Timely Real Estate News……………………. 15 August 2015
Sales volume surges ahead of 2014
As of July of 2105, the sales volume has moved past last year’s mark of $1.866 billion. It took seven months to get there, but we did! July’s figure of total sales volume for the communities I report on is $1.955 billion or a 4.7% increase year to date.
“This is really good news for our area, especially after falling way behind as of June 2015 when we were 17% behind in year-to-date sales for the year,” Carole Schiffer stated. Remember, sales reported in July are sale made in May, June and July. We will see how we do for the rest of this quarter ”. Look for our next report on September 15.
The biggest leap in sales volume occurred in Beverly Hills where they are $126 million over total sales through the first seven months of this year, and this one community accounted for the major increase in sales for Beverly Hills, Beverly Hills Post Office, Bel Air, Brentwood, and Westwood/Century City. Beverly Hills Post Office sales volume was down $9 million compared to 2014…Bel-Air was up $20 million, but Westwood/CC and Brentwood were down $14 million and $25 million respectively. “Still, what has been missing has been some of the large estate sales that we have come to expect every year in this affluent, desirable market” Carole said.
Beverly Hills had nine sales over $3 million in July with the largest at $19 million. BHPO had seven sales over $3 million and a $20 million sale. Brentwood had eight sales over $3 million and a $14 million transaction. Bel-Air had only three over $3 million and Westwood/Century City had only one over $3 million. As usual, these large sales which are the ones that are reported in the MLS, skew the numbers. They do not include any private sales that also might have taken place.
What is interesting to note this past July are two communities — Bel-Air and Westwood/Century City — have seen the SP/OLP (Sales Price vs. Original Listing Price) reach 100%, which is not normal for this market. Over-pricing still occurs, especially when long-time homeowners want to maximize their value but find that their properties suffer when their listing price is simply too ‘rich’ for the market. Yes, they eventually sell, but at a cost in terms of $$ and time, and generally for less than they would have sold for if they had been properly priced from the get go.
After the price surges in June, things have calmed down
We witnessed some of the largest median sales prices increases (in terms of %) ever in our communities in June 2015 — with some median sale prices going through the roof. For example, Beverly Hills was up 91% over the previous month (May 2015)…BHPO was up 79%….Bel-Air was up 50%, and Brentwood was up 54%….Westwood/Century City was up 18% over the previous month. So, you can see that prices were zooming upward as the summer kicked off. But that has changed. Prices are coming back to earth now.
In fact, all five communities slid back into the negative growth when measuring June 2015 to July 2015 — Beverly Hills was down 31%, BHPO was down 18%, Bel-Air was down 37%, WW/CC was down 15% and Brentwood was down 15% also. It simply means that prices have returned to some sense of normalcy in this always “hot market”.
For the year, however, median sales prices are showing moderate growth in some communities, slightly down in others. Through the seven months of 2015, Beverly Hills MSP climbed just 1% for the first seven months of the year…BHPO is down 4%, Bel-Air is up 2%, Westwood/Century City is down 4%, and
Brentwood is at plus 1%. Whether we have hit ‘our normal’ growth patterns remains to be seen as interest rates still remain attractive, and buyers are jumping in (i.e., sales volume) so this is, overall, good news for the stability of the Westside real estate market.
Comparing median sales prices to same period (July 2015) to last year, Beverly Hills was down 6%, BHPO was up 5%, Bel-Air was down 12%, WW/CC was down 30%, and Brentwood was down 7%. Again, this is just another sign that prices have settled down since the May-June period.
Long-term rates up — ever so slightly
The cost of money remains attractive for home buyers as the average long-term U.S. mortgage rates edged up slightly last week after three straight weeks of declines. The key 30-year loan rate remained under 4%. Mortgage giant Freddie Mac said last Thursday (8/13) the average rate on a 30-year fixed-rate mortgage rose to 3.94% from 3.91% a week earlier. The rate on 15-year fixed-rate mortgages increased to 3.17% from 3.13%.
A solid U.S. employment report for July out last Friday — with employers adding 215,000 jobs and the jobless rate steady at 5.3 percent — means there’s a strong chance that the anticipated interest rate increase by the Federal Reserve will occur next month. The Fed has kept its key short-term rate near zero since the financial crisis year 2008.
However, China’s sharp and sudden devaluation of its currency against the dollar this week could complicate the Fed’s decision on the timing of a rate increase. The rising dollar has been hurting U.S. exporters by making their goods costlier abroad. By making Chinese goods comparatively less expensive in the United States, a weaker yuan would push already-low U.S. inflation even lower.
It appears that as of the end of last week, the Chinese yuan crisis appears to be subsiding and the markets were in the green on Friday. While we’re not out of the woods on this issue, it is obvious to all that “What happens in China doesn’t always stay in China”. China is not Las Vegas.
The Fed wants to be “reasonably confident” that inflation is returning to its 2% target before raising rates. Inflation has risen just 1.3% in the past 12 months.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1%of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan also held steady at 0.6 point.
The average rate on five-year adjustable-rate mortgages fell to 2.93% from 2.95%; the fee increased to 0.5 point from 0.4 point. The average rate on one-year ARMs jumped to 2.62% from 2.54%; the fee was unchanged at 0.3 point.
It’s working….millennials are stepping up with FHA help
The FHA has finally found their silver bullet when it comes to getting first-time and millennial home buyers off the fence. Earlier this year, the Federal Housing Administration began reducing mortgage insurance premiums on its loans by an average of $900 a year. While the FHA loans typically come with low down payment requirements, they often have higher monthly payments as a result of the mortgage insurance that, unlike conventional loans, continues for the life of the loan, even when 20% equity is reached.
Now it appears the mortgage insurance premium reduction is having the desired effect.
Data from the Irvine, Calif., real-estate research firm RealtyTrac shows that FHA loans were used in 23% of allfinanced purchases in the second quarter of 2015, up from 19% in the second quarter of 2014. The FHA program, which historically has been aimed at first-time home buyers, lowered mortgage insurance premiums for borrowers by about $900 a year and took effect on Jan. 26 of this year. According to Daren Blomquist, vice president at RealtyTrac,it may be the catalyst for an increase in millennial borrowers and first-time home buyers, “So far the FHA premium reduction is having a bigger impact on getting millennial first-time buyers, and other low down-payment borrowers such as former homeowners returning to the housing market off the fence” than other federal programs, Blomquist said in an email.Find your new home now …
“Lower down payment requirements and lower monthly payments based on reduced (mortgage insurance premium) requirements has impacted affordability in a positive manner for FHA borrowers,” said David Norris, president and COO of LoanDepot. In addition, down payments are on the rise, a sign that FHA borrowers are bringing more cash to the table thanks to their mortgage insurance premium savings.
Mortgage market improving
Overall, the U.S. mortgage market appears to be finally recovering from the real estate crash of 2009-2010, with credit expanding and cash sales declining to their lowest level since December 2009. The Mortgage Bankers Association said that it upped its estimate for 2015 mortgage originations by $71 billion, to $801 billion. It also upped its estimate for 2016 by $94 billion, to $885 billion. “More sales are being financed and more applications are being approved,” said Mike Fratantoni, the MBA’s chief economist. “We expect this trend to continue into 2016 and beyond,” he said.
According to the latest data from the National Association of Realtors, home sales for June were up 3.2% over May, and are on track to nudge close to 5.5 million homes sold for 2015, the best year for sellers since 2006 and up nearly 10% from a year ago, according to Realtor.com economist Jonathan Smoke. Moreover, the median existing-homes sales price in June rose to $236,400, exceeding the peak median sales price number set in July 2006 of $230,400. It was the 40th straight month of year-over-year price gains. The NAR said that first-time home buyers in June represented over 30% of buyers for the fourth consecutive month, compared with 28% of buyers in June 2014.
In a related development, the lowered FHA premiums may also be playing a part in helping first-time buyers make more competitive offers. RealtyTrac data show that the average sale price of FHA-insured purchases was 102% of the average estimated market price, compared with 101% of the average market price for those same homes at the time of sale for other loan products. “Borrowers using FHA-insured loans are leveraging the savings from the premium reduction to submit higher offers,” Blomquist said.
Research shows that rising tuition costs may not be a problem after all
College loan debt has been an albatross around the necks of millions of college graduates since the whole concept of student loans were created in 1965 by the Federal Family Education Loan (FEEL). Certainly, banks and other lenders were lending money to mostly parents long before this. But saddled with thousands of dollars of college debt, many could not consider buying a home. Two of the most salient economic trends today are the declining share of first-time homeowners, and the sharp increase in student loan debt outstanding.
Given the fact the housing market has been slow to return to normal (though things seem to be turning around of late), it’s natural that economists and journalists would assume that it’s student loan debt that’s been holding it back.
But recent research indicates that this may not be the case. To test just how student loans are affecting the behavior of potential home buyers, researchers Jason Houle of Dartmouth College and Lawrence Berger of the University of Wisconsin drew on data from the National Longitudinal Study of Youth’s 1997 cohort, so that they could track a group of young people through their young adulthood to pinpoint, with other factors like socio-demographic factors (for instance, do you come from a wealthy family), to, as best they can, pinpoint the effects student loan debt specifically has on homeownership.
They found evidence of a negative, statistically significant association between student loan debt and homeownership in some models, but the association is substantively small to modest in size, and they also found no evidence that the probability of home ownership decreases as the amount of student loan debt taken on by debtors increases.
Thus, it seems unlikely that student loan debt is causing a generation of young adults to flee from the housing market; nor does it seem to be the case that student loan debt is primarily responsible for the slow post-recession housing market recovery. However, even if student loan debt isn’t reducing home buying, it may well be impacting young people’s well-being in other ways.
Competition is heating up for higher-end loans
There is good news for borrowers who are seeking “million-dollar loans”. If you’re looking for a mortgage you may soon find it easier to borrow $3 million than $300,000. J.P. Morgan Chase & Co. the U.S.’s second-biggest mortgage lender is set to join Wells Fargo & Co and others Wednesday in easing terms for ‘jumbo’ mortgages, in an effort to grab a bigger share of the higher end of the market, reported the Wall Street Journal last week.
The move reflects increasing competition among banks for the thriving business for larger home loans, where it’s easier to turn a profit and where borrowers are generally more reliable. By contrast, some banks are retreating from the business of making smaller mortgages, especially to poorer borrowers, as the cost of new regulation and the higher risk of litigation means the business isn’t as attractive as it used to be.
The WSJ said J.P. Morgan will cut its minimum down-payment for loans between $1.5 million and $3 million to 15% from 20% and also cut the minimum required FICO credit score required to 680 from 740 for loans tied to primary single-family purchases, second homes and selected refinancing.
What’s up with me????
I just returned from a week long, tiring but very much invigorating week long summit with my real estate coach, Tom Ferry in San Diego! It was an action packed 4 days of learning about the newest trends in the market, new marketing ideas and suggestions, financial management suggestions, and just flat out motivation to keep one going . I always return from these events fired up with all sorts of ideas for things to do.
I also took the time to spend with some friends of mine in a wonderful organization called Fellows of Contemporary Art for visits to some wonderful exhibits at UC San Diego, a fun gallery, the La Jolla Museum of Contemporary Art, and fabulous private collections in some wonderful homes in La Jolla. We also had a presentation from the curator of the Murals of La Jolla project which is a wonderful collection of murals on 15 buildings through- out La Jolla. They are a true treat to see. All of this very restorative for the soul!