Timely Real Estate News………… 6 September 2022
Is summer officially over? Heat index says, No!!
Cole Porter said it best… It’s “too darn hot..” And it is, as we struggle through California’s severe drought, facing 100+ degrees weather throughout Los Angeles for days. What to do? Stay indoors, stay cool, watch college football, which starts this weekend. Go Bruins! Beaches will be crowded, and why not? Please be safe….and be alert for fire warnings…it’s always that time of year.
Home-price growth slowed in June…not unexpected
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 18% in the year that ended in June, down from a 19.9% annual rate the prior month. The housing market has cooled
in recent months, and existing home sales have fallen for six straight months through July.
Higher mortgage-interest rates are making it harder for buyers to qualify for loans and pushing some out of the market. The average rate on a 30-year fixed-rate mortgage was 5.55% in the week ended August 25, up from 2.87% from a year earlier, according to housing-finance agency Freddie Mac. But Freddie Mac, in another announcement (see below), indicated that mortgage rates were headed down possibly below 5%, so that is good news.
Economists expect home-price growth to slow significantly by the end of the year, but prices continue to show large gains from a year
ago. The Case-Shiller 10-city index gained 17.4% over the year ended in June, compared with a 19.1% increase in May. The 20-city
index rose 18.6%, after an annual gain of 20.5% in May. Price growth decelerated in 19 of the 20 cities.
We are still seeing price growth in the West Los Angeles market, so when we read about no or slow price growth, we need to
remember that doesn’t reflect our local real estate market. Please give me call at 310 442-1384 so we can discuss this.
Another sign? Rents fell in California metro areas.
Is there a cooling trend ahead? Overall, median rents across the country’s 50 largest metropolitan areas grew last month, but the Los Angeles-Long Beach-Anaheim region saw a decline. California, of all places, could provide some indication that the housing rental market is cooling. Again, this is not something I/we are seeing in our local real estate market. I recently leased a sweet 3/2.5 home in Bel Air Crest for $10,500 in 10 days.
Overall, median rent across the country’s 50 largest metropolitan areas grew by $3 to $1,879 in July, representing the 17th consecutive monthly increase and a rise of 12.3% year over year, according to data from the NAR. But in the Los Angeles-Long Beach-Anaheim metropolitan region, the fourth-most-expensive in the U.S., rent fell by $4 to $3,047. In the Riverside-San Bernardino-Ontario region, rent fell by $22, and the Sacramento area saw a $19 decrease.
The decline shows a market that is cooling off, and the rest of the country could soon see similar relief, according to George Ratiu,
senior economist and manager of economic research for the NAR.
For Los Angeles, year-over-year rent growth peaked in April at 22%, Ratiu said. Since then, the region has seen a dramatic
deceleration of rent growth, with prices in July up about 4% from a year earlier.
Mortgage rates projected to decline next year
Well, this is good news…mortgage rates are expected to drop, but that doesn’t mean prospective homebuyers should necessarily delay a purchase for the prospect of lower financing costs.
The rate on a 30-year fixed mortgage will fall to an average 4.5% in 2023, according to a recent housing forecast published by Fannie Mae, a government-sponsored lender.
That dynamic would offer relief to would-be homebuyers who’ve seen mortgage rates balloon this year. The Federal Reserve started increasing its benchmark interest rate in March to tame stubbornly high inflation, which has resulted in higher borrowing costs for consumers — who may feel a sense of whiplash from 2020, when rates bottomed out near historically low levels. Obviously, there are mixed projections among the economists as to the future of the economy. Some say we are headed for a softness and others are saying
that with the lowering of mortgage rates, the buyers that are standing on the side lines, still want to buy and the market will come
“roaring back” again. We will need to see what the future brings.
International buyers are back…. secondary markets high on list
Just as US homebuyers did two years earlier, luxury international buyers are rushing to secondary cities with investment potential, including Austin, Boise and Palm Desert? Homebuyers have faced hurdles amid a shifting housing market — prices are up, mortgage rates continue to climb, and inflation is inflicting pain to the bottom line.
But not all buyers are feeling the pain equally. Despite heftier prices, luxury international buyers who have cash to spend have renewed
their interest in investing in U.S. real estate, and in this gradually cooling market, they now have less competition.
As their buying power increases, luxury international buyers are also expanding their horizons beyond metropolitan hubs like New
York and Los Angeles to secondary markets that U.S. buyers have favored in recent years in response to the COVID-19 pandemic and
rising home prices.
Between April 2021 and March 2022, international buyers bought $59 billion worth of U.S. residential real estate, according to the
National Association of Realtors. The buying spree continues. I am seeing a lot of foreign buyers now on the Westside, even though
the US dollar is as strong as the Euro, this is still the best place to invest in real estate in the US.
Pending home sales declining…. not surprising
It is not a big move but Pending home sales declined for the second consecutive month in July, and for the eighth time in the last nine months, according to the National Association of Realtors. Three out of four major regions registered month-over-month decreases, though the West notched a minor gain. Year-over year, all four regions saw double-digit percentage slides, the largest of which occurred in the West.
The Pending Home Sales Index is a forward-looking indicator of home sales based on contract signings, slid 1.0% to 89.8 in July.
Year-over-year, pending transactions sank 19.9%. An index of 100 is equal to the level of contract activity in 2001.
In June, housing affordability plummeted to its lowest level since 1989, according to NAR. Accounting for a 30-year fixed-rate
mortgage and a 20% down payment, the monthly mortgage payment on a typical home jumped to $1,944, an increase of 54%, or $679,
from one year ago.
Composting coming to a home near you….
Los Angeles City and County — like many other cities across America, are launching an aggressive composting program that will be rolled out to an initial group of 40,000 homes in the City and County. The program is already being launched in other areas of LA County and is scheduled to take effect city wide by the first of the year!
The city will be supplying residents with containers to use for their discarded foods to use with their green yard waste bins. I understand from my sister who lives in Canada and has been composting for a number of years there are a number of items that one can use to divide their food waste. All of this may sound routine to many Bay Area and Orange County residents who have participated in residential composting programs for years. But because of its vast scale, Los Angeles could have a transformational effect on diverting food waste, experts say.
Los Angeles isn’t advancing this environmental cause on its own. It is scrambling to meet a state-mandated deadline to move food
waste out of landfills by the end of the year. To make the program available to all 750,000 of L.A.’s households, the city must build the
capacity to handle a huge wave of organic waste, eventually up to 3,000 tons a day.
Hopefully we all will get behind this new program and help ourselves in fighting climate change. It all adds up!
Please enjoy this abbreviated issue of the Schiffer Line. I promise there will be more next time.
Talk to you soon
Carole: 310 442-1384
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