that it has launched a partnership
with autonomous-truck company Embark Trucks to buy property across the U.S. near major city hubs.
Embark, which went public in November in a $5 billion deal, plans to commercially launch the first trucks using its software in Sunbelt states such as California and Texas in 2024. The autonomous trucks would drive on highways, then pass on the trailers to human-driven trucks for the final stretch of city deliveries.
To do that, Embark needs numerous so-called transfer hubs close to highways on the outskirts of cities to park and switch trucks. Under its partnership, the company plans to initially lease these sites from Alterra.
The emergence of self-driving trucks comes as Americans’ voracious demand for electronics, household wares and other goods during the pandemic has been boosting amount of truck traffic. Truck operators need land near big population centers to store their vehicles.
But that land is scarce. For one, developers have been buying up outdoor facilities for use as e-commerce warehouses. And strict zoning rules mean that few sites qualify for truck storage. “You can’t just put a truck anywhere,” said Alterra’s co-managing partner, Matthew Pfeiffer.
That is creating a significant supply-and-demand imbalance. Investors are looking to profit by buying up these hard-to-find sites and renting them out to logistics or traditional trucking companies under five- or 10-year leases.
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Realogy, Coldwell-Banker’s parent, grows market share
Realogy earned $8B in 2021 revenue, $2B in Q4, as the parent of Coldwell-Banker, market share grew as well. Strong transaction, sales volume and market share growth boosted Realogy’s revenue as CEO Ryan Schneider says platforms like Zillow are company’s true competitors.
Despite a topsy-turvy real estate market marred by inflation, increasing mortgage rates and rock-bottom inventory levels, Realogy reported $8 billion in revenue for 2021 — $2 billion of which the company earned in the fourth quarter.
From September to December, Realogy’s revenue increased four percent year over year to $2 billion — a slight decline from the previous quarter’s $2.2 billion. The franchisor’s net income also grew from $29 million in Q4 2020 to $47 million in Q4 2021. Likewise, the basic earnings per share rebounded from $0.24 per share to $0.40 per share.
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Is there help in the wings for concerns about fire insurance?
Given all of the recent attention and concern about the increased potential and length of wildfires, and the difficulty for those of us who live in fire prone areas to get fire insurance, according to a recent article in the Los Angeles Times state officials have issued a “Safer from Wildfires framework.
The framework lays out a list of upgrades that individuals as well as local governments and community groups
should take. I have shared some of those suggestions in past Schiffer Lines but will do so again. These suggestions are drawn from best practices outlined by the consumer group United Policy Holders, the Institute for Business & Homes Safety and Cal Fire, among others. The recommendations are the results of an effort begun a year ago by Insurance Richard Lara and several state agencies involved in firefighting and prevention.
Today, 13 insurers with 40% of the market in the state are offering discounts to homeowners who have made fire-related safety improvements or who live in communities that have done so.
Here are six (6) recommendations to help making your home more fire resistant – Installing a roof rated Class A for fire resistance – Creating a 5 foot wide zone around the house for example laying down gravel or stone walkways in place of mulched flower beds – Removing combustible material such as untreated siding – blocking the entry of burning embers by covering vent openings with fire-resistant metal screens – installing double pained windows or fire resistant shutters – Enclosing the eaves to prevent burning embers from drifting into your attic. I will have more information on my next issue of Schiffer Line on the 15th of the month. Stay tuned!
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My Life
Recently I have been living the highs and lows of life in celebrating my birthday last week. The amount of celebrating with friends and family has been amazing. Between the flowers, and candy, it has been awesome// THANK YOU ONE AND ALL!
As some of you may recall, we lost my darling Mother almost two years ago, and due to some complications, we have just closed escrow on her house. Selling the house both my sister & I grew up in was very sad in closing that chapter of our lives, but sweet in the hopes that the young family who will be living there will enjoy it as much as we did. Mom had been a docent at LACMA and had an amazing art book collection which was donated to them and now will be the Kelly Schiffer Library, and some of her fabulous clothes have been given to the Music Center to be used as costumes which would thrill her, in fact she had said that some of them she wanted to be used in that fashion! Thank you to my
amazing sister for making that happen!
In the meantime, I continue to work with my buyers and hunt for properties to sell them. There really is a dearth of properties out there, so if you have an inkling of selling, please do let me know. I have some new videos on you tube. Here is the link. https://www.youtube.com/channel/UCjgqPmbfG1ERg5egYACFKKQ. Also, please subscribe to itThey can also be found on my business face book page for the next 10 weeks every Thursday.
I look forward to seeing and speaking with you. Please do not be a stranger. I celebrate that life is somewhat returning to normal (whatever that is or was), and we can all be out and about again. As I was told at a memorial service this past weekend, tell people that you love how you feel about them… let them know how important they are to you… please know that all of you are very important.
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