Goldman Sachs predicts V-recovery, stimulus package
Analysts from Goldman Sachs are predicting that economic growth will rebound more strongly than expected in the second quarter of 2021, despite projected GDP losses in the fourth quarter of 2020 and first quarter of 2021 caused by a resurgence of the virus in the United States and Europe.
According to their report issued last week, just as the global economy rebounded quickly (albeit partially) from the lockdowns in the spring, Goldman expects the current weakness to give way to much stronger growth when the European lockdowns end and a vaccine becomes available.
Goldman is now predicting a global GDP loss of 3.9% in 2020—driven by a major contraction in the European economy in the fourth quarter— and a bump of 6% in 2021. That indicates a V-shaped recovery, under which the economy bounces back to its baseline levels (or better) after a crisis with minimal hiccups along the way. They are also predicting a stimulus package will be passed before Biden’s inauguration.
Federal Reserve commits to full range of tools
In their November 5 meeting, the Federal Reserve stated it is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
The Fed recognized that the COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.
The Fed Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2% percent for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%.
Median sales prices continue upward
It is no surprise that demand for high-quality housing continues to push prices up on the Westside, even though sales volumes have leveled off through the first 10 months of 2020.
In the five communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City, and Brentwood, median sales prices were up by stronger margins than last month with Brentwood holding even with last year through October (no change). Beverly Hills led the way in median sales price increases with a 12% gain over last year, with an MSP of $6.475 million. The Westwood/Century City MSP was up 10% over last year at $2.411 million; Beverly Hills Post Office was up 5% at $3.000 million; and Bel-Air/Holmby Hills was next at $2.331, up 4%. Pacific Palisades, one of the communities I also cover, was up 10% over 2019 at $3.345 million.
What we are seeing across the board is a market that remains “hot”— lots of buyers who are seeking a quality lifestyle in attractive, safe and, well-managed cities and neighborhoods. During this pandemic, I am seeing buyers looking for security, calm, protected areas that offer good schools and appealing local amenities. We have all that right here…and our reputation has spread worldwide. Another measurement of our appeal is that homes are selling for an average of 93% of the original listing price, up substantially from this past summer. Once again, there are some outstanding high-priced sales that skew the numbers and percentages, and as my numbers are from the Multiple Listing Service only, any private sales are also not factored into these numbers.
Sales volume lags…still over $3 billion
Sales have been a mixed bag for 2020…volumes have hovered below last year’s record sales from 6% to 10% each month compared to what we saw for the first 10 months in 2019. In analyzing the data from 2019, there were block-buster sales that pushed these five communities to new sales records, but we have now turned the corner for high-end sales (see below).
Sales volume for these five communities through October were $3.070 billion vs. $3.417 billion through same period in 2019. That is a 10% drop. The biggest decline in sales volumes for the year is in Bel-Air/Holmby Hills, down $301 million from 2019, followed by Beverly Hills, down $175 million.
Westwood/Century City was down $38 million, and Bentwood was off by $54 million. The good news is that Beverly Hills Post Office was up $232 million through October. Pacific Palisades has had a great year with sales up 10% with sales of $800 million for 2020.
Buyers seek ‘multi-generational’ homes
The coronavirus pandemic has initiated several shifts in America’s housing market over the past eight months. Changes in the behaviors of home buyers and sellers were especially notable as buyers’ usual tendencies altered, and the urgency to sell accelerated.
This is according to new data from the National Association of Realtors’ 2020 Profile of Home Buyers and Sellers, a yearly report which discusses demographics, preferences and experiences of buyers and sellers across America.
Those who completed their transaction after March were more likely to purchase a multi-generational home. Multigenerational home purchases accounted for 15% of sales after March, compared to 11% for those who closed before April.
In light of stay-at-home orders instituted within the early weeks of the pandemic, 14% of buyers who bought after March said their transactions were delayed because of COVID-19. The report went on to say that buyers sought housing with more rooms, more square footage, and more yard space, as they may have desired a home office or home gym.
The NAR report also noted they shopped for larger homes because extra space would allow households to better accommodate older adult relatives or young adults that are now living within the residence. As an example, one of my clients whose son attends school in San Diego, just moved back into his apartment there after living at home for the past 9 months.
Pandemic revs up expensive homes market
The pandemic is revving up the market for expensive homes where many people are spending far more time, luring wealthy buyers, and nudging more sales over the half-million-dollar mark from Northern California to the New York City suburbs.
Nationally, nearly one in four home buyers between April and June bought houses priced at $500,000 or more, up from 14% of buyers during the preceding nine months, according to a report from the National Association of Realtors.
…And we are moving ahead in high-end sales on the Westside…. while we are seeing increases in expensive homes across the country, our high-end sales for all of the Westside from Beverly Hills to Malibu, is ahead of last year. The number of closed sales of $5 million-plus are 550 vs. 456 this time last year, up 21%. Of those, 150 were $10 million-plus vs. 134 last year. In the $20 million-plus range, we had 45 sales close escrow vs 39 in 2019 at this time.
We are down slightly in the $30 to $40 million-plus range by 12%, and the reason sales volume has decreased so much this year in the communities I report on is that we have not seen the sales in the $40 million-plus homes, which are off by 40%. So, there you have it — we’re up, were down, but overall, we are trending up in prices and sales in our higher priced homes. We have seen some block buster sales this year, and the same holds true for Orange County.
Second-home markets heat up, too
You would not know we are in a pandemic at times…. the housing market is booming across the United States, especially in second-home markets. Resort towns especially have become ‘hot’ because they provide vacation-style living, and many buyers are staying put year-round. For some, their primary home has become their second home now. When so many of us are working out of our homes, it has been become easier to work from our second homes.
According to the National Association of Realtors, homes are selling much quicker than they did a year ago, and sales of resort and second homes are no different. In September, 68% of vacation homes sold in less than a month, according to the Realtors’ Confidence Index Survey.
Historically, about 30% sell that quickly and the report noted that it is pretty amazing to see this uptick compared to past years. Sales of resort and second homes accounted for 6.3% of overall home sales in the third quarter, up from about 4.5% in the second quarter, according to the Confidence Index.
New law gives many chances to buy foreclosed homes Come January 1
A new law will enable individuals, non-profits, and governments a chance to buy foreclosed homes before investors can scoop them up.
In a recent Los Angeles Times review, during the last financial crisis, millions of Americans lost their homes to foreclosure, and many of those houses were scooped up by investors — large and small — to flip or rent out. Wall Street became a major player, with large firms creating subsidiaries that snapped up tens of thousands of single-family homes to rent out and became landlords.
In California, where housing costs are sky high, many low-income community groups see investors as a negative force. They say companies crowded out traditional home buyers in the wake of the Great Recession when housing was relatively affordable and are more willing to raise rents and evict tenants than mom-and-pop landlords
Here’s the new law: The new rules apply to one- to four-unit properties sold at foreclosure auctions. If an investor wins one of those homes at auction, then people who want to live in it, as well as nonprofit organizations and government entities, have 45 days to submit competing offers. If the home is a rental, the tenants living there could prevail by matching the investor’s offer. Other would-be buyers must offer more than the investor.
Hard to believe the holidays are upon us
Thanksgiving is a little more than a week away, and while it might be difficult to think of giving thanks given the year we have been experiencing, it is important for us to stop and take stock of all that we have.
Losing my Mom continues to be difficult for me, particularly as she was such an integral part of my life, but I am so VERY grateful for having her in my life for as long as I did and for the continuous feedback I get from those who knew her telling me how very special she was.
I am also grateful for the improved relationship I have with my sister and her family, and the knowledge that we are there for each other. My gratitude also extends for my health. A very special Thank You to all of my friends, family, and clients for everything you are and bring to my life.
As an ode to this year and what may be the anthem for all of us, I am including a link on You Tube.com to a song that I love hearing particularly this time of year. It is from Gloria Gaynor and the song “I Will Survive” sung by a turkey. I hope you enjoy this as much as I do.
I am also grateful to those of you who participated in my Halloween contest. Seeing the entries was fun. Be on the lookout for my next contest which will be launched in the next week or so.
In the meantime, life goes on and I would love to hear from you as to how I can assist you with your real estate needs. I will be very grateful and thanks for this as well. Just a reminder the real estate market goes on during the holidays, and in fact because some buyers and sellers sit on the side lines, it can be a great time to buy or sell a house as there may be less competition.