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.

Unknown-1

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.
images

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.

images-1

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.

Balloon

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.

images-1

Fraud is in the Air

June 11th, 2015

Whether home sales are going boom or bust, accusations of real estate fraud persist.    As the housing market evolves, the type of fraud cases change – and they can take years to get to court. Loan-modification scams, are no longer as rampant, but authorities still get calls about them.  Real estate cases are very complicated.  In a robbery, the crime is obvious, but in a property transaction, everything may appear fine, at first and then things unravel.  Here are examples of the types of real estate fraud charges now winding through courts.

The Not So Short Sale

A warrant was issued this month for the arrest of Conan Hayes, who once competed as a pro surfer and co-founded a clothing brand bought by Billabong.   Hayes is charged with short-sale fraud on a house in Costa Mesa. In a short sale, a bank agrees to the sale of a home for less than the amount owed on the loan. The warrant says Hayes gave Bank of America false information regarding his net worth, “which was in the millions of dollars.”

Hayes wound up in a program for people suffering financial hardships, even though prosecutors contend that in the previous nine months he sold his interest in a business for about $8 million and bought a $1.39 million house in Los Angeles for cash.

images

The bank claims they lost $586,245 on the short sale.

The Imposter Agent 

A Laguna Beach parcel with an expansive view of the hills and the Pacific Ocean beyond was offered for sale, and priced so low it looked like a steal.   Turns out it was, and now the unsuspecting buyer is out $500,000

Authorities have issued an arrest warrant for Edmara Nazaryan, one of the people they say took part in the fraudulent land sale which involved someone who masqueraded as the listing agent.   Nazaryan is wanted on charges of conspiring to commit a number of crimes, including grand theft and money laundering.   In this case, signatures were forged and the buyer’s money was placed in escrow.  But after a couple of wire transfers that Nazaryan and an unidentified man orchestrated, the money was gone.    Prosecutors suspect Nazaryan is now living in Moscow.images

The Ponzi Scheme 

Thomas Franklin Tarbutton of Newport Beach faces 29 felony counts in a scheme that prosecutors say took in more than $3.2 million.   Officials say Tarbutton’s Villa Capital Inc. solicited money from private real estate investors for about seven years. But instead of using it to generate income or profits, they say, he ran a Ponzi scheme.

Investigators suspect he made small interest payments to investors using funds from their initial investment, then stopped when the real estate market collapsed.

The Two for One

Two women are charged with stealing more than $2 million in a scheme prosecutors say preyed on local Vietnamese Americans and involved homes in foreclosure and phony investments.    Loan Thituong Nguyen is accused of soliciting investors for the properties, though neither she nor Lynn Eichenberger had any financial or legal claim to them.images-1

Nguyen told investors they’d have to pay 50 percent of the cost of the home upfront to get it into escrow, at the same time she also solicited the homeowners in foreclosure, saying if they paid her 50 percent of their mortgage balance, she’d get them a loan mod. The money from the investors and homeowners wound up in a business account set up by Eichenberger, which the pair later drained.

So be careful out there —  Do your due diligence.    Only deal with reputable, familiar agents and companies.   And if a deal seems too good to be true…. It probably is —

Slow Spring? Maybe… And some local news

April 27th, 2015

Home builders are taking it slow this spring, according to new figures on housing construction.

images

Permits for new construction fell 5.7% in March compared to February.   Housing starts — when construction actually begins — climbed 2% off last month’s sharp decline, but came in well below analyst expectations.images

The numbers were dragged down by a decline in multifamily construction, a sign that the apartment building boom of the last couple of years may be cooling off. Starts for buildings with five or more units fell 7.1% from February, while permits, a sign of construction to come, were down 16%.

But single-family builders, the bigger chunk of the market in most of the country, aren’t quite picking up the slack, with activity up only a bit despite near record-low interest rates, an improving job picture and a housing market that’s generally stable.

And some economists warn that lack of new supply could hamper the market this spring, especially in places like Southern California where inventory is already tight. As buyers shop for houses and find them sparse, some market-watchers say, they’ll either bail out or drive prices up again.  So be on the lookout —

 rising values

And under the heading of “How well do you know your neighbors ?”   

The Los Angeles County District Attorney’s Office announced an indictment was unsealed today charging a Hancock Park couple with human trafficking for allegedly importing three women from Indonesia to work in their home and other properties.  The  defendants Astati Halim  and Hendra Anwar pleaded not guilty.

Halim and Anwar are charged with three counts each of human trafficking and one count each of conspiracy to commit a crime, and bail was set at $300,000 for each defendant.images-1

Between May 2010 and September 2013, Halim and Anwar allegedly conspired with others in Indonesia to transport the women under false pretenses and misrepresented facts to embassy officials for the purpose of obtaining travel documents for the victims.

Once in Los Angeles, Halim and Anwar purportedly took away the victims’ passports and forced the women to work at two Hancock Park homes and one Beverly Hills property. The defendants own all of the properties where the victims worked.images

If convicted as charged, Halim and Anwar each face up to 17 years in state prison….  Oopps

To Air or Not to Air, BnB that is

March 27th, 2015

The last time he advertised one of his apartments, longtime a Los Feliz landlord got a request he’d never seen before.  A man wanted to rent 245-square-foot bachelor unit with hardwood floors for $875 a month, then list it himself on Airbnb.  “Thanks but no thanks,” he told the prospective tenant.

But he understood why: More money might be made renting to tourists a few days at a time than to a local for 12 months or more.Tourists

As short-term rental websites such as Airbnb explode in popularity in Southern California, a growing number of homeowners and landlords are caving to the economics.

A study released recently by the Los Angeles Alliance for a New Economy, a labor-backed advocacy group, estimates that more than 7,000 houses and apartments have been taken off the rental market in metro Los Angeles for use as short-term rentals.

In parts of tourist-friendly neighborhoods such as Venice and Hollywood, Airbnb listings account for 4% or more of all housing units.

That’s worsening a housing shortage that already makes Los Angeles one of the least affordable places to rent in the country.   In places where vacancy is already limited and rents are already squeezing people out, this is exacerbating the problem.

squeeze

Fast-growing Airbnb and others like it say they help cash-strapped Angelenos earn a little extra money. Airbnb estimates that 82% of its 4,500 L.A. hosts are “primary residents” of the homes they list, and that nearly half use the proceeds to help pay their rent or mortgage. And the effect on the broader housing market is so small that it’s all but irrelevant.

But there are growing signs of professionalization of the short-term rental world, like the property-manager middlemen who wanted the Los Feliz bachelor unit.

These “hosts” will list dozens of properties on the site. There are estimates that 35% of Airbnb revenue in Southern California comes from people who list more than one unit.  There’s a whole cottage industry that’s springing up around this.

LA City Council wants to study how these rentals have affected the city. No regulations have been drafted, and  current rules bar short-term rentals in many residential areas of the city, but critics say they’re rarely enforced.

As city officials craft new laws, they’ll certainly be hearing from Airbnb and its allies. Last year, the company spent more than $100,000 lobbying City Hall and released a study touting its economic impact in L.A.

Neighborhood groups are sure to weigh in too, especially in Venice.   The beach neighborhood has the highest concentration of Airbnb listings in all of metro Los Angeles.  A census tract along Venice Beach and Abbott-Kinney Boulevard, showed Airbnb listings accounted for 6% to 7% of all housing units — about 10 times the countywide average.images-3

Along the Venice boardwalk, a number of apartment buildings now advertise short-term rentals, and houses on the city’s famed “walk streets” routinely show up in searches on Airbnb.   Even several blocks inland, at Lincoln Place Apartments — a 696-unit, newly renovated complex that includes a pool, gym  — there were more than 40 listings on Airbnb and other sites.

One tenant moved out over the issue, saying Airbnb effectively drives up the rent.  He’s now looking farther east for something he can afford.   A new law of some sort is the goal of the City Council and Airbnb says it’s glad to help in that process.  “It’s time for all of us to work together on some sensible solutions that let people share the home in which they live and contribute to their community,” a spokesman said in a statement.

As for the The longtime landlord in Los Feliz he concedes he “might be old-fashionimages-4ed,” but he just doesn’t like the idea of strangers traipsing through his apartments. He prefers good, long-term tenants, and in L.A.’s red-hot rental market he has no problem finding them.

“I almost find it painful to rent things these days,” he said. “There’s so much demand and so many people who are qualified and nice people who I have to turn away.”

For the apartment in Los Feliz, he found a tenant in less than 24 hours.

Beware the Zestimates

February 18th, 2015

When “CBS This Morning”  asked chief executive, Spencer Rascoff of Zillow about the accuracy of the website’s automated property value estimates — known as Zestimates —  it was eye opening —

Zillow is the most popular online real estate information site, with 73 million visitors in December.  Along with active listings of properties for sale, it also provides information on houses that are not on the market.

You can enter an address or general location and pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus get a Zestimate.images-6

Sellers and buyers routinely quote Zestimates to real estate agents as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.

Disparities like these are daily occurrences and, in the words of one real estate agent  “they are the bane of my existence.”

Consumers often take Zestimates “as gospel,” and if either the buyer or the seller won’t budge off Zillow’s estimated value it can kill a deal.

fighting 4 cash

So, are  Zestimates accurate? And if they’re off the mark, how far off?   Zillow CEO Spencer Rascoff answered that Zestimates “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.

Okay.   So on a $500,000 house, that would be a $40,000 disparity — a lot of money — and could create problems.

But here’s something Rascoff didn’t talk about: Localized median error rates on Zestimates can far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the website, at the bottom of Zillow’s home page in small type is the word “Zestimates.”  This section provides helpful background information along with valuation error rates by state and county — some of which are stunners.

Here are some examples, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%. images-5

In some rural counties in California, error rates range as high as 26%.

In San Francisco it’s 11.6%.  With a median home value of $1,000,800 in San Francisco, that median error rate  translates into a price disparity of $116,093.

Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets.

In Carlsbad, Calif., an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP Codes. He found that Zestimates came in below the selling price 70% of the time, with disparities ranging as high as $70,000.

In a second ZIP Code, the agent found that 100% of Zestimates were inaccurate, and that disparities were as large as $190,000.

So what do you do, now that you’ve got the scoop on Zestimate accuracy?

Take Rascoff’s advice: Look at them as no more than starting points.

In pricing discussions rely on the real authorities on local real estate values — experienced agents and appraisers. images-4

Mortgage Rates defy Gravity

January 27th, 2015

Mortgage rates keep falling, and that has borrowers rushing to close a deal.Unknown

Applications for home loans soared 49 percent for the week that ended Jan. 9, according to the Mortgage Bankers Association, the largest pop since 2008.  The jump from a week earlier came from a 66 percent increase in refinances and a 24 percent gain in purchase applications.

But will the surge continue?

Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year mortgage declined to 3.63 percent this week, compared with 3.73 percent a week earlier, and 4.41 percent from the same time last year.

The mortgage rate decline has defied forecasts. The average on a 30-year fixed loan ended 2014 at 3.87 percent, a far cry from the 5 percent many experts predicted. Industry leaders, including the Mortgage Bankers Association, had predicted rates on a 30-year-fixed loan would climb to about 5 percent by the end of 2015 as the U.S. economy improves and the Federal Reserve makes an expected increase to its short-term interest rates.

However, those predictions came before increasing concerns with economies abroad as Asia and Europe continue to struggle with lackluster growth.  Unknown-2Those concerns caused investors to rush into safer U.S. Treasury securities and government-backed mortgage bonds, which has put downward pressure on mortgage rates.   And given the continued weakness in global economies, mortgage rates are likely to stay low for the near future.

 But even if rates stay low, it’s uncertain if there will be a continued surge in applications.   Why?

Because many homeowners have already refinanced in recent years, limiting the number of people who would benefit from low rates. Also low rates don’t spur purchases as much as other factors, such as income or wage growth.  images-2So although there is no doubt it’s going to spur refinance and home purchase activity…it’s really a question of how much.

Shop for your mortgage

January 16th, 2015

Americans may be spending more time shopping for shoes than for a mortgage, a report from the Consumer Financial Protection Bureau suggests. Almost half of consumers seeking a loan to purchase a home do not shop lenders, the agency.Unknown

A consumer taking out a 30-year mortgage for $200,000 and paying an interest rate of 4.5 percent will pay about $60 per month more than someone borrowing at 4 percent, and the borrower with the cheaper loan will also build equity faster.

“Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating,” said CFPB Director Richard Cordray, who is announcing a “know before you owe” information initiative designed to help consumers navigate the still-complex mortgage market. “Consumers will be able to gain greater control over the outcomes of the mortgage process and maximize the benefits of this major transaction,” Cordray said.

The survey, conducted in 2014, also found that a majority of home buyers, 70 percent, seek information on mortgage choices from sources that have a stake in their decision, like lenders.  Just 20 percent said they rely heavily on websites, despite the ready availability of mortgage-related information online. A paltry 2 percent seek a lot of information from housing counselors.images-1

It’s not a process consumers go through very often, so there is a tendency to latch onto the first knowledgeable individual and assume that they are acting solely in your best interest.

The CFPB wants to change that, and the “culture of how people obtain their mortgages” because consumers in the survey who said they felt more knowledgeable and empowered about mortgages were more likely to shop around and find the best terms. To that end, the agency intends to improve mortgage disclosures with a new “Know Before You Owe” form.  Its website already includes a section called Owning a Home, which walks consumers through the home-buying process.

Most people want to get a mortgage from someone they know and trust, and consumers should absolutely shop for a loan, especially first-time home buyers. Where there’s a disconnect is in what you should base your be shopping upon.   Rates and fees are important, but they’re not the only factors that should be within your decision-making process.

Borrowers should also make sure the lender can do the full mortgage processing in house. If the lender is farming out the paperwork, that could put the closing date at risk. Changes in closing dates can be costly, especially if the rate lock needs to be extended. The lender needs to have control to ensure the closing will happen on time.

images-1We would also recommend looking at the lender’s product offerings. (They may not do government loans, for example.) Be sure they have a full product menu. It’s also best to know what kind of designations or qualifications the lender has in the industry. Ideally, the lender should be taking a holistic approach and seeing how the mortgage fits into the borrower’s total financial picture. They should not just be quoting a rate, but helping with financial planning.

Bottom Line – The more effort you put in as a consumer, the more you will be rewarded in terms of getting a better deal.