Timely Real Estate News…………………….15 October 2015
A “whopper” month in Beverly Hills keeps sales volume rising on Westside
With six homes selling for more than $8.9 million in September in Beverly Hills — and with the two most expensive selling for more than $20 million each, the community recorded more than $94 million in total sales for last month and a record $9.250 million median sales price, compared to $4.300 million median sales price for the previous year. This amounts to a 127% increase compared to a year ago….when Beverly Hills’ median sales price for September was down 1% from the previous 2013 period which gives you a snapshot of how one month can make a dramatic impact on real estate statistics. Total sales volume for Beverly Hills was $44 million ahead of 2014, and Beverly Hills Post Office was $24 million ahead of the previous year’s totals, which accounts for the major increase in the communities I report on — Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City and Brentwood.
Total sales through the first nine months of 2015 topped $2.472 billion vs. $2.383 billion a year ago through September 30, a 3.7% increase year-to-date, not as much as a year ago when we saw a 12% increase over the previous year’s first nine months. But with the market and the recession during 2015, we again see that there is resiliency in the Westside real estate market.
Median sales prices in the other four communities I report on include Beverly Hills Post Office with $2.353 million which is 4% below a year ago; Bel-Air was up 3% at $2.372 million MSP, Westwood/Century City was down 4% at $1.685 million and Brentwood was up 3% at $2.825 million median sales prices. So, we see that year-to-date, median sales prices are remaining near previous year levels, which show that in these communities the market is stabilizing.
Median sales prices grew in Westwood/Century City by 10% over the previous 2014 September…Brentwood was up 16% compared to a year ago, while Bel-Air was down 23% and Beverly Hills Post Office was down 33%. Confused? Yes, the numbers begin to all blend together when you’re comparing median sales prices between sales periods vs. comparing year to year.
Frankly, we are looking for trends in these numbers, and the year-to-date median sales prices are remarkably steady. It is an anomaly when you see Beverly Hills recording a $9.150 million median sales price where it is usually in the $5 million range. But consider that this rather unique piece of real estate on the planet attracts buyers who are willing to pay upwards of $20 million and more for luxurious estates. Three mega-homes are currently under construction right now that will be going for record amounts including one for $500 million, a 100,000 sf home in Bel-Air. The numbers get a bit skewed when trying to track an area’s performance and that’s why I always pay more attention to year-to-date median sales prices. And these are holding steady.
The Fed Factor: It was tame inflation, lackluster job performance that kept rates down….
A temporary reprieve is about all we got last month…and it was based on global economic news, tame inflation and lackluster jobs data which were the key reasons for leaving the benchmark Federal Funds Rate unchanged last month. The Fed Funds Rate is the rate banks use when lending money to each other overnight.
While the September meeting minutes showed that many Fed members had expected to raise the Fed Funds Rate sometime later this year, this was before the weak September Jobs Report was released. Most analysts do not expect the Fed to raise the Fed Funds Rate at its meeting on October 27-28, and many no longer expect the Fed to act in 2015.
It will be important to stay tuned to the policy statement after the October meeting for any hints regarding the Fed’s plans. When the Fed does increase the Fed Funds Rate, it is possible home loan and other consumer rates may rise as well, depending on other market and economic conditions. In housing news, historically low home loan rates—coupled with high demand and limited supply—have strengthened home sales and home price gains.
The respected research firm CoreLogic’s Home Price Index Report showed home price including distressed sales rose 6.9 percent in August 2015 from August 2014. CoreLogic forecasts this trend will continue, and prices will rise 4.3 percent from August 2015 to August 2016. Finally, the S&P 500 Stock Index had its best week of 2015, pressuring Mortgage Bonds. While Bonds slid lower, home loan rates are holding steady and remain near historic lows.
It is important to remember that weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. When you see bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse.
The federal government ran a deficit of $435 billion in FY15, $48 billion less than in FY14. The deficit in FY15 was 2.4% of GDP, its sixth consecutive yearly decline, and slightly below the average of the past 50 years. Revenues were up 8% and expenditures 5%. If Congress allows sequestration to kick in when the continuing resolution funding government expires on 12/11/15, growth will be cut by 0.5%.
There is something else to consider: Rates fluctuate during any day’s trading and these changes still reflect that while mortgage bonds slipped last week…home loans remain in an attractive territory, and that’s good news, Carole Schiffer stated.
Developers are rushing to put up new high-rise condo projects
This has been a year that has seen the housing market in Los Angeles continue its meteoric price rise, with established neighborhoods steadily increasing in value, and emerging areas finding their footing. Homeowners throughout Los Angeles and its regions find themselves in the enviable position of seeing prices ascend to levels unseen since before the crash of 2008.
But the unfortunate side-effect has been that prices are now beyond the reach of many buyers. The median sales price of single-family homes in the second quarter in greater Los Angeles (the Westside, Downtown and Northeast) reached a record high of $1,371,500, and for condominiums it hit $675,000, making the across-the-board price for homes (gulp) $938,000.
Some of the hottest neighborhoods are areas which 10 years ago would have been perceived very differently than now: Echo Park, East Hollywood, Koreatown, West Adams, Downtown and others would have been considered either too “fringe” or lacking in services. What a difference a decade makes! Those areas are now some of the hottest markets in town, with percentage increases outstripping established areas like Cheviot Hills, Beverlywood, Westwood, Brentwood and Beverly Hills.
And some of the hardest reservations to score are at restaurants in those areas. I can say from personal experience that, especially in Downtown, one must plan far in advance to dine at some of the trendiest spots, such as Bestia, Perch L.A. and the sizzling Bottega Louie, where they don’t take reservations and the wait can be upwards of an hour for a table. But no one seems to care, as the people-watching is as delicious as the food!
Another new development is — oddly enough — new development! The high-rise condo boom of cities like New York, San Francisco and Chicago has made its way to our laid-back, low-rise shores, and is transforming the city’s “topography” with some spectacular and luxurious towers throughout the city. The tallest residential project underway is the 50-story project at 820 S. Olive St. by Vancouver, Canada-based developer Onni Group.
Chinese developer Greenland USA’s $1 billion mixed-use project in the South Park district — Metropolis — includes a 54-story condominium tower. Other high-rise residential projects include Beijing-based developer Oceanwide’s $1 billion mixed-use Fig Central, and another project by Onni Group at 1200 S. Flower St.
Millennials continue to be ‘hot’, but boomers are ‘hotter….
Millennials are clearly the future of real estate. Nevertheless, there’s a new trend afoot that might be your next hot opportunity — and America’s wealthiest generation will be driving it. And these are the boomers! Everyone has struggled to understand why younger people have been reluctant or unable to enter the housing market with the primary culprits being student loan debt, stricter lending standards and a limited job market have made it harder for Millennials to purchase homes.
OK — we get that. But the reality is that boomers are the next big real estate boom (pardon the pun)! Boomers not only control the purse strings; they’re holding almost the entire purse. According to the International Council of Shopping Centers, the 55+ agent group controls more than three-fourths of America’s wealth and has three times the net worth of younger generations. More importantly, boomers outspend other generations by $400 billion each year on consumer goods and services according the U.S. Government Consumer Spending Survey.”
The peak birth rate for the baby boomer generation occurred in 1960. These individuals turned 55 this year. For those who are still working, they are at the peak of their earning capacity. And for many boomers, continuing to work is a choice. After all, retirement is for senior citizens. This stems from the fact that most boomers believe they are 10 to 15 years younger than their parents and grandparents were at this stage of their lives.
Due to loss of retirement funds during the recession, many boomers have had to turn to work during the downturn. And here’s another bang on the retirement drum: Boomers are NOT selling! Nope. Because the boomers control the inventory, their choice and inability to sell has been an ongoing drag on the current market. We’re at a tipping point where this is about to change.
The prediction is that the majority of the 78 million boomers probably need to remodel their homes or will be moving due to being in transitional life stages. Transition, in this case, meaning downsizing from the family home, but not yet ready for retirement.” I am seeing a great deal of this at my open houses, says Carole Schiffer. “Boomers are coming in looking to downsize, and to either move to a completely different neighborhood, or just stay in the same “hood”, just in a smaller home”.
Other news that is making the rounds these days….The Chinese are still coming. Despite the downturn in their economy, there are enough very wealthy Chinese who view the United States as the best place to invest their funds, especially in California. The economy and job market are growing faster in California than the U.S. overall and that trend is expected to continue over the next few years.
Recent high-profile obstacles to economic growth — whether real or perceived — pale in comparison to the state’s position as a magnet for well-educated entrepreneurs, a hub for trade with the Pacific Rim and the center of the technology boom. Christopher Thornberg, founding partner of Beacon Economics in Los Angeles, offers a simpler explanation. “The answer is: People want to live here,” he said. “It’s amazing what you can get away with on that.” The state’s unique climate and geographical delights continue to attract wealthy visitors and immigrants from around the globe”.
Mortgage rates will increase but not go out of sight….economists are predicting that long-term mortgage rates will remain lower, even with short-term rates increasing. As we already discussed, no decisions were made at the Federal Reserve
meeting last month, but we have a number of significant economic data points due for the market to consider: With market expectations down, it’s unlikely that anything other than a large, positive increase in either Retail Sales or Industrial Production could push rates significantly higher. More than likely, rates will continue to wander as the market ponders whether we can build up some economic steam.
“I’m not an economist for sure — but trends are pointing to a more normal real estate market — and that’s good news for all of us”. Carole Schiffer
In the last few weeks, the traffic at my open houses has been quite heavy, and for the most part, everyone who has attended appears to be “real” buyers. It is very exciting to see and experience the energy demonstrated by these buyers and sellers. Some of them are coming to see my lovely new listing in Mountaingate which is 4 bedrooms/4.5 baths, a lovely golf course view and is priced at $2,650,000. Please let me know if you or someone you know is interested in seeing the property. Also private sales are still happening. I just sold a great property also in Mountaingate with a fabulous golf course and city views. It was shown to two prospective buyers, and they made offers. Please let me know how I might assist you with your real estate needs.