SchifferLine 15 December 2021

The SchifferLine
Timely Real Estate News………………..15 December 2021

*************************************************************
Sales volume reaches $5.101 billion…a record
It comes as no surprise as sales volume for the first 11 months of 2021 reached a record $5.101 billion, a 48% increase over the same period in 2020, for the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood. While the percentage of increase over the previous 11-month period is a bit lower than at the end of October, the numbers are really staggering. It doesn’t seem to be abating. Mind you these increases are not particular to these communities but are all across the board. I am just discussing these five areas.

This record reflects the sustained success we have had for attracting buyers by offering the world’s most beautiful homes and neighborhoods…so really it is no great surprise that we continue these incredible sales achievements. The usual suspects continue to lead the sales increases — Beverly Hills was up $768 million in volume compared to a year ago, Brentwood came next with an increase of $419 million, followed by Westwood/Century City at $189 million-plus, with BHPO adding $163 million and Bel-Air/Holmby Hills bringing in $156 million. Marina del Rey, another area I specialize in, enjoyed an 86% increase in sales volume, reaching $214 million through November 2021 compared to $115,851 a year ago for the same period.

Homes are now selling at near 100% of original listing price, which is a positive upturn as some of the areas last month were experiencing as much as a 15% decline between the original asking and final sale prices….what does this mean? Sellers are getting better educated and are pricing their homes competitively. Some areas, where multiple offers were just ‘out of control’ were up 105% over original listed price. Just this past week, I was representing a buyer who is a long time client of mine in the attempt to purchase a fabulous home in Santa Monica. Seems that a number of potential buyers felt the same way about the house as there were 25 offers! It came on the market for $2,595,000, but the price was increased 2 days later by $100,000 and while we are not sure what it sold for, it

***********************************************************
Median sales prices….coming up roses !
Beyond record sales prices, we are also seeing record median sales price increases across the entire area. The isn’t new to those reading the Schiffer Line as I have been pointing out that our pricing continues to steadily move upward, and as the year has matured, our prices are also making increased gains in every area.

For example, Beverly Hills median sales price for November 2021 is $7.500 million, up 15% over November 2020. Beverly Hills Post Office is up 14% to $3.383 million….Bel-Air/Holmby Hills is up 30% to $3.025 million. Brentwood was up a whopping 73% through the first 11 months for 2021 at $3.874 million, and Westwood/Century City experienced a 13% increase to $2.626 million. Marina del Rey was up 18% for 2021 at $2.012 million.

November can be a bit crazy sometimes, because traditionally, it is the period of the once-assumed ’slow season’, which — as you can see — is not slowing down much. When you compare my areas’ performance of November 2021 to November 2020 (month-to-month), there are some stark differences. Bel-Air/Holmby Hills was up 246% in median sales prices to $7.987 million from $2.305 million, quite a jump. Beverly Hills was up 28% to $7.500 million (over November 2020), Westwood/Century City was up 97% to $5.200 million, Brentwood was up 63% to $5.200 million. However, BHPO was down 28% to $1.925 million, unusual for this very ‘hot’ area. Please remember my oft pointed out comment, when there are some high number sales such as the two in Beverly Hills a $16,050,000 and $21,500,00 respectively or BHPO for $21,500,000 or Bel Air for $9,000,000 or Brentwood for $13,000,000 and $16,645,000 and lastly in Westwood $12,800,000. These numbers obviously impact the averages. I must also remind you that these are transactions that went through the Multiple Listing Service, thus any and all private sales and there are many are not covered here.

My broken-record speech — the best measurement is to watch the trend lines of median sales prices over a period of a year…everything evens out over time, and the true value of properties emerge through the analysis of accumulated month-to-month data we get from the MLS. We’re in a good place — mortgage rates remain low (even in the mid-3’s — and Fannie Mae and Freddie Mac have increased the conforming loan limits to $970,800 which will enable many buyers to avoid obtaining a jumbo loan whose interest rates while still low are higher than the prevailing rates for a non jumbo loan.

***********************************************************
Re-financing takes dramatic upturn
A brief drop in mortgage rates, due to the first news of the omicron variant, caused mortgage refinance demand to rise dramatically last week. The rate drop wasn’t all that dramatic when looking at the weekly average of the 30-year fixed. However, the rise focused on how homeowners are now looking at ‘remote work’ continuing for some time and are adjusting to improving their home environments…hence the need for re-financing.

For loans with conforming loan balances ($548,250 or less through the end of 2021), fell to 3.30% from 3.31%, with points decreasing to 0.39 from 0.43 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association.

Again, that was the average. Rates had dropped sharply at the end of the previous week and then stayed there for a short period of time. However, it was enough time to cause a 9% jump in refinance applications week to week, seasonally adjusted. They were still 37% lower than the same week one year ago. Mortgage rates were 40 basis points lower at this time last year. Still, these are great rates compared to pre-‘Covid when rates were approaching over 5%.

Government (FHA) refinance demand saw an outsized 20% weekly increase. The refinance share of mortgage activity rose to 63.9% of what it had been in the past.

***********************************************************
High-end sales
The high end of the Westside residential market just keeps getting stronger and stronger. There have been 1,032 closed sales of $5 million-plus so far this year, versus 636 at this time last year…that’s up 62%! Of these, 341 were $10 million-plus, versus 181 at this time last year, up 88%. Ninety-two (92) $20 million-plus were sold and there were 49 at this time last year— up 88%.

Twenty-nine (29) were $30 million-plus, versus 16 at this time last year or up 81%. Fourteen (14) were $40 million-plus, versus six at this time last year, up 135%! Seventy (70) of the 92 were $20 million-plus were sold to American buyers or 76%. Of the 92 $20 million-plus sales, 37 were not officially listed when sold. It is interesting to note how the highest-priced sale for the past three years has continued to rise.

The highest priced sale in 2020 was $165 million, and for this year, $177 million. Maybe we will have a $200 million sale in 2022.

The second top sale this year was in Malibu. The top sales in the other areas are Pacific Palisades for $83,000,000 and was unlisted when sold. And Bel Air had an unlisted home sell for $69 million.

***********************************************************
Rent hikes are heading our way, big time in 2022
Not only are we seeing dramatic increases in median sales prices in Los Angeles area and beyond, but we should also expect to see rental housing increases like never before. In some areas of the country, rents are doubling from a year ago. The reason is — huge demand and lack of supply.

We’re currently behind as much as 2 million housing units in California, where development of new housing encounters continued red tape at every level, and cities/counties simply cannot process the paperwork to keep up with demand.

But the problems aren’t confined to the law of supply/demand. Rents for single-family homes across the country jumped more than 9% on average in August 2021 from the prior year, according to a report from the analytics firm CoreLogic. It is estimated that rental housing has become so expensive in California that more than 50% of a renter’s income goes for housing. However, it is worthy to note that a state law states that a landlord may not increase rent more than 5% annually, plus the CPI increase.

Mark Zandi of Moody’s Analytics said the strains on the housing construction market were building well before the pandemic took hold in the states. “There’s a lot of evidence that the lack of housing closer to where the demand is and urban cores is having a meaningful negative consequence on long-term economic growth.“

***********************************************************
Pending home sales increased in October
Pending home sales increased in October, rebounding after a decline the month prior, according to the National Association of Realtors (NAR). Contract activity rose month-over-month in each of the four major U.S. regions.

On a year-over-year basis, however, transactions were split, as two regions reported drops and two others posted gains. The NAR Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, rose 7.5% to 125.2 in October. Year-over-year, signings fell 1.4%. An index of 100 is equal to the level of contract activity in 2001.

“Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later,” said Lawrence Yun, NAR’s chief economist. “This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low.

“The notable gain in October assures that total existing-home sales in 2021 will exceed 6 million, which will shape up to be the best performance in 15 years.” And while the market is expected to remain robust, Yun forecasts home prices will rise at a gentler pace over the course of the next several months and expects demand to be milder as mortgage rates increase.

*********************************************************
Environmental update
California regulators voted last week to ban the sale of new gas-powered leaf blowers and lawn mowers starting in 2024 and portable generators by 2028, the latest step in the state’s aggressive effort to reduce harmful pollutants and transition toward a carbon-free economy.

The new regulations by the California Air Resources Board require all newly sold small-motor equipment primarily used for landscaping to be zero-emission by the target dates, with some exceptions.

The agency’s decision is based in part on the belief that battery technology will improve, and zero-emission gear will become more widely available before the requirements kick in — though there will be an annual review to determine whether they are on target and whether regulation needs to be altered or delayed.

The restriction applies to homeowners and commercial landscapers alike, and the ban also includes gas-powered weed trimmers, chainsaws and power washers. The regulation does not ban existing gas-powered equipment, however, which can continue to be used.

Combined, these small gas-powered engines create as much smog-causing pollution in California as light-duty passenger cars. There are approximately 15.4 million small off-road engines in California, and they produce about 141 tons of smog-forming emissions per day, according to the agency.

***********************************************************
So, what about me?
It is not about me at all… As previously noted, while the office is a little quieter than usual, the market and my business is moving along at a brisk pace! None of my buyer clients are a breather in their quest for a new home. I have been working very hard to put my escrows to bed in the hopes that I will have a quiet and hopefully restful holiday It is a challenge, but I am working at it. I still have a number of potential buyers who are ready, willing and able to buy their new home, so sellers if you want to move, contact me… Carole@caroleschiffer.com or 310-442-1384. I am here to make it happen!

For the Thanksgiving holiday, I had some guests for dinner and then at 10:30 at night after we cleaned up my sister brother-in law and I headed down to our home in Coronado where none of us had been since February 2020. This house is our family “happy place” and it was wonderful to be there once again. We have a pet Seagull there whom we have named “peg leg” as you can see, he has only one leg. It was amazing to us that after not being there for almost 2 years the minutes we opened our window blinds in the am, there he was sitting on our window ledge waiting for his breakfast! He came back for every meal. Wonder who has been feeding him while we were gone?