Timely Real Estate News………………………………….. 15 August 2019
Sales surge in July…. back in positive territory
It was good news to see that July single-family home sales surged more than 10% compared to a year ago. Sales for the five communities I report on had total sales of $2.311 billion compared of $2.093 billion in 2018. That’s a nice bump considering that we have been in negative territory for over 18 months.
Sales for Beverly Hills was plus $164 million for July compared to July 2018 and Bel-Air/Holmby Hills was $165 million to the good. Brentwood turned positive with $10 million over 2018, but the others were down. Beverly Hills Post Office was off $106 million, Westwood/Century City was down $24 million and Venice was down $70 million compared to last year
Median Sales Prices — a Wow month for BH
Again, Beverly Hills is the leader in median sales prices for July 2019 — having reached $8,599 million MSP for July 2019, a 52% jump over June 2019. Brentwood was another MSP winner, growing by more than 77% over June for July with an MSP of $5.007 million. BHPO was up just 2% for July. The other communities I report on were down — Bel-Air/Holmby Hills was down 46%, Westwood/Century City was off 4%, Venice was off 5% from June. As always, I must remind you that one or two high number sales skew the numbers.
What we are seeing is a resurgence in the area’s most popular cosmopolitan community — Beverly Hills. It’s always on the high-end buyer’s radar because of its attractiveness in residential neighborhoods, shopping, and dining. But as I have said so many times, the median sales prices are like roller coaster with home prices and sales volumes very volatile, especially in these economic times.
It is interesting to note that the median sales prices for all these communities stayed within the range of a minus 5% to a plus 2% on year-to-date performance…meaning, we’re continuing to hold our prices steady but are surging in sales volume in some of our communities. There is a ‘drag effect’ on the nearby communities to Beverly Hills, always the leader in sales and pricing — so their ‘water lifts all boats’ so to speak.
California affordability dips in second quarter
Affordability is dipping everywhere it seems, so it’s no surprise that California is experiencing this challenge. Thirty percent of California households could afford to purchase the $608,660 median-priced home in the second quarter of 2019, down from 32% in first-quarter 2019 but up from 26% a year ago. according to the California Association of Realtors.
A minimum annual income of $122,960 was needed to make monthly payments of $3,070, including principal, interest and taxes on a 30-year fixed-rate mortgage at a 4.17% interest rate. 40% of home buyers were able to purchase the $475,000 median-priced condo or townhome. An annual income of $95,960 was required to make a monthly payment of $2,400.
Higher home prices negated the lowest interest rates in more than a year and reduced Californians’ ability to afford a home purchase in the second quarter of 2019,
Affordability remains the biggest challenge for us in California which is faced with an influx of new residents and not enough housing — including the shortage of multi-dwelling housing. And compounding the affordability issue is that builders and developers are pulling back on their plans for 2020, meaning that new housing will continue to be lacking throughout California and the rest of the nation.
Most metro areas saw price gains
Price gains occurred in most metro areas in the U.S. under marginal inventory growth in the second quarter of 2019, according to the National Association of Realtors. Single-family median home prices increased year-over-year in 91% of measured markets in the second quarter, with 162 of 178 metropolitan statistical areas showing sales price gains. That is up from the 86% share in the first quarter of 2019. The national median existing single-family home price in the second quarter was $279,600, up 4.3% from the second quarter of 2018 ($268,000).
The metro areas where single-family median home prices declined included the high-cost areas of San Jose-Sunnyvale-Santa Clara, Calif., (-5.3%), San Francisco-Oakland-Hayward, Calif., (-1.9%) and Urban Honolulu, Hawaii (-1.2%). Ten metro areas experienced double-digit increases, including the moderate-cost metro areas of Boise City-Nampa, Idaho; Abilene, Texas; Columbia, Mo.; Burlington-South Burlington, Vt. and Atlantic City-Hammonton, N.J. Lawrence Yun, NAR’s chief economist, said home builders must bring more homes to the market. “New home construction is greatly needed; however, home construction fell in the first half of the year,” he said. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.”
Ninety-three out of 178 metro markets under study have price growth of 5% or better. “Housing unaffordability will hinder sales irrespective of the local job market conditions,” Yun said. “This is evident in the very expensive markets as home prices are either topping off or slightly falling.”
The five most expensive housing markets in the second quarter were the San Jose-Sunnyvale-Santa Clara, Calif., metro area, where the median existing single-family price was $1,330,000; San Francisco-Oakland-Hayward, Calif., $1,050,000; Anaheim-Santa Ana-Irvine, Calif., $835,000; Urban Honolulu, Hawaii $785,500; and San Diego-Carlsbad, Calif., $655,000.
Consumers put more faith in real estate than stocks
According to a nationwide survey by Bankrate, real estate has surpassed stocks as Americans’ favorite long-term investment. In the survey, 33% of 1,000 respondents named real estate as their favorite investment for building wealth that they don’t need access to for a decade or more. That is the best that real estate has performed on Bankrate’s annual survey in the last seven years. In 2018, stocks were the most popular investment.
Millennials, at 36%, were the most likely age group to call real estate their top long-term investment choice. Other generations also favored real estate, including generation X (31%), baby boomers (30%), and the silent generation (23%). “Millennials who are higher on real estate than any other age group, have cooled a bit on cash, and still aren’t keen on the stock market when investing for more than ten years,” says Greg McBride, Bankrate’s chief financial analyst.
Well, of course, we have seen these up/down trends since I have been in real estate for over 30 years. One only has to look at home prices and inventory shortages to understand the real estate dynamics — property values are climbing every year.
It pays to be near a Trader Joe’s….home values increase
Where’s the power of a brand? Well, one thing is sure, being located near a Trader Joe’s has advantages. If you’ve ever had to drive 10 miles just to get some groceries, you’ll know just how much of a difference a supermarket can make in your day-to-day life.
Living in a food desert, or an area that has only quick-stop conveniences stores rather than supermarkets with fresh fruit and vegetables, is synonymous with more health problems, lower quality of life and, naturally, lower home values.
In a study by Attom Data Solutions, released last week, confirmed what many may have already felt intuitively. Homes within a close range of popular food stores such as Trader Joe’s and Whole Foods have high home value rates and investment returns.
On average, a home within close range of a Trader Joe’s is worth $608,305. Homes near a Whole Foods. Trader Joe’s is a Southern California tradition — having been founded in Pasadena in 1958. Bottom line, even though we Angeleno’s are tied to our cars, we all prefer to live near important services such as schools, dry cleaners, gas stations and markets. One of the questions I am asked almost every time I am showing property in either Bel Air Crest or Mountaingate… “where to you shop?”
We are lucky, we basically are in the middle of markets, in either Westwood or Sherman Oaks.
New FHA loan policies will help alleviate affordability
The Department of Housing and Urban Development finalized new Federal Housing Administration condominium loan policies. The changes should yield thousands of new homeownership opportunities and help alleviate affordability restraints impacting markets across the country.
Specifically, the new policies outlined by the FHA extends certifications from two years to three, allows for single-unit mortgage approvals, provides more flexibility with owner/occupancy ratios, and increases the allowable number of FHA loans in a single project. The rule will go into effect in mid-October – 60 days from publication. HUD believes the changes will extend critical benefits to aspiring homeowners and confirm the agency is properly serving the public.
June condominium and co-op sales were recorded at a seasonally adjusted annual rate of 580,000 units. The figure represents a decline of 3.3% from May and a 6.5% drop from the same time last year. With more than 8.7 million condo units nationwide, only 17,792 FHA condo loans have been originated in the past year
Competition for starter homes heating up
There are 19 million millennials renting, many of whom want to purchase homes. But market trends and emerging businesses and tools are hampering their dream of owning a home today. Many prospective first-time buyers cannot find a home that they can afford, or, even worse, overpay for their first homes, thanks to the legions of investors in single-family rentals (SFRs), whose cash offers often beat out bids from other buyers. Competition with investors is one of the reasons these 19 million millennials who want to buy a home and have the income to do so are still renting.
It is hard to fault a seller for preferring a cash offer over one backed by a mortgage, especially one from a first-time buyer who has yet to be approved. More than one out of four applications for purchase mortgages fail to close each month.
Still, many investors don’t pay all cash and rely on mortgage financing, which allows them to leverage the size of their cash investment, just like homeowners. About one in five purchases by small investors finance one-third or more of their investments. “Small investors” are defined by researchers at the Federal Reserve as those who purchase between three to 10 properties.
Investors are less sensitive to rising prices than home buyers, and rents for single family homes are rising as fast or faster than home prices. And getting a mortgage for a single family home as an investor is easier than ever before. So, the cards, in many ways, are stacked against the first-time home buyer “out there” on their own.
Rising sea level could be devastating to our State
It is an alarming study — researchers say damage by the end of this century could be far more devastating than the worst earthquakes and wildfires in state history. In the most exhaustive study ever done on sea level rise in California, a team of U.S. Geological Survey scientists concluded that even a modest amount of sea level rise — often dismissed as a creeping, slow-moving disaster — could overwhelm communities when a storm hits at the same time.
The study combines sea level rise and storms for the first time, as well as wave action, cliff erosion, beach loss and other coastal threats across California. These factors have been studied extensively but rarely together in the same model.
The results are sobering. More than half a million Californians and $150 billion in property are at risk of flooding along the coast by 2100 — equivalent to 6% of the state’s GDP, the study found, and on par with Hurricane Katrina and some of the world’s costliest disasters. The number of people exposed is three times greater than previous models that considered only sea level rise.
And at a time when marshes are drowning, cliffs eroding, beaches disappearing and severe storms likely to become more frequent, scientists say even a small shift in sea level rise could launch a new range of extremes that Californians would have to confront every single year. And do not forget the recent cliff collapse where three lost their lives in San Diego two weeks ago.
How are the “dog days of summer” affecting me?
Honestly, it has been a rough two weeks or so. You might have noticed that the last
Schiffer Line came out a little late last time, and it will again this time as well. I have prided myself on getting it out on the 1st and 15th of each month but unfortunately we had some challenges in the office that couldn’t be overcome, but we’re back on track now.
I am looking forward to a robust rest of the year. I know we all look at the ups and downs of the stock market, but as indicated in the article in this issue with all of us putting more “stock – pun intended” in real estate than in the stock market, we will ride out all of these uncertainties, so if I can assist you with any of your real estate needs, please let me know. Call me – Carole Schiffer at 310 442-1384.
Carole Schiffer, Realtor Coldwell-Banker Residential Brokerage/Brentwood Office 310-442-1384 (office) or e-mail me at email@example.com www.caroleschiffer.com
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