Timely Real Estate News……………………….15 January 2016
2015 wasn’t spectacular…but ‘we held our own’!
While the economy sputtered, surged, and sputtered again, Westside Los Angeles real estate held its own, with sales moving slightly ahead of 2014’s volume by 1.5%. Total sales volume for the five communities I report on each month — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City, and Brentwood — exceeded $3.263 billion, just $50 million ahead of last year’s total of $3.213 billion. Not great, but considering it could always be worse, we are well positioned for 2016.
On the median sales price front….we continue to see strong improvement over the previous year (2014). Beverly Hills was 20% higher for the 12 months ending December 31 vs. 2014, with an average median sales price of $5.262 million. Beverly Hills Post Office was up 3% at $2.600 million….Bel-Air was up 12% at $2.355 million, and Brentwood was up 9% at $2.845 million. Only Westwood/Century City was down for 2015 compared to 2014 at $1.695 million.
December 2015, however, showed some surprises…for example, comparing December 2015 to December 2014, Brentwood was up a whopping 128% with a median sales price of $4.785 million, Bel-Air was up 31%…Westwood/Century City was up 16%….Beverly Hills was up 11%…and only Beverly Hills Post Office was down 6%. Of course, a month does not make a trend…not yet, anyway. As always there are sales that are particularly high that skew the averages.
Santa Monica — one of the Westside’s glorious beachfront communities, enjoyed a strong year as sales volume was up 3% to $616 million…median sales prices were 15% ahead of 2014 at $2.3016 million, and for December 2015, median sales prices were 24% ahead of 2014 at $3.130 million. Santa Monica had a good, strong year.
Of course, what this means for most of the areas I cover, prices are strong and are moving upward. Why? Simply, the law of supply and demand. Inventory is getting better…but it’s still not as good as pre-recession levels according to Carole Schiffer. “We’re seeing prices rise because the market does not have a lot of competition….buyers are lining up for every property that is properly priced.. When you price your home properly, you’ll get multiple offers and that’s what I am seeing now. November and December were strong months for a number of us in my office, which dismisses the myth that you can’t sell real estate during the holidays. Not true.”
Intelligent buildings for home or office will be the norm, not the exception
It’s not a ‘maybe’ — it’s a given: Most commercial and residential buildings will be smart….smarter than what we have now. More and more ‘smart technology’ is being integrated into buildings everywhere because customers not only want it, they demand it. And the smart technology is not just for flipping on your TV but controlling every device in the home or office — from the refrigerator to lights to air conditioning to entertainment systems.
According to a recent survey by Coldwell Banker many Americans are keen to own or invest in smart home technology, particularly if it will help sell their homes faster and or make their living easier. Harris Poll conducted the online Smart Home Marketplace Survey in October on the Coldwell Banker’s behalf. Of the more than 4,000 adults surveyed, about 1,000 reported owning at least one smart home product.
The most popular types of smart tech among participants were entertainment products like smart TVs and speaker systems as well as security and temperature-controlling programs. Of respondents who said they currently have smart home products, 57 percent were male and 43 percent were female. Forty-four percent reported being parents with children under 18 years of age.
This is a trend that spans generations from Millennials to baby boomers to seniors…And Coldwell Banker concluded that this technology is becoming more mainstream and is not limited to the young and affluent. And surprisingly, older generations are adopting certain products faster than younger ones (40 percent of those 65 and older own smart temperature products, compared to only 25 percent of Millennials). About half of smart home technology users have household incomes between $50,000 and $100,000.
Smart home technology also shows signs of having an addictive quality, as 70 percent of people who own it said purchasing their first product made them more likely to buy another one. One product is definitely not enough to consider your home “smart”– 60 percent of those surveyed said a home should have at least three different categories of products to be worthy of the title. Just over half of respondents who have been slower to adopt smart home technology said they would purchase or install such products if they were selling their home to expedite the process. Of those homeowners, 65 percent said they would be willing to spend $1,500 or more on smart home products to make that happen.
“Close to 5 million existing homes were sold in the United States in 2014, which represents a huge white space for smart home manufacturers,” said Sean Blankenship, the company’s chief marketing officer. “We are aiming to be the conduit between these manufacturers and homebuyers and sellers, and conducting this research was one of the first of many steps toward achieving this goal.”
On the office front, smart buildings are also getting smarter
Here’s an interesting fact from The Royal Institute of British Architects: We spend on average of 20 hours each day inside commercial or residential buildings. As the planet’s population continues to expand beyond the current seven-and-a-half billion people, so will the buildings in which we live and work. They will naturally become more numerous but also denser (people per area) as land value increases. Estimates for the total number of buildings in the world vary, but a rough estimate is that there are at least one billion buildings across the world. Whichever way we slice and dice the data, it is clear that buildings, particularly the buildings in which we work, are a vital part of our lives.
Here are the trends (re: requisites) for smarter commercial buildings….
1) Seamless wired or wireless connectivity is a “must have” — not an option for new commercial buildings. With the global number of active mobile connections (GSMA Intelligence) now exceeding the number of people in the world, and with the vast majority of mobile connections originating or terminating within a building, it is indisputable that people expect to be able to perform much of their normal business via cellular or Wi-Fi based wireless connections.
2) The need for energy-efficient low-voltage power in buildings. Energy to power all of these devices will be critical and cost will rise so there is pressure to create highly energy-efficient systems in all buildings.
3) Environments for tenants/employees have to improve. No longer working nine-to-five, employees will demand better environments where they will spend increasing amounts of time and sophisticated sensor technology that is woven in the building’s fabric will be critical to service the growing appetite for high technology systems.
4) Commonalities in network infrastructure. This is a big challenge as buildings will have to eventually employ common networks that can cross function and communicate — devices will speak the same language and utilize the same networks. This is not an easy process with existing buildings but to survive, every commercial enterprise will eventually have to adapt.
Whether it’s on the home front or in the office, smarter buildings and environments are going to be critical to being efficient and cost effective. Nowhere, however, do any of these studies identify stress-free solutions regardless of how sophisticated your smart building is, whether it’s the home or office. When was the last time you talked with technical support?
Markets roiled by China implosion….but will it hurt US real estate market?
If you’re selling smart phones in China, your business is hurting (ask Apple), but if you’re selling real estate in America, not so much. Chinese buyers are still roaming our countryside, many still flush with cash and looking for sound investments. But in China, its luxury market is hurting.
According to Knight Frank Prime Cities Forecast, a global real estate trend watcher, China’s slowdown is expected to hit its domestic housing market hard — as well as nearby markets in Asia favored by wealthy Chinese buyers. Price growth in Shanghai is expected to fall by more than half, from 10 percent in 2015 to 4 percent in 2016. Hong Kong is expected to see prices fall by 5 percent, making it the worst performing market, followed by Singapore, where prices are expected to fall 3.3 percent in 2016.
Yet the top global luxury market in 2015 — Sydney, Australia — is once again expected to top the price list in 2016, despite the large number of Chinese buyers in Australia. “We continue to see foreign buyers at open houses on the Westside,” stated Carole Schiffer. “And despite the Fed rate increase, we are not seeing any reluctance to enter the market at all. So that’s good news.”
And on the US Economy…..even though the Fed raised rates in December, mortgage rates actually initially moved downward. Given the instability of the US stock market in the last week or so, interest rates have been fluctuating between being higher and lower. Economists believe that the US economy has enough “wind in its sails to power through the relative softness in our international trading partners, and we recognize that the market has been spooked by data out of China, pointing to more challenges ahead.” Mortgage lenders do expect, however, interest rates will begin moving upward, although in small increments through the year.
Relax….Millennials are going to buy homes…. It just takes a bit longer
Anyone with kids just out of college might be worried that they might not want to leave the “nest”…there’s even a movie about it — “Failure to Launch.” Well, relax. My advice? Give them some time (and yes, probably some money!) Millennials are, indeed, interested in moving out of the rental market into the home buying market.
In a recently conducted national survey of Millennials, the National Association of Realtors (NAR) found that although only half of surveyed households believe the economy is currently improving, nearly all young renters eventually want to buy a home, and a convincing majority still view home-ownership as part of their American Dream.
Additionally, a newly introduced index tracking the financial outlook of households found that compared to last year, an increasing share believes their personal financial situation will improve in the months ahead. The survey data reveals that an overwhelming majority of current renters who are 34 years of age or younger want to own a home in the future (94 percent). Overall, 83 percent of polled renters have a desire to own, and 77 percent believe home-ownership is part of their American Dream.
The top two reasons given by renters for not currently owning was the inability to afford to buy (53 percent) and needing the flexibility of renting rather than owning (19 percent). When asked what would likely be the main reason for buying in the future, renters cited lifestyle considerations such as getting married, starting a family or retiring (33 percent) and an improvement in their financial situation (26 percent). And one of the compelling factors is the increasing percentage of Millennials getting substantial support from parents and relatives to make their down payments as housing prices continue to rise.
“Certainly, first-time buyers are not flocking to Beverly Hills or Bel Air, where median sales prices are in the $2 million plus range,” Carole Schiffer stated, “but we are seeing Millennials increasingly making headway in Culver City, Venice, and other parts of West Los Angeles.” Cheer up…the Millennials are coming.
How did you spend the holidays?
I would love to hear from you if you want to share your stories. Mine was a lot of fun.. Tiring, but a lot of fun… As some of you know, my Mom will be 94 this coming May. While she still lives in her home here in West Los Angeles with a companion or two, and is in really great shape, she is almost 94. She & I were scheduled to go to Vancouver to spend the holidays with my sister and her family. Literally at the 11th hour (one day before), Mom informed us that she simply was not up to making the trip.. .. So everyone came here, and they all stayed at my house.. All of us!! My little 3 bedroom 2.5 house was crowded to say the least, but we all had a great time, and everyone was sad to say good bye. It was almost like being in college again, with everyone sharing bedrooms, bathrooms and the kitchen!
Please do not forget to check out my new web site, caroleschiffer.com. I am here to assist you with any and all of your real estate needs, and look forward to speaking with you soon.