Renting stinks!! And it may get worse —

August 26th, 2016

L.A.’s high rents $2,000 for a median priced 1 bedroom, and low vacancy rate 3% , mean that our city is a nightmare for those on the market for a new apartment.

Two years ago, a study by the UCLA Ziman Center for Real Estate famously concluded that Los angeles was the least affordable city in the nation because the gap between wages (the median individual take here 1s $28,555) and lease rates in L.A. was the largest that the researchers could find.

Since then, rents have continued to increase, and incomes have essentially remained flat. Now, a new report from personal finance site WalletHub places Los Angeles among its 10 “worst Cities for Renters ”

No surprises, here.images

Of the 150 American cities analyzed for affordability, quality of life, vacancy rates, safety and other factors, L.A. came in 141st.

On specifics, Los Angeles came in 141st for affordability, 108th for quality of life, and 125th for our vacancy rate.

Los Angeles ranked 129th for cost of living, 127th for job openings, and 77th for the number of households that spend at least half their income on housing.

Our best ranking,  interestingly, was safety, where we ranked 35th!!

The best American city for renters, the site says, is Scottsdale, Arizona, with the worst, Oakland.

The site says July is peak season for moving, and, according to a spokeswoman, “the share of U.S. renter households” increased “in 2015 to more than 36 percent — the highest since the 1960s.”

UnknownThe good news, depending on how you see things, is that L.A. is the midst of a building boom, which could add much-needed apartment units to the market.

Until then, hold on —

Bye Bye Air BnB…maybe ?

July 27th, 2016

As it has in cities that include San Francisco; Portland, and Newark AirBnB has signed an agreement with Los Angeles to collect and remit lodging taxes on behalf of its hosts.

The tax collection, at a rate of 14 %, is set to begin in August. The agreement also allows the city to audit the tax payments and to go after hosts for previous tax liabilities.images

LA Times reported that city officials hope the agreement will generate tax revenues of at least $5 million annually, BUT they do not want the agreement to be misinterpreted as legalization of short-term rentals.

In Los Angeles, many of AirBnB’s current listings would be considered illegal because of the city’s zoning laws regarding short-term rentals. In most areas of the city, it is illegal to rent out a home for less than 30 days. Hosts who are renting out their homes on AirBnB and other platforms are required to pay lodging taxes, but the city has had difficulty collecting the taxes, which is another reason why officials said they agreed to this deal with AirBnB. money bags

These city tax agreements are at the core of AirBnB’s strategy for legalization in various jurisdictions around the world.

The move by Los Angeles city officials to agree to a voluntary collection agreement with AirBnB comes when the city is considering new legislation to regulate the types of short-term rentals offered by platforms such as AirBnB, HomeAway, and FlipKey.

The new law would legalize short-term rentals for residents for up to 90 days per year, but it requires platforms like AirBnB to provide the city with information about the hosts, their addresses, and the number of days they have rented their homes and for how much.

Property landlords also have to register with the city, and rent-controlled or designated affordable housing would be exempt from participating in short-term rentals. Hosts who fail to comply with the law would also be fined, as would websites that display listings that violate the new law. Sites that don’t provide data to the city would likewise be fined.

UnknownThis legislation awaits approval from the Los Angeles City Council, but given how it is structured, it’s debatable whether it would survive legal review by the courts.  AirBnB and other short-term rental platforms can argue that they are not responsible for what is advertised on their sites or what their users do on their sites.

Other cities in Southern California have taken much more restrictive approaches to short-term rentals. Santa Monica has essentially banned short-term rentals, and Anaheim in Orange County, is set to ban them as well.

In an interesting coincidence –  Los Angeles will be the site of AirBnB’s annual convention for its host community, AirBnB Open, in November.

cartoon-skyline-city-atlanta-georgia-usa-29810241Tourists

State of So Cal Real Estate

July 1st, 2016
To sum up — rising values

1 – If you’re planning to buy a home, do it now, because prices are going up for the next few years. 

2 -Investments in single-family rental properties have weak potential because of high home prices. 

3 – Apartment developments have the best potential in LA County.

The LA economy is different than it was. In the last twenty years it’s lost a half million manufacturing jobs, many in the aircraft business. Tourism picked up some of the slack but at lower pay, and many jobs now revolve around services. Healthcare is the fastest growing industry. The demographics are different too; 48 percent of residents in LA County are Latino, 14 percent Asian, a third are immigrants.

The population isn’t growing very fast, but home prices are – that’s partly because LA is running out of room. Growth is mainly in the cheaper, outer communities in Riverside and San Bernardino. Home prices were up 30 percent in the last three years – although it’s difficult to separate real home sales from the boom in foreclosed subprime properties. Whatever the cause, you can expect prices to go higher in the next few years, so don’t wait if you plan to buy.

In LA County, prices are up the most in West Hollywood, the least in Torrance.

Home prices are high compared to rents, which makes single-family rentals a difficult investment except in special circumstances. Overall, high home prices force the majority of people to rent, and rents are high compared to incomes. This makes apartment buildings a good investment – LA County, with the highest percent of renters, has the best investment potential.Hm Calculate

Mortgages are a difficult investment right now. Lenders will likely back away from high loan-to-value mortgages during this period. The same is true for construction loans; new projects will be financed in very careful stages.

The area is growing at an unequal pace – partly because of housing costs – with faster growth in Riverside and San Bernardino Counties, slower growth in Ventura and LA.

The climate for investments in retail businesses is best in Riverside County, worst in LA and Orange – where demand hasn’t budged in the past two years and the market is over-served. doc

All counties will be adding healthcare jobs.

Luxury Home Sales Slowing

July 1st, 2016

A cooling market for the most expensive homes is costing hotel and casino magnate Steve Wynn some money.  Two years ago, Wynn paid $16.25 million for an 11,000-square-foot mansion perched above the Bel-Air Country Club.

Less than a year later, he sought to unload the home for $20 million.  No luck.

Then he tried $17.45 million. No luck again.money bags

In May, Wynn dropped his price to $15.95 million, $300,000 less than what he paid for the property in 2014. The home went into escrow “very close” to that price last month but it’s clear he’s taking a loss –

It’s not just Wynn who isn’t getting as much money as he hoped.

Even before Britain’s vote last week to leave the European Union jolted investors worldwide, there were reports of a slowdown in the ultra-luxury housing market.

In Los Angeles, agents were seeing more price cuts. Condo sales on New York’s Billionaires’ Row were slowing. Luxury developers shelved projects in Miami. And prices at the tip-top end of the London market were on their way down. Blame it on the global economy, which has displayed weakness in the past year, choking off the spigot of international millionaires and billionaires seeking a pied-à-terre, or two, in glamorous locales.

So far, in Los Angeles the effect has been minimal, given the nature of Southern California ultra-luxury development – which largely consists of one dramatic hillside estate at a time, rather than a condo tower with multiple units. But a spate of new construction is on the horizon. By one estimate, there are about 30 new hillside homes priced above $30 million that could hit the market in the next year and a half.Unknown-2

The so-called Brexit vote may not help matters.  It has sown economic uncertainty on a global scale and caused the dollar to strengthen against major currencies – potentially leading international buyers to trim their purchases in the United States.

In Manhattan, the slowdown has taken a sharp toll. The number of previously owned homes that sold in the first quarter for $10 million or more fell 40% from a year earlier.

In Los Angeles County, by comparison, $10-million plus sales ticked up by one to 17 in the first quarter compared with a year earlier, according to the California Assn. of Realtors, whose data largely covers resale transactions.

But over a longer timeline, it appears the market has begun to stall. The number of sales of $10 million or more in L.A. County has dipped in three of the last five quarters for which data is available, even as inventory has steadily grown, according to the Realtors group. And, brokers say, the slowdown is more pronounced the higher the price.

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As of mid-June, nine homes in the county had sold this year for $20 million or more, compared with 18 during the same period last year, according to Loren Goldman a vice president with First American Title Co.  It’s possible the slowdown will bleed into the rest of the market eventually, but that’s not likely to happen “any time soon.”

Local agents put much of the blame on a pullback by international buyers who had flooded Los Angeles in recent years. Turmoil in their economies, along with a strong dollar, have many from Russia, the Middle East and China second-guessing a purchase here.

One dynamic has yet to play out – whether the strong dollar continues to deter international investors from entering the U.S. real estate market, or as their own home country currencies weaken, they come to increasingly view U.S. as a haven.

It’s not necessarily clear which one of those two mindsets  is going to win out. Unknown

The End of the 1 Year Lease?

February 11th, 2016

Los Angeles rental listings site RadPad has added short-term rentals as an option for tenants and landlords.Keys

Traditionally, the site focused on long-term rentals and was primarily in competition with sites like Craigslist and West Side rentals. Now, it joins sites like Airbnb, VRBO and Home Away, in offering homes and apartments for short periods of time.

But, the short-term listings on the site won’t be as short as one day. Rather they’ll list week-to-week and month-to-month stays.  It’s one of the biggest requests now a days, people want more month-to-month options. They want more flexible leasing options.

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Raphael Bostic of USC said he sees a trend in renters wanting more flexibility in leasing arrangements.

“Why do we have such a very structured lease setup? You don’t see the three month lease. You don’t see the five year lease for that matter. And part of it I think has been conventional wisdom. Part of it’s been technology challenges,” he said. “So I think what’s happening is that we’re learning about the market because of these disruptive technologies, and it’s leading to the emergence of a whole host of new relationships.”

The change at RadPad is partially in response to feedback from landlords. When they weren’t offering the short-term option, landlords were pulling some of their listings and putting them on sites like Airbnb.  More and more over the last year and a half traditional landlords are trying short-term rentals and finding they can make 30 to 40 percent more a month on short-term.moving couch

Landlords do stand to make more money, but the management of short-term units is a more labor intensive.

Another reason why you have the longer lease is because it provides certainty for the landlord that the unit is going to be occupied.  Housing advocates argue that longer leases provide security for renters too. With more and more property being taken off the traditional rental market, it means fewer options for residents who need a long-term place to live. Currently L.A.’s vacancy rate is at 2.7%.. That lack of supply continues to mean high rental prices – some of the highest in the country.

no vacancy

So although units rented out for the short-term are at the mercy of price fluctuations in the marketplace. In a place like L.A., landlords don’t have to worry much about the prices going down.

THE SURGE IN U.S. MANSION PRICES IS OVER FOR NOW

January 27th, 2016

The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to the real estate agent representing the Seller.MansionNot now….

It’s being offered at a discounted $3.68 million, but nobody’s biting.  The owners, a couple from China, are getting anxious. They’re the kind of well-heeled international investors who fueled a four-year luxury real estate boom that helped pull America out of its worst housing slump since the 1930s. Now the couple is reeling from the selloff in the Chinese stock market and looking to raise cash to shore up finances.

Across the U.S., the story is much the same. The world’s economic woes — from China to Russia to South America — are damping sales in the high-end real estate market. Haywire overseas stock markets and dropping currency values caused in part by plummeting oil prices are dulling the demand for mansions, penthouses and winter escapes.

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The volatility in China and Russia and the oil issues in the Middle East are impacting the high end of the American housing market.  And we’re probably not going to see material price increases any time soon.

Prices for the top 5 percent of U.S. real estate transactions remained flat in 2015 while all other houses gained 4.9 percent.

In the Los Angeles suburb of Arcadia, dozens of aging ranch houses were demolished to make way for 38 mansions built with Chinese buyers in mind. They have manicured lawns and wok kitchens and are priced as high as $12 million. Many of them sit empty because the prices are out of the range of most domestic buyers, and there has been a crackdown by the Chinese on large sums of money leaving the country.

The stronger dollar is driving South American buyers away from luxury condos in Miami’s downtown area.  Buyers there signed 25 percent fewer pre-construction contracts in 2015  than in 2014.

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Manhattan resale prices for the top 20 percent of the market peaked in Feb. 2015 and have fallen every month since.

Even in San Francisco, where the market for luxury properties remains strong, the inventory of listings for $2 million or more jumped in October to a record level.  Both buyers and sellers are increasingly worried about the direction of the economy.

With more sellers jumping in and more buyers holding off the law of supply and demand is having an effect and prices are slipping.

The real test for the U.S. market will come after the Super Bowl on Feb. 7, when the prime home-buying season begins. images-2

As the U.S. jobless rate hovers at 5 percent, the lowest in almost eight years, demand for lower-priced homes has increased.  The cheapest U.S. ZIP codes had annual home-price growth in November that was more than twice the 4.3 percent rate for the most expensive ones.

But it’s the high end market fueled by wealth overseas investors that will remain flat.   After a lackluster 2015, the Standard & Poor’s 500 index has tumbled 8 percent. Benchmark oil prices are now around $30 a barrel compared with more than $100 eighteen months ago. The dollar has climbed 8 percent against 10 leading currencies in the past year, making U.S. real estate more expensive for foreign buyers, according to the Bloomberg Dollar Spot Index.

When the foreign buyers do come come back, they’ll be on the hunt for deals, because believe it or not, there’s even a limit to what a wealthy person will spend —Unknown

California Real Estate Trends of 2015

December 29th, 2015

The past year has seen lots of changes in real estate, some anticipated, much of it not, but this is what stands out –

1. Housing recovery gained momentum   By mid-year, sales of existing homes statewide rising valueshad hit a nine-year high, thanks to job growth, increasing consumer confidence and continued low interest rates. The biggest challenge was lack of homes to purchase. That led to stiff competition that pushed up prices and left many would-be buyers in the lurch.

Take Away – With many of these trends, you can have your short-run gain but it is accompanied by long-run pain.  We should all try to be mindful of that.

2. Lack of affordable homes threatens the state’s future  A year ago, the percentage of California households who could afford to purchase a median-priced home  in the state was 36 percent. Today it is 29 percent.

Take Away –  Look for state and local government officials to attempt to tackle the problem of adequate supply of affordable housing

3. Foreign buyers kept the high end hot  While rising prices threaten the entry- and mid-levels of the market, no such concerns seem to impede the upper-upper end.  Asian buyers, along with the Hollywood elite and newly wealthy tech titans, continue to push up prices of high-end homes, especially in San Francisco, Silicon Valley, Los Angeles and Orange counties.

Take Away – The top of the California market apparently has no ceiling.images-1

4. Cash was (still) king  Most of those foreign buyers paid cash. In all, 23 percent of all home buyers paid cash this year. In many cases, those all-cash buyers were competing against folks who needed to get a mortgage to purchase a home, giving them a distinct advantage.  In 2014, 66 percent of international buyers paid all-cash. That trend continued throughout 2015.

Take Away – Because foreign buyers tend to be wealthier and because they have a more difficult time obtaining U.S. financing don’t expect this to change anytime soon.

 

5. Mortgage lenders eased up on credit – but not much  Credit has eased slightly from absurdly tight levels.  Lenders needed clarity before they were going to be willing to underwrite more risky loans, and they have not had that clarity. But it is beginning to happen. The average national default rate on mortgages leading up to the collapse of the housing market was 12.5 percent. In early 2015, the default rate was 40 percent of that at 5.7 percent. As of third quarter of 2015, it has dropped further to 5.45 percent.

Take Away –  Default rates should continue to decline.

images6. Rents skyrocketed and demand climbed   Rents increased a staggering amount in 2015 and there is no sign that is going to slow down.  Average monthly residential rates are 50 percent higher in California than in other states. That means that, although home prices are rising, they are not rising as quickly as rents. Many current renters would be better off buying a home.   When you can borrow money at today’s fixed rates, you have locked in your housing cost for the rest of your life.  However, the events of the past decade have made many renters skittish about taking the plunge.

Take Away – Some people think renting may be better than owning.  Soon they may regret having made that decision.

 

7. Online listing companies continued to threaten the industry and consumers   The merger of listings search giants Zillow and Trulia earlier this year as well as the shift of realtor.com to a shareholder-owned company have many in the industry concerned.  A lot of people interpret these things as ‘it’s a move toward being a broker,’ which is not the case.  There is no reason to go into the brokerage business when they can have all the profits and none of the headaches and none of the liabilities.  Yes, we no longer operate in a world in which real estate agents hold listings as proprietary knowledge and consumers now have access to a wealth of information.  But at no point will these giant search engines replace the consumer-oriented services real estate agents provide.  That would leave buyers and sellers without expert guidance through the various legal landmines inherent in even the smoothest of real estate transactions.

Take Away – While do-it-yourself works OK most of the time in booking flights or finding a decent hotel that allows pets, the stakes in real estate are far higher.

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HAPPY NEW YEAR !!!!

Rents are going up – Still

November 25th, 2015

A new report  finds the cost of renting in Los Angeles is skyrocketing with no signs of slowing down, and many renters are feeling the pain.  It’s the same old Story  — More demand, fewer vacancies and soaring rent prices seems to be a trend in the L.A. metro area.rising values

A new market report reveals  that for those wanting to live in the city, it is going to be pricey.  According to the study, the average cost of rent on the west side is about $2,700, which is up nearly 7 percent from last year.  Santa Monica and Marina Del Rey cost over $3,000, while rent in the San Fernando Valley jumped more than 15 percent to about $1,400 a month.

One frustrated renter said —  “I had to move out of L.A. and go somewhere further away so I can get somewhere that’s at least a livable wage, I mean, livable rent for me,” he said.   So he  chose to rent in the Inland Empire’s city of Claremont, which is a daily three-hour commute.

Downtown has seen more high-end luxury apartments with average monthly rents of about $2,100.   Alba Valladares, a caretaker, said she’s noticed the upward trend.Unknown-1 She and her three daughters live in a two bedroom apartment downtown and barely make ends meet.   “I work part time and my mom works part time. We’re basically working just to pay rent… doesn’t include bills, food, etc,” said Karla Valladares, Alba’s daughter.

Major tech companies are coming and relocating in LA  – which has been a big driver and has led some experts in real estate to predict rents to rise about 4.8 percent in Los Angeles County for the remainder of 2015 to an average of over $1,800 a month –  Which is more than double the rate of inflation.  Which tells me something’s gotta give  —

And then there is this –   No necessarily Real Estate related more a community / quality of life issue  —   And certainly relevant to Los Angeles

Sometimes, when you can’t get your municipal government to respond to your pleas, you’re forced to take matters into your own hands. At least, that seems to be the philosophy of one anonymous Islamabad-based graffiti “artist.” UnknownThe spray paint-wielding agitator has been taking to the streets drawing penises around troublesome potholes in city roads. Because, while it is often difficult to get the city to dispatch repair people to fix potholes, it’s almost universally true that they can’t seem to send workers fast enough to get rid of “obscene” graffiti.

It should be noted that the unknown Picasso has most likely taken his cue from Wansky, a Manchester, England figure who employed the same method to call attention to potholes in his own hometown. In Wanksy’s case the tactic worked –  though previous calls about the potholes yielded no response, the phallus-encircled potholes were fixed within 48 hours.

 

 

 

 

 

 

 

 

 

 

LA is Booming !!

November 6th, 2015

2015 has seen prices in Los Angeles housing market continue to rise, with established neighborhoods steadily increasing in value, and emerging areas finding their footing. Homeowners throughout the city find themselves in the enviable position of seeing prices ascend to levels unseen since before the crash of 2008.images-6

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 2nd Qtr in Los Angeles reached a record high of $1,371,500.

For condominiums it hit $675,000, making the across-the-board price for homes $938,000.

Some of the hottest neighborhoods are areas which 10 years ago would have been perceived very differently. Echo Park, East Hollywood, Koreatown, West Adams, Downtown and others would have been considered either too “fringe” or lacking in services.
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Those areas are now some of the hottest markets in town, with percentage increases outstripping established areas like Brentwood and Beverly Hills.

Another new development is — funny enough — new development! The high-rise condo boom of cities like New York, San Francisco and Chicago has finally made its way to LA  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 downtown at 820 S. Olive St.  And a Chinese developer, Greenland USA, has a $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.

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Other areas are also about to feel the developer’s shovel. In Miracle Mile, local developer Rick Caruso is planning a super-lux, 19-story residential tower adjacent to the Beverly Center and in Century City a $300 million, skyscraper by a Miami developer is underway.  But for prestige, it’s going to be difficult to beat Townscape Partner’s 8150 Crescent Heights (at Sunset Boulevard), designed by perhaps the most famous architect in the world, the omnipresent Frank Gehry.

It’s an incredibly fascinating time to be living in Los Angeles and it’s a good bet that the landscape of LA ten years from now will be almost unrecognizable.

No Bubble in Southern California

October 2nd, 2015

What may feel like a real estate bubble in Los Angeles — with all-cash offers and frenzied bidding wars — is actually the midpoint of a steady housing market recovery, analysts say.

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The UCLA Anderson Forecast released Monday said L.A. is only three years into a rebound that started in 2012. Home prices have since climbed 27 percent. History suggests there will be four more years of price increases and home values will go up another 35 percent before there is any sort of correction.

The reason comes down to a fundamental imbalance: there’s lots of job growth, but because of strict building and environmental regulations, there will be very little increase in the housing supply.

It means we can’t expect to see housing more affordable during the next few years.  So, while entering the market is tough, buying a home right now in L. A. isn’t as risky as the high prices make it feel, the report said.

“L.A.’s housing market, despite becoming more expensive and unaffordable, is not in a bubble.”  UCLA economist William Yu wrote. “The current rise in home prices seems to be driven by rising effective demand and limited supply, not by speculation. Therefore, the housing bubble burst we experienced several years ago is unlikely to haunt us this year or next, and the smart money will continue to invest here.”down graph

That includes Chinese buyers, who have been bidding up Los Angeles houses in recent years.

Though the Chinese economy has recently slowed, Yu doesn’t expect the downturn there to impact prices here. Actually  China’s economic problems could raise home prices in Southern California as investors seek stability outside their country.

With the uncertainties in China contrasted to the promising and stable outlook in the U.S., it is wise to reallocate money from China to the U.S. and  wealthy Chinese individuals still have sufficient equity to make a move.

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