The SchifferLine
Timely Real Estate News……………………………15 April 2022
*************************************************************
Celebrations
This is the time of year for the celebration of Passover, Easter and Ramadan.
I hope whatever holiday you celebrate; it is a happy, mediative and festive one spent with family and those close to you.
Hopefully, these celebrations will soften the bite of Tax Day on the 18th of April!
************************************************************
Sales remain strong although median prices are slowing
In the communities I report on each month, we are seeing continued strong volumes but not the robust increases in median sales prices that we have been experiencing during the Pandemic, which, by itself, seems a bit odd. For example, Beverly Hills median sales prices have fallen to $3.650 million, down 7.59% for March compared to February. However, please understand that under the new MLS reporting data I am receiving, the Beverly Hills area has been greatly expanded to include areas outside of previous reporting areas…so data is trending differently.
On the other hand, Bel-Air/Holmby Hills’s median sales price for March was up 88%, at $4.050 million, and Westwood/Century City was at $1.250 million or up 83%, while Brentwood was $2.100 million, up 9%.
Sales volumes were strong — Beverly Hills sold $883 million for March 2022, Bel-Air/Holmby Hills sold $326 million; Westwood/Century City was at $408 million, a very active market these days, and Brentwood was at $303 million in sales volume.
Days on market, always a valuable indicator of market strength, were down in all these markets, with Beverly Hills at 30 DOM, Bel-Air/Holmby Hills — 35, Westwood/Century City at 52, and Brentwood at 14 DOM, quite an improvement over last month. Santa Monica was at 52 DOM.
Median sales prices have moderated somewhat throughout the Westside, and we continue to see multiple offers on most properties — if they are competitively priced. I have several very qualified buyers who are seeking homes on the Westside, so please call me — Carole, 310-442-1384.
************************************************************
Rising mortgage rates….what to do? Buy now!
We’ve been through this before…recessions, economic slowdowns, inflation…you name it and it all eventually shows up in higher interest rates. And that’s where we are now. Going from less than 4% just months ago to a little over 5% for a conforming loan. This is our new reality. If you are waiting for the rates to go down, you will be greatly disappointed. So0, what to do?
My recommendation is that if you are searching for a new home, step up now because as we have seen in the past,
rates are going to continue to go up. Some economists see as much as 8% for mortgage rates in the near future, so today’s rate of 5.1% looks like a bargain. They also all say that should the rates climb to 8% they will “level back “ down in the 5 range. While these rates are certainly as low as they have been for the last few years, in the scheme of things they are still low, and again, are likely to stay at this rate. As we have seen before, those who are waiting for the ’return to normal’ are going to be frustrated as they have been in the past. We’re past the ’new’ normal. Waiting for the rate to get better is in my esteemed opinion fool hardy as is not going to happen. Wish I could tell you otherwise, but as they say, “A is A” Ayn Rand – “Fountain Head”.
************************************************************
What Is a Conforming Loan?
A conforming loan is a mortgage that meets the dollar limits set by the Federal Housing Finance Agency (FHFA) and the funding criteria of Freddie Mac and Fannie Mae. For borrowers with excellent credit, conforming loans are 
advantageous due to their low interest rate. According to my favorite lender, Simon Atik at Guarantee Rate Affinity that loan rate was 5.1%.
The total mortgage application volume fell another 6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was down 41% from the same week one year ago.
Applications to refinance a home loan, which have been falling steadily for months, dropped another 10% week to week. Refinance demand was 62% lower than the same week one year ago.
Please take into account our mortgage rate history….the current rates proport to be the best you will get for some time. I remember when I bought my condo in Westwood in 1982, I thought the 13% interest rate was a gift!
************************************************************
NAR’s chief economist Lawrence Yun on inflation:
Inflation continues to kick higher with an 8.5% consumer price rise in March. Aggressive inflation will force the Federal Reserve to raise interest rates multiple rounds this year and actively pursue quantitative tightening. That is why mortgage rates recently have shot up so high. Higher mortgage rates will inevitably pull home sales down in the coming months and slow home price appreciation. My projection at the moment is for a 10% reduction in home sales this year and a 5% home price gain by the year’s end.
“Rents rose by 4.4%, even though many private sector data sources have been pointing to even faster gains. Hotels
and motels are charging 29% more. Home price is not part of the consumer price index but has hurt first-time buyers, especially with rising mortgage rates. Clearly, more construction of both apartments and single-family homes is needed.
Realtors drive much more than the general population and have felt the pain at the pump. To airfare, which rose 24%, and pretty much to all goods that are transported. Higher energy prices moreover will provide revenue to energy-producing countries including Russia, irrespective of economic sanctions. It is a lower energy price from raising global oil supply that will squeeze Putin.”quantify this, gasoline prices were up 48% from a year ago. Higher energy prices will also filter up to
Yun is the long-time chief economist for the National Association of Realtors.
************************************************************
Fed to raise interest rates again….will impact real estate
A new rate hike will surely trigger higher mortgage rates…the question is: How much? There is no doubt that the Federal Reserve is going to be much more aggressive regarding controlling inflation, which hit a 40-year high of 8.5% for March. The ruling opinion amongst economists — the Fed will pile on 50 base points hike at their May meeting.
As I stated above, mortgage rates are now 5.1% and could go as high as 8% later this year. Not only do higher interest rates mean buyers’ monthly mortgage payments are going to rise, it will also result in some buyers, who must meet banks’ strict debt-to-income rations — losing their mortgage eligibility. Fewer buyers should result, however, in a deflation of U.S. home price growth, which is up 18.8% over the past 12 months.
The impact is not only going to be felt by first-time home buyers (the most), but it will make it more difficult for existing homeowners to move because it will mean giving up existing low-interest loans for much higher-rate loans in a new home. Also, homeowners are going to be impacted for any refinancing, so it behooves both buyers and sellers to assess their future financial moves relating to their home investment. Yes, it is challenging times.
************************************************************
Mortgage applications decline
As a consequence of all of this, mortgage application volume continues to decline “…as financial markets expect significantly tighter monetary policy in the coming months,” said Joel Kan, a Mortgage Bankers’ economist. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”
The refinance share of all applications fell to 38.8% from 51% a year ago. Mortgage applications to purchase a home declined 3% for the week and were 9% lower than the same week one year ago.
A strong employment market with continuing wage growth is keeping housing demand hot, but the supply of existing homes for sale is still extremely lean. Bidding wars tend to be the rule, rather than the exception. Affordability is falling fast, and entry-level buyers are being sidelined.
“The elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges,” added Kan.
************************************************************
Home prices continue upward trend….not ending soon
No surprise — home prices continue to rise everywhere as inventory remains tight. Home prices nationwide, including distressed sales, increased year over year by 20% in February 2022 compared with February 2021. On a month-over-month basis, home prices increased by 2.2% in February 2022 compared with January 2022.
The CoreLogic HPI Forecast, a leading real estate tracking source, indicates that home prices will increase on a month-over-month basis by 0.6% from February 2022 to March 2022 and on a year-over-year basis by 5% from February 2022 to February 2023.
“New listings have not kept up with the large number of families looking to buy, leading to homes selling quickly and often above list price. This imbalance between an insufficient number of owners looking to sell relative to buyers searching for a home has led to the record appreciation of the past 12 months.
Higher prices and mortgage rates erode buyer affordability and should dampen demand in coming months, leading to the moderation in price growth in our forecast,” according to Dr. Frank Nothaft, Chief Economist for CoreLogic.
************************************************************
Westside’s high-end sales are up but slowing….
While we are used to seeing amazing increases in home sales and price increases for each month of the past two years, we are seeing a bit of a ‘stall’ – we are still ahead of last year at this time, but it is not like it used to be.
There have been 252 closed sales of $5 million-plus so far this year, versus 233 at this time last year, up only 8%. Of these, 94 were $10 million-plus versus 75 at this time last year, up 28%. Sales are moving more slowly.
Twenty-five (25) of these sales were $20 million-plus, versus 12 at this time last year, up 108%. Of these, 12 were $30
million-plus and there were only two at this time last year. Of these, 10 were $40 million-plus and there was only one at this time last year.
The community locations of the 25 homes over $25 million were — seven in Beverly Hills Post Office, five each in Beverly Hills, Bel Air and Malibu, two in Hancock Park and one in Holmby Hills. At the moment, we have 101 pending sales of $5 million-plus and 26 of these are $10 million-plus.
************************************************************
Brentwood Circle, luxurious gated community
Brentwood Circle is a beautiful, 24-hour, guard-gated community of 67 luxurious homes, north of Sunset Boulevard
within close distance to Brentwood Village, a quaint shopping area featuring fine restaurants, shops, offices, beautifulparks and a post office.
What makes Brentwood Circle unique is that it has the prestigious, world-famous Getty Center as its neighbor to the north. And with that, a bit of trivia and history: When the Getty Trust decided to build on their incredible property in Sepulveda Pass in the 1980s, one of their emergency access roads to their property was through the Brentwood Circle neighborhood.
This presented challenges for both neighbors, and to resolve the issue the Getty Center helped facilitate the construction of a private gate to control access to both the community
and the Getty. Today, Brentwood Circle has a 24-hour guarded main entrance, augmented by two other exit-only gates within the community.
Brentwood Circle is a unique enclave in many ways…it has a relatively small number of homes for a private community which naturally brings neighbors together…and in the past the community purchased two-foot cast iron bells that they would display during the holidays, (only a few remain, however) and more importantly, there is little turnover of homeowners because residents love the uniqueness of Brentwood Circle and the privacy it provides.
************************************************************
What is the mood and temperature in my office now?
Frankly, it is quite busy. At our weekly sales meetings we are hearing the reports of a few more listings, a good number of new escrows, and some really extra ordinary leases, with some really healthy amounts. The majority of my office recently went on a road trip to Santa Ynez to see two homes listed by Coldwell Banker, one for $69,000,000 and the other for $30,000,00. Unfortunately, I was not able to join them as I was too busy working on other things to take a day or two off to play. I will share their findings on my next Schiffer Line on the first of May.
One of the things I am working on is preparing my new listing in Westwood Hills, which will be coming on the market the end of this month. It is a charming home that is getting its “Spring Sprucing up” done before it is shown. The price will be $1,699,000. I am taking names and phone numbers for anyone that might be interested so they can get a head start on seeing it when it is ready. If you are or know someone who might be interested, please do not hesitate to give me a call… 310 442-1384 and I will add you/them to the list.
************************************************************
Some Final Thoughts
As we look at the horrific pictures and news reports coming out of Ukraine, I am reminded of how lucky we all are to live where we live and to celebrate with our loved ones
Happy Passover, Easter & Ramada
You must be logged in to post a comment.