The SchifferLine
Timely Real Estate News……………………..15 July 2021
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Sales volume continues upward….!
We’re seeing sales volumes never seen before in the communities I cover — record volumes keep climbing upward each month. For the five communities I regularly report on — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood — sales volume through the end of June 2021 was $2.619 billion, up 71%, compared to $1.523 billion in June 2020.
When comparing sales volume to pre-pandemic June 2019, sales were up 47% for June 2021 at $1.775 billion.
Obviously, the pandemic depressed sales volume last year.
Please note: One must keep in mind that last year at this time, we were in the throes of the pandemic, and sales for June 2020 were down from 2019, so these large % increases you are seeing in today’s market will continue. The Federal Reserve believes we have a strong economy, and there is no expectation the Fed is going to moderate interest rates any time soon.
Is it going to calm down? We live in the land of supply and demand, and it is no surprise that demand is far outstripping inventory of single-family homes in these communities. I do not see where sales volumes are going to moderate back to previous years as the price of valuable real estate continues escalating upward. And combined with the latest inflation stats released this week, home prices will just continue rising — as does everything else.
Leading the sales volume increases was Brentwood, which has seen an increase of more than $384 million in sales through June, compared to last year. Beverly Hills had $250 million more in total sales volume, Bel-Air/Holmby Hills had $193 million more, Beverly Hills Post Office increased $160 million over 2020, and Westwood/Century City sales were $118 million over year-to-date sales for 2021.
Needless to say, we’re in the middle of a very hot selling season and are seeing buyers flooding the market. Lack of inventory is certainly causing most of the increased sales prices, but it also influenced by the perception that real estate in prime communities is one of the best investments one can make. That certainly is proven here now.
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Median sales prices continue their ‘mixed bag’
While sales volumes are heading upward also, and median sales prices have moved steadily upward, although not displaying the dramatic gains as in sales volumes For example, Brentwood, which had a booming June, showed a 14% increase in median sales prices at $4.114 million; Bel-Air/Holmby Hills had a 13% increase at $2.718 million; Beverly Hills was at $7.414 million, a 10% increase; Westwood/Century City’s median sale price through June was $2.582 million; and Beverly Hills Post Office was down 2% at $3.305 million.
Culver City, another community I cover, had a median sales price for June of $1.645 million on 30 transactions…this community, with its relatively low prices, has become one of the hottest markets in our area.
One of the key stats I look at is how original asking (or list) prices compare to the final sales price — where over-pricing plays a major factor in how sellers view their property’s value. As I noted in my quarterly newsletter, many homeowners tend to over price their homes because sellers see all of the robust sales taking place, especially on the Westside.
Two communities I cover have a good track record in pricing vs. final sales — Westwood/Century City actually recorded 101% of comparing original list price to final sales…. Brentwood which has received a great deal of activity this spring and early Summer, had a 99% comparison. The other areas were either 90% or 89% in the final sales price (compared to original asking price). Sellers who over price their homes from the outset soon learn that strategy doesn’t work…not today.
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High-end sales setting records — no surprise!
This year continues to be the best ever in high-end sales. There have been 535 closed sales of $5 million-plus so far this year, versus 252 at this time last year, up 112% Of these, 175 were $10 million-plus this year, and there were 81 at this time last year: up 175%.
In the $20 million-plus category, there were 44 sold compared to just 20 a year ago, up 120%. Just amazing! Please remember as mentioned in the previous article, one must keep in mind the impact that the pandemic had on prices 
all across the board so that needs to temper how we look at these stats.
Twelve (12) of these sales were $30 million-plus this year, versus 10 at this time last year. And eight were $40 million-plus, versus five at this time last year.
As of July 1, there are 123 pending sales of $5 million-plus, and 44 of these are $10 million-plus. Of the 44 sales of $20 plus million, the buyers are: 33 American, (75%).one Saudi, one Chinese, one Indonesian, one Canadian, one Danish, and one from India.
The areas of the 44 sales were: 12 in Malibu, 8 in Beverly Hills, 5 in BHPO, 4 each in Sunset Strip, Bel Air, Brentwood and Holmby Hills and 1 each in Westwood, Santa Monica and Palisades…16 of these properties were not officially listed when sold.
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Inflation is here — will it hurt the real estate market?
According to the Wall Street Journal this week, Americans should brace themselves for several years of higher inflation than they’ve seen in decades, according to economists who expect the robust post-pandemic economic recovery to fuel brisk price increases for a while.”
Economists surveyed this month by The Wall Street Journal raised their forecasts of how high inflation would go and for how long, compared with their previous expectations in April. But the burning question — will this impact the real estate market. Yes, it will have an effect, but there was no prediction as to how much — they only noted that prices are going up across the board, and that means housing costs will for sure. Buyers and renters are going to pay more for housing.
The respondents on average now expect a widely followed measure of inflation, which excludes volatile food and energy components, to be up 3.2% in the fourth quarter of 2021 from a year before. They forecast the annual rise to recede to slightly less than 2.3% a year in 2022 and 2023. That would mean an average annual increase of 2.58% from 2021 through 2023, putting inflation at levels last seen in 1993.
“We’re in a transitional phase right now,” said Joel Naroff, chief economist at Naroff Economics LLC. “We are transitioning to a higher period of inflation and interest rates than we’ve had over the last 20 years.”
The inflation measure—the Commerce Department’s core price index of personal-consumption expenditures—jumped 3.4% in May from a year earlier, the biggest increase since the early 1990. So, we shall see what impact it will have on housing — surely with the level of sales volumes and increases in median sales prices, we are facing price increases — just do not know how much!
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The Pandemic is leaving its mark on real estate
As the US economy continues to recover from the effects of the pandemic, property owners that weathered the crisis without financial distress are snapping up the limited supply of homes for sale, pushing up prices and further excluding less affluent buyers from homeownership. At the same time, millions who lost income are behind on housing payments and on the brink of eviction or foreclosure.
According to The State of the Nation’s Housing 2021, a new report released this week by the Harvard Joint Center for Housing Studies, a disproportionately large share of at-risk households is those with low incomes and people of color. While policymakers have taken bold steps to prop up consumers and the economy, additional government support will be necessary to ensure that all households benefit from the expanding economy.
Even before the pandemic, household growth in the suburbs and small metros was on the rise. The pandemic helped accelerate this growth, particularly among younger households who were ready to own homes and were looking for more space to work remotely.
In 2020, existing home sales rose 6% and new single-family home sales jumped 20%, putting total home sales at their highest level since 2006. The home buying binge occurred despite a historically tight supply; in late 2020, months of supply for existing homes dipped below two months for the first time ever, while median time on the market hit a record low of 18 days.
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Home improvement boom — it’s here and growing
Home Depot, Lowes, Ace Hardware — these are the new hot retailers today. Why? Because the pandemic created a drive to spruce up our homes and that desire is continuing. Half of U.S. homeowners recently surveyed say they plan to spend more on home improvements in 2021 than they did last year, according to the latest BMO Real Financial Progress Index, a quarterly indicator measuring consumer sentiment about finances.
Renovation projects are expected to continue to rise too. Two-thirds of more than 2,500 U.S. homeowners surveyed said they plan to tackle home improvements this year, the index shows.
Many homeowners are using cash to complete these home renovation projects. 50% of homeowners said they were using cash to pay for these projects, followed by credit cards (24%), line of credit (12%), and loans (12%), the index shows.
Real estate professionals can help as this remodeling wave continues by offering homeowners information into how the renovations, they do can affect their home’s value. For example, kitchen and bathroom renovations tend to offer some of the highest returns on investment. The National Association of Realtors latest report offers some insight: The report showed that there has been a major shift in the housing market since the beginning of the pandemic—record low interest rates, incredible demand, and more people working from home
And what this has produced are home improvements — many on a long-ignored “things to do” list…., homeowners are now stepping up. The top 10 household projects are: painting, bathroom remodels, new flooring, landscaping, kitchen remodels, painted exteriors, smart home devices, new roofs, fencing, and installing a deck or porch. One of the biggest growth areas is the “outdoor kitchen” that expands the home’s living area with outdoor patios complete with the best barbecue, islands, and kitchen equipment available. But they can be pricey — costing as much as $30,000 to $50,000 depending on the size and quality of the barbecue grill, accessories, decking and patio furniture.
Unfortunately, the issues with the supply chain are creating problems. Not only in the delivery of product, but with the cost of the raw materials themselves…
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Drought places added pressure on Southern California
As one stands on the sand at the shores in Santa Monica, looking westward at the magnificent Pacific Ocean, one cannot help remembering that the ancient mariner was right….” water, water everywhere, and not a drop to drink.” Instead, we look eastward for our water.
Precious water resources are literally ‘drying up’ — one only has to take a look at one of the Metropolitan Water District’s pride and joy — Lake Mead and realize we’re in the middle of a serious drought.
After years of an unrelenting drought that has quickly accelerated amid record temperatures and lower snowpack melt, Lake Mead is set to mark another more dire turning point. Next month, the federal government expects to declare its first-ever shortage on the lake, triggering cuts to water delivered to Arizona, Nevada, and Mexico on Jan. 1. If the lake, currently at 1,068 feet, drops 28 more feet by next year, the spigot of water to California will start to tighten in 2023.
The crisis, said Eric Kuhn, former general manager of the Colorado River Conservation District, can no longer be ignored. “According to Merriam-Webster, a drought is a temporary condition,” he said. What is happening, he suggested, is something more permanent and troubling. “This is aridification.”
As fires sweep over large swaths of the West and scorching temperatures fry others, the scarcity of water is a less visible most pressing consequence of climate change confronting the states that depend on Lake Mead.
First to be hit are the areas along the Nevada-Arizona border near Las Vegas, who rely on the lake for tourism, fishing, and recreation. Ramps are closed. Jammed boats are towed from newly shallow waters. Fishermen scour to figure out where to catch striped bass. The iconic lake’s predicament is marked by a “bathtub ring” of calcium deposits that highlight the rocky edge where water once flowed.
We all earnestly hope that rain will fall again, the snowpack will return to normal, and we’ll be free of worrying about water shortages
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Local Issues
We have a few local issues facing us that you should know about:
Mount Saint Mary’s College, now University is working on developing a 35,000 sq ft. wellness center on its campus which is at the top of Bundy Drive. Here are some of the areas of concen.
Lack of fire and evacuation from MSMU during emergencies; Uptick in MSMU related vehicles/cars/deliveries/ onto the small narrow streets; additional commercialization of campus – 24/7 inclusive of summer camps and external events; more than 2,000 MSMU car trips up and down the canyon at peak hours poring onto the canyon streets and Sunset Blvd; over TWO YEARS OF CONSTRUCTION and everything attendant to that… trucks, etc.; additional evening and weekend events and summer camp; the return of wildlife to a quiet campus
They are in the process of holding public meetings and hearings. For more information contact. BundyCanyonInfo@gmail.com. You can also contact LA city – kathleen.king@LACity.org. They ask that you copy the folks at Bundy Canyon on any emails you send to the city.
The other issue is the on-going potential development of the last remaining 445 acres of undeveloped land in the area adjacent to Mountaingate. The potential project is being proposed by Nicklas Berggruen to be called the Berggruen Institute. Mr. Berggruen purchased the property with the agreement that he would develop the formally agreed upon 28 homes, in fact he filed the track map and received approval from the City Council in 2019. Instead, he wants to develop a facility with three buildings. The Mountaingate Open Space Association is perusing legal means to have him uphold the original agreement.
Both of these issues address the same areas of concern. It is incumbent upon and the responsibility of each of us who live or work to work to protect not only our properties and their value, but our natural resources as well.
If you want more information, please do not hesitate to contact me… ceschiffer@gmail.com, 310 442-1384.
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What about your business you might ask?
Frankly, I am busier than I have been in years! Listing and escrow in Mountaingate, and now a passel of buyers who missed that one and are asking me to find more for them, About 4-5 buyers for Canyon homes in Bel Air Crest, and potential listings in Westwood Hills, and Bel Air Park. While I am tired, I really do love all of the activity, so keep it coming!
Looking forward to hearing from and seeing you… Take care
Stay safe, healthy & happy!
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