Notes on a Realtors Scorecard: Thoughts from a Cali economist…Inglewood is HOT and more
Thoughts from a respected California economist: Ken Rosen, chairman of the Fisher School of Real Estate and Urban Economics at UC Berkeley recently stated that Southern California is just starting to enter the 7th inning of a 9 inning game when it comes to real estate appreciation. He anticipates appreciation to continue through 2015 and 2016 but feels we will see some type of pull-back beginning in 2017. How big will depend on the jump in interest rates, the election of the next president and whether the Feds manipulation of the rates to get out of the great recession was truly economic genius or a quick fix to a bigger problem.
Inglewood attracting investors and young families: Last year we wrote a few blog articles on the surging popularity of Westchester and that has now spilled over into neighboring Inglewood. With the announcement that St. Louis Rams owner Stan Kroenke plans to build a state of the art NFL stadium
surrounded by retail and residential development where Hollywood Park currently resides, many investors have followed his lead. Most home sales are seeing multiple offers and the nicer areas have jumped up over 20% in value in the past 18 months. The mayor of Inglewood James Butts has done a phenomenal job of marketing the future of Inglewood as a place with tremendous potential thanks to new development and the cities proximity to LAX and both the Westside and South Bay. Inglewood still has a reputation as a tough city with poor schools and its fair share of gang violence. However, continued economic development with a focus on cleaning up the area will lead to increasing price appreciation and a reputation as a city of opportunity.
Fun Fact: Madison Square Garden bought the Forum in Inglewood in 2012 and promptly spent $50 million in renovations. In just a few short years, the Forum is on track to be the #1 major concert venue in Los Angeles this year.
Inventory slightly increasing: We are starting to see inventory slowly increase on the Westside which is what the market desperately needs. It is still nowhere close to historical levels but buyers are getting a little more breathing room. That said, we are still seeing some frustrated buyers pay a big premium in multiple offer situations to make sure they don’t get outbid. In some cases buyers are paying 7-10% more than the next highest offer. We expect this trend to start dying down by mid-summer but unless we see a bigger surge in inventory or a hiccup in the financial markets, multiple offers with favorable seller terms will still be the reality most buyers will face the rest of 2015.
9 offers in Mar Vista…on Walgrove!- Despite being situated on a busy street and a few doors down
from a busy intersection (Walgrove and Rose), 1409 Walgrove sold for $1.2M (all-cash), 150K over the asking price! The 3+2 home is only 1,244 sq. ft. with a non-permitted detached guest house which was formally the garage. The house is in good condition and ready to move into but the big selling point was the huge backyard as the lot is just over 8,500 sq. ft. Larger lots definitely go for a premium and this was no exception. Hedges shield the property from Walgrove so once inside you don’t notice the street…despite the large lot, we are surprised to see this sell for over $930 a sq. ft.
Two condos go way over asking in Santa Monica- 1915 Washington Avenue, an updated 3+3, measuring 2,500 sq. ft. hit the market for $1.995M and sold for $2.117M with multiple offers. The townhouse featured great natural light, a private elevator, rooftop deck with great views and a great master bed/bath.
1018 4th Street #303- A top floor 2+3 with 1,951 sq. ft. of living space sold to an all-cash buyer for
$1.818M, $200K over the $1.595K asking price. The buyer is rumored to be a foreign investor. The unit has a gourmet kitchen, rooftop deck, luxurious master bed/bath, captures great natural light and has vaulted ceilings.
By John SkinnerMortgate rates remain largely unchanged from last week
Average fixed mortgage rates moved just slightly lower following three consecutive weeks of increases. The 30-year fixed-rate mortgage averaged 3.84% with an average 0.7 point for the week ending May 21, 2015, down from last week when it averaged 3.85%. A year ago at this time, the 30-year averaged 4.14%.
“Housing starts surged 20.2% to a seasonally adjusted pace of 1.14 million units in April, the highest level since 2007,” said Len Kiefer, deputy chief economist, Freddie Mac. “As homebuying season moves into full swing, homebuilders remain positive about home sales in the near future. Although the NAHB housing market index slipped 2 points to 54 in May it is still above 50, indicating that on balance builders remain optimistic about housing markets.”
The 15-year FRM this week averaged 3.05% with an average 0.6 point, down from last week when it averaged 3.07%. A year ago at this time, the 15-year FRM averaged 3.25%.
Source- Housing Wire
Articles to check out
1- Sales of existing homes cool off in April amid tight supply (National)
Tight supply in many parts of the country is the reason behind the decline. Homes are selling in an average of 39 days, their fastest clip since June 2013, and that’s driving prices up.
2- So Cal home sale prices show gains
Southern California home prices and sales climbed in April for the second straight month after a period of stagnation. The gains, however, may signal a tough summer ahead for buyers, who face a dwindling supply of homes in most areas. Prices up a moderate 6.2% from April 2014, to a median of $429,000 across the six-county Los Angeles metropolitan area. Sales volume climbed 8.5%.
3-New home construction rebounds strongly, reaches best pace since 2007 (National)
The figures were higher than forecasted and indicated broader economic growth. Many economists attributed the drop in 1st quarter numbers to severe weather across the nation.
Notes on a Realtors Scorecard: The craziness continues…
The real estate market has picked up steam and is outperforming all expectations with listings and sales once again setting new records: The strong seller’s market has not shown any signs of subsiding this year. Through the first quarter of 2015, we are experiencing multiple offer madness with a lack of inventory for eligible buyers. We seem to have about five buyers for every reasonably priced home or condo that comes on the market. The environment for buyers was tough the past 18 months but now it seems to have hit another level. Buyers with conventional loans are having to compete with more all-cash buyers thanks to continued foreign investment, an influx of even more builders and flippers and Silicon Beach making the tech industry a huge player in Los Angeles.
In my estimation we have passed the hysteria experienced in the last housing peak but as long as interest rates stay low and the Westside and South Bay is a destination in the tech world, housing prices will continue to increase over the next 18 months.
Follow-up: I am starting to hear the same thing I heard in 2006 when the market was at its height. Real estate on the Westside never goes down. We know this is not true. We must always remember real estate, even on the Westside, does experience downturns and anybody who tells you likewise is fooling themselves. In the long-run it is a great investment but it can be a high risk/high reward situation if you have a short-term horizon.
Sales volume up: According to Progressive and Chicago title companies, new title orders (indicating a home sale or refinance) are up 10% from last year and if you take into account refinancing, title orders are up 15-20% with people taking advantage of higher equity in their homes and low interest rates.
90402 has a robust 1st quarter: The first quarter of 2015 is up over 20% in terms of the average price per square foot of homes sold compared to 2014. The number of listings sold is up from 13 in the 1st quarter of last year to 15 this year and sellers are receiving over 100% of their asking price. Properties listed for sale in the first quarter of this year average being on the market for just 38 days while last year the average was 133 days. Most of the properties are being bought with cash or a large downpayment with appraisal and financing contingencies being waived.
California not the most expensive when it comes to property taxes: While real estate property taxes in California have gone up in recent years, the good news is that California is not one of the most expensive states. The average American household spends $2,089 on real estate property taxes each year. The average for the entire state of California is $1,431.
Quick look at a few headline sales in April: Brentwood- 230 North Carmelina sells slightly over asking for $10.4M- This John Byers designed 5+4.5 home situated on a 35,000 sq. ft. lot in prime
Brentwood sold for over the $10.250M asking price despite being on the market for about a month before going into escrow. They received multiple offers a few weeks into marketing the property which has a great layout for entertaining and a large master suite. The property needs some cosmetic upgrades and is another example of the premium buyers will pay for large lots on the Westside.
Westchester- 7911 Denrock Ave sells for $1.825M: This 5+5 Cap Cod style new construction boasting 3,250 sq. ft. on a 5,788 sq. ft. lot in prime North Kentwood is another example of the luxury properties that are being built in Westchester. The property received multiple offers and sold over the $1.799M asking price and closed on April 24th.
Culver City- 4269 Vinton Ave sells for $1.338M: This 4+3, 2,209 sq. ft. traditional style home on a 5,774 sq. ft. lot had six offers and sold over the $1.299M asking price. It has some nice features including Brazilian hardwood floors and a spacious Master suite. The house has a bit of a funky floorplan but not enough of one to trip up potential buyers.
Partners Trust in the rankings: The Los Angeles Business Journal ranked Partners Trust in the top ten of all real estate agencies in Los Angeles and listed among the leading independent franchises in the city. Real Trends named us as the 86th highest brokerage by volume nationwide and 20th in California
$1 Million over asking! Three April examples- Brentwood and Santa Monica
Brentwood: 1626 Old Oak Road- Listed at $4.8M and sold for $6.535M!: This tear-down/major
remodel candidate was in high demand thanks to being located in highly desired Sullivan Canyon and boasting a 28K flat lot. The property had over 10 suitors and sold in an all cash deal.
12251 Castlegate- Listed at $3.650M and sold for $4.826M- $1.2M over list price: This 18K flat lot
was in high demand thanks to being on a cul-de-sac street with views of the Getty, Mt. St. Mary’s and the ocean. The mid-century home that occupies the property will be torn down.
Santa Monica- 428 19th Street sells for $4.8M…$800K over the asking price: This elegant
Mediterranean North of Montana home is a 5+4, 4,460 sq. ft. home situated on a 8,932 sq. ft. lot. The house features soaring ceilings, great natural light, gourmet kitchen, huge master suite overlooking a Jay Griffith designed backyard and pool.
Articles you should read
1- The Incredible Shrinking Mega-City: How Los Angeles has engineered a housing crisis
2- Santa Monica City Council takes first steps to reign in short-term rentals
3- For millennial home buyers, only Honolulu is pricier than Southern California
4- Cash out refinancing is making a comeback as home equity rises
5- Silicon Beach expansion- Snapchat signs leases to expand in Venice
New water heater regulations now in effect leading them to be bigger and more costly
Changes in hot water heater regulations may cause a routine replacement to become an unexpectedly expensive endeavor. New federal regulations aimed at increasing Energy Factor (EF) ratings, require hot water heaters that are larger, more costly and more environmentally conscious than what is required under current regulations.
With these changes, homeowners will face increases in cost between 15 and 35 percent. The new regulations require a more complicated installation and an increased amount of system parts. The larger size of the new units could create an additional unforeseen expense. Electric hot water heaters larger than 55 gallons (the minimum size for most residential units) will require a minimum of 128 cu. ft. with a duct to a larger space in order to comply with these standards. For many homeowners, that could lead to a major renovation involving construction and a greater cost.
On a positive note, the savings on your utility bill will be around 25% and most tankless water heaters already meet efficiency standards.
Population Growth in LA is outpacing new housing…and it isn’t even close
Waves of new residents are outpacing new housing stock in the country’s least affordable rental markets, according to a Zillow analysis of U.S. rental and mortgage affordability.
In Los Angeles, where renters spend an average of 48.2 percent of their monthly income on rent, only 187 new housing units were added for every 1,000 new arrivals between 2012 and 2013. In New York, it was 383 per 1,000 newcomers, and in San Francisco, it was just 193.
The middle class increasingly feels the pinch, according to Christopher Herbert, managing director of Harvard University’s Joint Center for Housing Studies. “Low-income people have always had trouble finding affordable housing, but now as rents have gone up, that’s true of middle-income people as well,” said Herbert, who cites income declines as a major culprit.
Source: Housing Wire
Los Angeles mansionization laws could negatively impact the value of your property
Bowing to the demands of the anti-mansionization crowd, The Los Angeles City Council’s Planning and Use Management committee has approved temporary measures that could be in effect up to two years while the city fully updates the old ordinance.
The Baseline Mansionization Ordinance, which has been in place for years has some loopholes and the city council is looking at enacting stricter rules. It is very important that residents understand the repercussion for having strict building codes that cut down on the square footage of a home being built. Grotesque over-sized mansions on small lots are ugly and should be curtailed. However, strict rules such as stating basements have to count toward the square footage even though they are not visible at street level is a bit extreme.
In specific zip codes, the allowable home size is 50% of the lot size for residential lots less than 7500 square feet. With the size of new homes reduced, the resulting property value may decrease as well. The value of an older home that is purchased with the intention of either building new or enlarging its size is most often a home that is priced at the lower end of the market in a neighborhood, and those homes will likely suffer a reduction in value since the home size that can be built on that site will be reduced.
If you would like more information, here is a good article that appeared in the times last month.
Temporary LA Mansionization rules could be in effect for two years
A look at the numbers: 1st quarter 2015 statistics
The Westside real estate market continues to hum along with the market appreciating at a strong pace in 2015 and overall sales volume up compared to the 1st quarter of 2014. Click the graphic below for access to the Partners Trust statistics page which will provide you with a link to the 1st quarter 2015 report along with the ability to check out reports from the past three years.
