Timely Real Estate News……………………………….1 November 2018
Home prices soften. Harbinger for future?
We’re so used to seeing home prices zooming upward, reaching new heights practically every month, as a result. It is not necessarily a surprise to see prices leveling off, ever so slightly. These reports do get noticed. Home prices in the U.S. rose at a slower pace for the fifth consecutive month, yet another sign the housing market is slowing down, prices are scaling back in Los Angeles County as we saw price cuts on 28.8% of the listings last month, up from 17.9%.
Standard & Poor’s reported last week that its CoreLogic Case-Shiller national home price index reported a 5.8% annual gain in August, down from 6% in the previous month. It is the first time in a year that annual gains fell below 6%. The 20-City Composite posted a 5.5% year-over-year increase, down from 5.9% in July — substantially lower than analysts’ expectation of 5.8%. A .2% drop doesn’t sound like much, but when prices continue to trend upward, economists are speculating that we’re about to see a change.
Existing home sales fell 3.4% in September from August, the lowest level since November 2015 according to the National Association of Realtors. New home sales also fell to a near two-year low in September, and three prior months of sales was revised lower because of higher interest rates and rising prices. The housing market has been losing momentum since July according to Lawrence Yun, their Chief Economist.
The high-end market has also softened somewhat
High-end sales on the Westside of Los Angeles County are still down but not by far according to our latest research. There have been 469 sales of $5 million-plus this year, compared to 504 this time last year, a 7% drop. Of these sales, 129 were $10 million-plus while there were 147 last year in this category, down 16%.0
In the $20 million-plus range, there were 36 sold through September of this year, vs. 43 homes in that range last year. In the $30 million-plus range, there were 16 sold this year vs. 19 sales a year ago. Seven of these sales were in the $40 million-plus range while there were only 8 at this time a year ago.
It is noteworthy that of the 36 sales of $20 million-plus homes, buyers were mostly American (29 or 81%), the other seven buyers were from Monaco, Saudi Arabia, Canada, Japan, China, Australia and England. Interestingly, of these properties, 17 were not officially listed in the MLS at the time they sold.
Who’s to blame? Lots to go around….
Finger pointing is pretty consistent these days. Higher interest rates will continue to play the villain in housing affordability, especially for first-time buyers. While the issue of low inventory is improving and interest rates, even though they are rising, are still basically low it does throw a damper on the market, though I can tell you I am personally busier than I have been all year.
The Federal Reserve, in efforts to keep inflation in check during a very robust economy, is expected to raise rates again through 2020. With the stock market in its anticipated correction zone, the housing market — on a national basis — will continue to reflect a slow-down in sales because of the high credit costs and their impact on affordability.
From my perspective, I see that prices have moderated in the communities I report on each month — Beverly Hills, Beverly Hills Post Office, Bel-Air/Holmby Hills, Westwood/Century City and Brentwood. Sales-price-to-original-listing prices are down to an average of 90% or less, which is low for our market. And the number of single-family homes sold in these communities through September 2018 is down 12.8% from 660 to 575 units sold in 2017
Housing market is cooling…a good thing?
USC’s Lusk Center for Real Estate pointed out last week in the Los Angeles Times
“…. buyers are pulling back because housing has simply become too expensive — a situation made worse by the recent surge in mortgage interest rates. Some who can still afford a home are holding back because they don’t want to buy at the peak. Prices have gotten ahead of themselves,” said Richard Green, director of the Lusk Center. “I think it’s very possible the market is going to cool down for a while.”
According to Green, that would be welcome news for many would-be buyers. “That’s especially true in California, where experts say opposition to development has long stymied companies from building enough homes for everyone who wants to live here. Million-dollar listings have popped up even in some working-class Los Angeles communities, as have billboards on which investors promise to buy your house fast with cash.
As I have pointed out in the past, when you are seeing small bungalow homes in Atwater, Eagle Rock and mid Adams Blvd going for $1 million and up, the entire landscape of housing and its prices is changing in Los Angeles, which in turn can drive people away.
When you realize that California needs 180,000 new housing units every year, and we only produce 100,000, the law of supply and demand wins.
Volcanos in California? Really? Yes, really!
California volcanoes are at the top of federal volcano threat list. Three of California’s volcanoes are considered to be a very high threat, along with 15 others nationwide, according to the first update of the federal government’s volcano threat assessment in more than a decade. Yes, Virginia, California has volcanoes.
Mount Shasta in Siskiyou County, Lassen Volcanic Center in Shasta County and the Long Valley Caldera that includes the Mammoth Lakes area in Mono County remain in the highest risk category as defined by the U.S. Geological Survey.
The USGS’ list of the 18 “very high-threat volcanoes” remains the same as the last list updated in 2005. They include two volcanoes on Hawaii’s Big Island: Kilauea, which underwent a new eruption earlier this year and sent oozing lava to destroy hundreds of homes; and Mauna Loa, considered the largest active volcano on the planet. In the LA Times last week, it was pointed out, however, there have been only 10 eruptions in California over the last 1,000 years, however, in any given year the chance of a major volcanic eruption in the state is about the same as the risk of a major earthquake on the San Andreas fault.
The last major volcanic eruption on the mainland U.S. was Mt. St. Helens, which underwent a deadly eruption in 1980. If there’s any good news, it’s that major volcanic activity is usually accompanied by some warning signs, and scientists have become much better at forecasting major events before they happen, enabling authorities to sound warnings to reduce the chance of deaths. On my way to Vancouver to visit my sister’s family, I have flown over Mt. St Helens many times, it is really cool to see the top of the volcano.
What’s in a down payment?
“Hi, Mom. Hope all is okay. Say, Susan and I have been thinking about buying that home for sale on Elm Street, but we’re a bit short on our down payment. Could you….”
Well, you know the rest of the story. With homes being priced out of the market for many first-time buyers, scrambling to raise cash for a down payment continues to challenge most millennials these days. In two of my most recent transactions, parents are gifting their “kids” the down payment to make it happen.
The National Association of Realtors released a report showing that overall, buyers paid a median of 13% down, up from 10% last year, the highest since 2005. Twenty-four percent received a “gift” from a close relative (mom and dad?), 58% used their savings as their primary source, and repeat buyers used the proceeds from the sale of a previous residence. Nearly all purchased a single-family home.
A majority of buyers continue to choose a detached, single-family home (82%) as opposed to a townhouse or row house (8%) or a condo/duplex/apartment unit (4%). Median age of repeat home buyers’ skyrockets but stays flat for first-time buyers, and for the third straight year, the median age of first-time home buyers was 32 years old.
Single females remain a strong segment of the housing market — accounting for 18% of single-family homes. Their median income was the same as last years at $75,000, and they spent a median of $203,700 on a home. These buyers were more likely to purchase smaller homes than repeat buyers, with a median size of 1600 square feet.
The holidays are a great time to put your home up for sale…
There are a few myths about selling your home during the holidays. Think about it. The holidays, is a great time to dress up your home, especially if you’re thinking of putting it on the market. And why not? The Fall season comes with its own beautiful palette of reds, oranges, golds, and yellows, all of which present a warm, cozy setting for prospective buyers. So, here are five handy things you can do to dress up your home.
#1 Add accessories featuring colors of the season. If it’s Fall, these colors are everywhere outside, by bringing them inside as appointments, table settings, and flowers it can lighten up any room with a warm glow. #2 Make the most of the season’s scents and sensations. Buyers will feel the warmth of your home sweeping over them and they may want to make quicker decisions so they can be in their new home for the holidays. Pine cones, evergreen branches, fall leaves and even pumpkins and ears of corn all help build the spell you want. #3 Show off the best of your environment. It’s critically important that you stage your interior AND exterior as well. Make sure that you have your landscaping, lawn, and flower beds neat, clean and full of “freshness”. Show off the beauty of your property…make sure you put in color to accentuate its naturalness. #4 Play up the season’s best. Halloween is over, but Thanksgiving is just around the corner. Show off how your home might look/feel for guests at your Thanksgiving dinner…even putting on place settings and flower and themed arrangements. Lighting will also be important as we near Winter and shorter days…make sure your outdoor lights are working and interiors are appropriately staged, too. #5 Change with the season. After Thanksgiving, you can switch to the rest of the holidays – Christmas or Hanukkah. There are so many options for you to ‘warm up’ your home with your traditional holiday decorations. Buyers place themselves in your home and can visualize how they would celebrate the holidays.
In addition, many sales take place now as some buyers/sellers want to for a variety of reasons close escrow before the end of the year, and some buyers take the rest of the year off, so there can be less competition for homes, which can be to your advantage both as a buyer and/or seller.
What is going on with me?
With my Mom not wanting to be among crowds, I am left with the responsibility of doing the holiday shopping for two. It is a challenge to try to figure out what she would like to give as gifts as that tends to be very much a personal thing. Also, and while I am not complaining, I am very busy with business, so really don’t have that much time to get into the stores, and find myself doing the majority of my shopping on line.
From a business perspective, in most of my transactions my buyers and/or sellers all want to close escrow before the end of the year, so it has been a huge juggling act to get everything put together. I have a huge need, PLEASE. I have 5 or 6 buyers for Canyon homes in Bel Air Crest! One or two need elevators, and others have missed out on being able to purchase the homes that were available just weeks ago. If you are at all considering selling your Canyon (this doesn’t mean I don’t sell Custom homes because I do), please get in touch with me Perhaps we can get your home sold without it being put on the “official market”.
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