The SchifferLine
Timely Real Estate News…………………….15 January 2021
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Los Angeles Housing report ā how CB sees it
Coldwell Banker issued its forecast for 2021 Housing for Los Angeles, highlighting the increased in median sales prices and marginal decreases in inventory. The CB annual forecast stated that there will be 1.5% less homes for sale in January, and that home prices will increase from 5% to 7% as result of this demand-supply shortage.
What this means is that many homebuyers will be facing a hot, competitive market, especially during the typically active selling period starting in Spring and ending in the Fall. Although we didnāt really see a slowdown in sales this last Fall, CB anticipates that the lack of inventory will surely frustrate buyers.
What CB sees, however, is that closed escrows will increase 6% to 10% ā depending on area ā compared to the market being down 5% in 2020 (as reported earlier in the SchifferLine).
But the forecast said that while mortgage rates are now at record lows (around 2.66%), they will eventually rise to 3.5% by yearās end, so it is imperative that if you still want these record low rates, you need to move quickly. Bottom line: The 2021 market will be where we left the 2020 market ā HOT! Low mortgage rates, stronger economic recovery as we get more people vaccinated, and strong housing demand will favor sellersā¦which will last into Autumn. Sellers may have their sway in the first half of 2021 according to CB, but buyers will begin to make headway in better pricing come Fall.
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Home prices continue upwardā¦.
For the most part, 2020 ended on a happy note āhome prices continued their steady upward climb, while sales volume was creeping back to pre-2020 levels.
For the five communities I report on ā Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood, the average increase in median sales prices at yearās end was 4% compared to a year ago, December 2019. Median sales prices increased 4% for four of these communities for the year ā over 2019 year-end prices. Beverly Hills Post Office, however, posted a gain of 11%, ending with $3.150 million median sales price. Beverly Hills ended up 4% at $5.475 million, Bel-Air/Holmby Hills ended up at $2.350 million, Westwood/Century City was at $2.362 million for 2020, and Brentwood was up 4% at $3.3225 million. Venice ā a community which I serve as well ā had $2.015 median sales price, which recorded no change from 2019 year-end #s.
2020 has been a year of steady price increases which has been the norm for the nationās real estate market in times of smaller inventories and higher demand. Even the pandemic could not stop the buyer onslaught in our market ā demand is outpacing supply, causing these steady increases.|
Sales volume makes inroadsā¦.
Total sales for 2020 for these five communities was $3.906 billion, only 4% behind 2019 year-endās total, which was $4.095 billion. At the end of November, we were down 5%. There were the normal ups and downs in terms of sales volume in each of these markets ā The big contributor to sales volumeās increase was Beverly Hills Post Office which had a net increase of $225 million in total sales compared to 2019.
Brentwood also was in the positive at $60 million more than in 2019, while Beverly Hills, the normal front-runner in sales volume, was behind $165 million in total sales. Bel-Air/Holmby Hills was down $281 million, and Westwood/Century City was off by $29 million from the year before. Venice sales volume was up 30% over 2019 at $465 million vs. $358 million.
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Pending home sales slide 2.6%
Nationally, pending home sales declined 2.6% in November, according to the National Association of Realtors. Month-over-month contract activity fell in each of the four major U.S. regions. However, compared to a year ago, all four areas achieved gains in pending home sales transactions.
The Pending Home Sales Index is a forward-looking indicator of home sales based on contract signings, fell 2.6% to 125.7 in November, the third straight month of decline. Year-over-year, contract signings climbed 16.4%. An index of 100 is equal to the level of contract activity in 2001.
“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” said Lawrence Yun, NARās chief economist. “It is important to keep in mind that the current sales and prices are far stronger than a year ago.ā
Yun predicts a favorable outlook for the housing market in the coming year. According to his 2021 projections, there will be a slight upward rise in mortgage rates to around 3% from the current 2.7% rate. Existing-home sales are expected to increase roughly 10% and new home sales by 20% next year.
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High-end sales surging
What we are seeing is that high-end sales on LAās Westside are stronger than ever as we enter 2020. The number of closed sales of $5 million-plus by yearās end are 706, versus 560 at this time last year up 26%. Of 
these, 205 were $10 million-plus this year and there were 162 $10 million-plus sales at this time last year, up 27%.
There were 59 at $20 million-plus this year, and there were 43 closed sales of $20 million-plus at this time last year up 37%.
It is interesting to note that even though we have had so many more $20 million-plus sales this year, there were more $30 and $40 million-plus sales in 2019, which might indicate that prices were adjusted downward for some of the higher-priced and over-priced homes. There were 17 closed sales of $30 million-plus this year, versus 21 at this time last year and seven $40 million- plus sales this year, versus 10 at this time last year.
As of the end of December, there are 83 pending sales of $5 million-plus at the moment, 23 of these are $10 million-plus and three are $20 million-plus.
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Mortgage rules toughen up for vacation hot spots
Many of you might own a condo in a vacation area and when not in use, it is put into a rental program to earn extra $$. Well, mortgage financing giants Fannie Mae and Freddie Mac have tightened the rules on buildings that offer too many short-term rentals in vacation locales.
This is drawing objections from the real estate industry. The new rules could make it tougher for some buyers to get a mortgage on condos in resort areas, and many real estate professionals arenāt happy about it, The Wall Street Journal reports.
Fannie Maeās new rules, which took effect December 7, 2020, says the government-sponsored enterprise would no longer back loans in high-rent vacation spots. Freddie Mac echoed that decision, with similar rules to take effect in February.
That could make entire buildings ineligible for mortgage financing even though just a few units are rented out on a short-term basis, real estate professionals argue. Fannie Mae said the new rules are focused on banning ācondotelā buildings that are organized centrally through management, rental, and realty companies. They said the new rules are not focused on individuals who may offer their units up for short-term lease.
As a result of this Fannie Maeās declaration, lenders are now becoming much more sensitive to making loans where homeowners are anticipating income from their units. As a result, all lenders are shutting down loans on these condo units until this is more clarity on the subject.
The counter of that is that a number of communities such as Bel Air Crest and Mountaingate do not allow short term rentals, with a minimum of a six-month lease required. If you are thinking of renting your property out on a short-term basis, please check with me and I can assist you in finding out what the regulations are in your neighborhood.
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Other loan news!
My lender, Simon Atik at Guaranteed Rate Affinity, tells me that he has a few 12- and 24-month bank statement deposit loans which doesnāt require tax returns.
For a 10% jumbo, they are SLOWLY coming back. At the moment, he is at 10% down up to $1.5M. Most likely loans up to $3M will be back as they were pre pandemic, but they come with HORRIBLE pricing and do require a lot of reserves. Also, what that means is that the purchase can be up to $3M if you donāt have a lot of assets. This program is really for those with strong assets who donāt want to liquidate or cash out of their stock or retirement portfolio and are possibly low on cash.
As more information and these programs become available, I will share that information with you in future Schiffer Lines.
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Americans accrued $7,512 additional debt in 2020
Clever Real Estate’s latest survey revealed the average American’s non-mortgage debt burden increased by $7,512 in 2020 due to booming unemployment.
The Covid-19 pandemic and ensuing economic fallout pushed millions of American to the brink as they relied on unemployment benefits, credit cards, and savings to stay afloat. Now that 2020 is behind us, researchers are starting to provide more complete analyses of how renters and homeowners navigated a volatile economic landscape.
From March to December 2020, the average American increased their non-mortgage debt by $7,512, according to their survey. Fifty-two % of the 1,000 respondents said they carry a monthly balance on their credit card, and 79% said the balance is more than $1,000.
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Staying Safe in Fire Zones
With the La Nina weather conditions we are experiencing, high winds, more brush growth and lack of rain, we all need to be extra careful in properly maintaining our properties to safeguard them against the horrible fires we have experienced in the last few years.
One of the easy ways we can do this is to increase the distance from our homes and all plant material. It has been suggested that we take this from two (2) feet to five (5) feet. I know this sounds excessive and for me would have me remove some trees, etc. which frankly I am not prepared to do. But we can and should keep all of our plant material trimmed and possibly change some of the plants we have that are more flammable than others.
Another thing we can and should do is to install vents in the exterior of our homes that would hopefully prevent those flames from entering homes through the attic, once that happens we can pretty much count on us having a major fire in the house. There are a few companies that do this, and most include the vents at the bottom of the house also. Some insurance companies are also offering discounts if you install these vents. I have done it at my home and feel more secure in knowing I have taken some steps to protect my property. If you can the name of the company I used, please let me know.
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Staying Safe Period
I know you all are most likely like me and are suffering from Covid fatigue. However, with the vaccines here now, and the hope that we all will be able to get them sooner rather than later, I hope that you all maintain your safe living practices, WEAR THAT MASK, MAINTAIN THE 6 FEET DISTANCE FROM OTHER FOLKS, WASH YOUR HANDS FREQUENTLY AND STAY HOME. We all know someone who has lost a loved one to Covid.. hopefully letās work together to stop the spread of this horrible disease!
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