Timely Real Estate News…………………….15 January 2015
2014 ended on an “up note”….sales activity and median sales prices increase over 2013Everything is relative, of course. When we start comparing how we did in 2014 compared to the past several years, you can feel more confident as we are racing into this year with some positive numbers in the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City and Brentwood. Before I plunge into the results of the past year, I want to share with you the “state of real estate” in 2008. This is the time when we were in midst of a severe recession, and I reported in The SchifferLine for the year ending (2008) that median sales prices were off by as much as 33% in Beverly Hills, BHPO was down 48%, Bel-Air down 68% and Brentwood declined 42%…. many of these #s were based on abysmal sales volume, too. So when we jump forward to 2014, we are now nearly back to our previous sales volumes (over $3.2 billion)….our median sales prices have increased in four of the five areas (only BH was down from 2013)…. we are seeing a solid foundation of continued growth over the past two years in these five communities.
Total sales for 2014 was $3.207 billion, an increase from $2.926 billion in 2013, or a 9.6% increase. Beverly Hills had $892 million in sales activity vs. $900 million in 2013, a less-than-one-percent drop. For last year, sales were up in all of the other communities, with Brentwood coming in at #2 at $802 million.
Median sales prices The past year showed that while Beverly Hills was down 7% in median sales prices compared to 2013, BHPO was up 24%, Bel-Air was up 8%, Westwood/Century City was up 20% and Brentwood was up 11%. What is impacting Beverly Hills median sales prices is that the 2014 volumes do not include the mega-sales that were present a year ago even though BH had a $70 million sale close escrow in December. BHPO had a $39 million transaction last month, but aside from a few in the low teens, December simply had more sales in the lower sales price categories. Most of the homes sold in Brentwood, Westwood/Century City, and Bel Air were under $3 million.
In our Westside world, we continue to see strong price supports, increased inventories, and multiple offers on homes that are competitively priced. Having the right price coming out of the gate will dictate “days on market” –and in December, we saw that both Westwood/Century City and Brentwood had the final selling price over the original listing price (over 100%). Beverly Hills and Bel-Air, however, were at 85% and 88% of their original listing price which is usually caused by “over-pricing” in the first place. Pricing is the key indicator on this important sales element. The stats for December 2014 for“Days On Market” showed that Beverly Hills had 82 DOM, BHPO had 107, Bel-Air had 61, Westwood/Century City had 45, and Brentwood ended with 59 DOM.
I want to share with you some very important trends that Coldwell Banker is forecasting for 2015.
Please read these if you want to understand what is happening now in real estate and what we look to be happening in 2015. As we move into 2015, here are eight things real estate watchers are keeping an eye on:
1. Big investors cash out. Institutional investors played a pivotal role in the housing market’s recovery by purchasing hundreds of thousands of properties and renting them out. Now that they’ve realized substantial gains on their investments and home price increases have slowed, many of these landlords may be ready to cash out.
“Home price appreciation has given those investors a good opportunity — and motivation — to sell and realize a solid return on many of their properties in many markets,” RealtyTrac said in a report analyzing more than 200,000 purchases made by institutional investors between January 2012 and August 2014. RealtyTrac found that institutional investors who bought in 2012 could stand to see returns of 38% to 43% if they sold now. There have already been some signs that investors are stepping away from the market. The National Association of Realtors reported that institutional buyers accounted for 15% of all sales in October, down from 20% in January.
2. Foreign buyers stop buying. Foreign buyers have also helped prop up the housing market in recent years. “As the dollar has strengthened, it made U.S. housing more expensive,” said Doug Duncan, chief economist for Fannie Mae. While
sales to Chinese buyers have remained strong, sales to buyers from Europe and Russia — where the economies are struggling — are starting to lag, said Lawrence Yun, chief economist for the National Association of Realtors. Russian buyers, for example, have endured a triple whammy from crashing oil prices, a plunging ruble, and international sanctions. A drop in foreign real estate investment already seems to be playing out in California, where trends often hit first. The number of sales to international clients there has fallen by about 25%, according to the California Association of Realtors.
3. Incomes fail to keep up with home prices. Despite a much rosier outlook for jobs, incomes are still not keeping pace with housing market prices, said Jed Kolko, chief economist for Trulia. And that could make it hard for buyers to afford homes in the areas they want to live in. “Income is not rising fast enough and affordability is a growing obstacle to homeownership,” he said.
4. Lenders will be too skittish. For Mark Zandi, of Moody’s Analytics, the key risk to the housing market recovery is still the difficulty many potential homebuyers have getting mortgages. Even though Fannie Mae and Freddie Mac recently eased lending standards, it doesn’t mean lenders are going to take it easier on borrowers. In fact, many lenders may still be too nervous to lend to borrowers who don’t have near perfect credit or large cash down payments. In addition, former homeowners who lost their home to foreclosure may have to overcome damaged credit histories or financial burdens that were brought on by the recession, said Kolko. Meanwhile, Millennials who might be looking to buy have short-lived credit histories and heavy debt loads from student loans to contend with, he said.
5. A sharp increase in mortgage rates. While Fannie Mae’s Duncan doesn’t expect to see a sharp jump in mortgage rates, he said the Federal Reserve could surprise everyone and send its benchmark rate higher than it is projecting. “The Fed is uncharted territory,” said Duncan. “If it pushes rates up, it could have a big impact on the market.” Stan Humphries, chief economist for Zillow, said if rates climbed to 6%, it would mean home buyers in high-priced markets like San Francisco, Los Angeles and San Jose, would be spending more than half of their income for housing.
6. Affordability: Prices rose 4.6% for the year ended October, according to the S&P/Case-Shiller index. Three years ago, when a bottom in home prices was just taking hold, that kind of gain would have been cause for celebration. Prices have risen 25% over the past three years. That makes last year’s gain look far less impressive. It also has made homes much less affordable, even though mortgage rates this past year drifted back below 4% for the 30-year, fixed-rate mortgage. Figuring out whether sales will pick up in 2015 could depend on whether there’s more available for sale, and if those sellers get real: In most neighborhoods, prices aren’t rising the way they were one or two years ago. There is also the risk in some markets that prices could really dip. Slower price gains help on the affordability side, but they also rob the market of the urgency that motivates buyers. On the local Westside front, we are seeing continued price increases in the median sales prices, but this is more of an anomaly within a national real estate picture — we just have neighborhoods and communities that continue to appreciate faster than other less fortunate areas.
7. Inventory. Bill McBride, a respected real estate blogger, frequently reminds his readers that in the resale market, activeinventory—more than total sales volumes—influences pricing. In 2014, sales were so-so, but inventory remained low, which is why prices continued to rise—albeit at a far slower pace than in 2013.The home-buying season typically begins in earnest in early February, and picks up in the spring. If there’s a big surge in inventory, then that could be a good omen for sales volumes (it’s hard to buy homes when there’s nothing for sale), but it could also make it harder to raise prices.
8. New construction: Builders catered less to the entry-level market last year, focusing instead on putting up bigger, prettier homes that carried heftier margins. That meant fewer sales and less construction. This worked pretty well in 2013, as it allowed them to pass on rising labor, land and materials cost to very willing buyers.
It had less success in 2014. Sales of new homes stood just 0.2% above their year-earlier level during the first 11 months of 2014. New single-family building permits were up just 1% over the same period. Apartment construction, on the other hand, boomed. The headwinds facing younger buyers are well known by now: student debt, tighter mortgage credit, slowly growing incomes and a preference for urban living, where housing costs are more expensive to start.
One tailwind: rents are still rising, which could spur those who have the means to make a down payment to buy a home. Whether sales pick up in 2015 depends on whether buyers begin to put up more entry level homes, and whether more pent-up demand for housing is released.
According to a leading real estate tracker, “we’re stable”!
Great news! The Case-Shiller Index tells us that we ended 2014 on a stable note. Their latest data which tracks prices nationwide and in 20 major cities, reported prices grew 4.6% in October compared to a year earlier. That’s the slowest pace
since September 2012, but one which many economists say is healthier for both buyers and sellers than the double-digit growth seen this time last year.
From September to October, prices climbed 0.7% after seasonal adjustments are taken into account, though some economists say those adjustments are overly generous. Of the 20 cities Case-Shiller tracks, gains were strongest in San Francisco and Tampa, Fla.; weakest in Chicago and Cleveland.
In the Los Angeles area, prices were up 4.9% year over year, also the slowest annual gain since September 2012. Prices here ticked up 1.6% in October after being basically flat the last three months, and now sit at levels last seen in December 2007.
The report suggests that the housing market is hitting a good balance heading into the new year on a national level. Watch for the latest real estate news and trends in your neighborhood in The SchifferLine.
How were your holidays? Our Canadian Adventure!
As some of you may know, my sister lives in West Vancouver, British Columbia, Canada. For thepast 20 months, she & my brother in law have been totally renovating their home after taking it down to the studs (it was to be done in 12 months, and they are about 75% finished today)! You also may not know that I am very lucky to have a 92 year old Mom who lives near Century City and is in generally great shape! Mom & I traveled to Canada to spend the holidays with the rest of our family and had a FABULOUS time! My sister’s home is amazing and because the guest portion of her house is not done, we stayed at the Shangri La Hotel in downtown Vancouver and were treated like Queens for the entire stay. The weather was great in that we only had about ½ day of drizzle and the rest of the time it wasn’t any colder there than it was here! I would love to hear some of your holiday stories.
Now that it is back to work and reality, I am busy. This looks like it will be an awesome year for me & my clients. The home I listed in mid November in Mountaingate is in escrow, and I am in the process of preparing other properties to go on the market in the nextmonth or so. Also I am instituting a new program whereby for every closed transaction where I represent either the buyer or seller, I will be making a donation in that clients name to a local charity of their choice! I am very much looking forward to representing you or someone you know in a real estate transaction so that we can both give something back. Please check out my facebook page – carole.schiffer.realtor@facebook. com, email me a firstname.lastname@example.org or give me a call at 310 442-1384. I look forward to hearing from you.