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Southern California Home Prices are at Record Levels, Despite the Pandemic

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FROM THE LE TIMES:  In the middle of a global pandemic, Southern California home prices keep setting records.

The six-county region’s median price reached $600,000 in August, up 12.1% from a year earlier, according to data released Wednesday by DQNews.

That was the largest percentage increase since 2014 and the third consecutive month during which prices set a new all-time high. Sales rose 2.4% from a year earlier.

“We have had houses with 40 to 50 offers,” said Syd Leibovitch, president of Rodeo Realty, which has offices throughout the Los Angeles area. “It’s just bizarre.”

Although the price leaps may seem unlikely amid double-digit unemployment, analysts say the trend reflects the uneven effect of the coronavirus and its economic fallout.

Compared with low-wage workers, people who tend to have the financial ability to buy homes have been far less likely to lose their jobs, and in some ways, their ability to purchase a house has only expanded.

Interest rates have plunged, with the average rate on a 30-year fixed-rate mortgage now below 3%. And many typical entertainment and recreational activities are still closed or operating at reduced capacity, leading some households to save more at the very time they realize they could use much more space.

“Where are you going to take your Zoom calls where you don’t interfere with one another?” said Kevin Tidwell, an agent with Rodeo Realty.

Tidwell said the desire for larger homes with bigger backyards is causing people to increasingly come to the San Fernando Valley from central L.A and for those already in the Valley to trade up in size.

The desire for more space, coupled with historically low borrowing costs, has helped boost sales and prices across the country. But part of the sharp double-digit increase in the median is simply its definition.

The median is the point at which half the homes sold for more and half for less and thus reflects not only actual increases in value but also the types of homes selling at any given moment.

Jordan Levine, deputy chief economist at the California Assn. of Realtors, said a desire for larger homes could, in and of itself, push up the median. But more important is the uneven effects of the economic downturn.

Though many low-wage workers probably couldn’t have bought a home before the crisis, Levine said the country’s economic pain has been felt on a sliding scale, with middle-income households hit less than low-income households, but harder than the wealthy, factors that are causing a shift toward the luxury segment of the market.

For example, homes that sold for $1 million or more accounted for 22% of all homes sold in California last month, up from 16% in August 2019, the trade group’s data show. The share of homes that sold for less than $500,000 fell to 38% of all sales in August, down from 46% a year earlier.

“People who are shopping down at the bottom end of the market are more likely to have suffered job loss or had a family member lose income that precludes buying a home,” he said. “It’s hard for me to break down what percent of that double-digit price growth [in the median] is due to the change in the mix, but part of it is definitely that.

“That being said, we are also seeing real honest-to-goodness price growth.”

Real estate agents say they see it in the increasing number of bidding wars on individual homes, as more people enter the market but find few options available.

Economists say too little home building is a driving factor behind California’s long-running inventory shortages.

Selma Hepp, deputy chief economist at CoreLogic, said the coronavirus is making the problem worse: Millennials are increasingly entering their prime home-buying years, but baby boomers who own large swaths of the housing stock are at heightened risk for complications from COVID-19.

“They don’t want to be moving right now,” she said of the older generation.

In Los Angeles and Orange counties, there were 19% fewer homes for sale in August than a year earlier, according to Zillow. Larger declines were seen in the Inland Empire, as well as in San Diego and Ventura counties.

“We have no inventory,” said Heidi Ludwig, a Redfin real estate agent who specializes in the South Bay.

How long the upswing will continue is unclear. Part of the increase in sales and prices reflects pent-up demand from the spring, when stay-at-home orders and fears of the virus all but froze the market during what is typically its busiest season.

If the economy takes a turn for the worse, the housing market could also trend downward.

For now, prices are shooting up across the region.

  • In Los Angeles County, the median home price rose 12.2% from a year earlier to $692,750 in August, while sales fell 3.8% from a year earlier.
  • In Orange County, the median home price rose 11.6% to $800,000, while sales climbed 10.9%.
  • In Riverside County, the median home price rose 13.1% to $441,000, while sales edged up 0.6%.
  • In San Bernardino County, the median home price rose 9.8% to $380,000, while sales climbed 2.8%.
  • In San Diego County, the median home price rose 9.4% to $640,000, while sales climbed 7.2%.
  • In Ventura County, the median home price rose 8.1% to $647,250, while sales climbed 7%.

Antonio Herrera, 28, is among those trying to break into homeownership. He and his partner are looking for homes in the $500,000 range in South Los Angeles but so far have had trouble closing a deal.

“I expected homes to maybe sell slightly over [asking],” he said, “but we are seeing houses go up $50,000 to $100,000.”

WRITTEN BY ANDREW KHOURI FOR THE LA TIMES 
Original Article here: 
https://www.latimes.com/homeless-housing/story/2020-09-23/southern-california-home-prices-jump-12-percent-in-august

Coronavirus Pandemic Fuels Affordability Crisis for Homebuyers

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FROM CNBC REAL ESTATE: Fierce competition for a limited supply of homes for sale has caused a surge in prices. Now, potential buyers, some fleeing urban areas hit hard by the coronavirus pandemic, are facing a national affordability crisis.

The median prices of single-family homes and condos in the third quarter are less affordable than historical averages in 63% of U.S. counties, up from 54% a year ago, according to Attom Data Solutions, a property data-base.

It calculates affordability for average wage earners on the income needed to make monthly mortgage, property tax and insurance payments on a median-priced home with a 20% down payment. It also assumes homeowners will pay no more than 28% of their income on those payments.

Price appreciation is now outpacing wage appreciation in 90% of housing markets nationally.

A pandemic-induced run on housing began in earnest in May and has not let up. Home sales in August were running at the fastest pace since 2006, and prices were up over 11% annually, according to the National Association of Realtors.

“In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way,” said Todd Teta, chief product officer with Attom Data Solutions.

He points to rock-bottom mortgage rates, rising incomes despite high unemployment and a weaker economy. The latter would usually hurt, not help the housing market.

“But those same low mortgage rates, along with other factors, have led a lot of buyers into the market chasing a reduced supply of homes,” he said. “The result is price hikes have raced past the impact of wages.”

Of course all real estate is local, and some markets are more affordable than others. Of the largest counties analyzed, the least affordable included Los Angeles, Phoenix, San Diego and Miami.

More affordable counties include Chicago, Houston, Philadelphia, Cleveland and Tampa, Florida, even though home prices have seen the biggest gains in some of these cities. Home prices are rising faster than incomes there, but for now at least, homes are still affordable.

As homebuying becomes less affordable, buyers are getting by with a little help from friends and family. About 59% of millennial homebuyers are receiving help with their mortgage down payment according to a recent report from Lending Tree. Forty percent of homebuyers of all ages are getting help from either family, friends, employers or a down payment assistance program to obtain a mortgage for their home purchase.

Written By Diana Olick For CNBC Real Estate

July pending home sales jump over 15% annually, as properties go into escrow in record time

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FROM CNBC.COM:

  • Pending home sales, which measure signed contracts to purchase existing homes, increased 5.9% in July compared with June, according to the National Association of Realtors.
  • Sales were 15.5% higher annually.
  • “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings,” said the NAR’s chief economist, Lawrence Yun.

The usual summer slowdown in the housing market is not happening this year. Buyers continue to show strong demand, spurred by the new stay-at-home world of the coronavirus and by record low mortgage rates.

Pending home sales, which measure signed contracts to purchase existing homes, increased 5.9% in July compared with June, according to the National Association of Realtors. Sales were 15.5% higher annually

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, the NAR’s chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

Yun said he does not expect sales to drop off in the historically slower fall season. He is predicting existing home sales to increase to a 5.8 million annualized pace in the second half of this year. That would bring the full-year total to 5.4 million, a 1.1% gain compared with 2019.

Regionally, pending home sales in the Northeast rose 25.2% for the month and were up 20.6% from a year ago. In the Midwest, sales rose 3.3% monthly and 15.4% annually.

Pending home sales in the South increased 0.9% for the month and were up 14.9% from July 2019. Sales in the West rose 6.8% monthly and 13.2% annually.

The only thing holding back even stronger sales is the shortage of homes available. Inventory at the end of July was down 21% annually, marking the lowest supply ever recorded by the NAR, since it began tracking this metric in 1982.

“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” 

Mortgage rates marked record lows in July, giving buyers additional purchasing power. Home prices, however, continue to push higher due to stiff competition in the market. The median home price in July hit a record $304,100, as measured by closed sales.

July sales of newly built homes, which are also measured by signed contracts, surged dramatically, as buyers are now looking for new, high-tech, smart homes with floor plans designed for working and schooling at home. Builders are also benefiting from the severe shortage of existing homes for sale. 

WRITTEN BY DIANA OLICK FOR CNBC.COM

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Bidding Wars Are Back. Here’s What You Need to know

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From MotelyFool.com: Housing prices can fall during a recession, but that doesn’t always happen right away. Sometimes, it takes a while for home values to drop, but once they do, it gives investors a key opportunity to snag quality real estate on the cheap. And that opens the door to huge profits for house flippers as well as investors looking to snatch up rental properties.

But that doesn’t seem to be happening during our current recession. Not only are home prices holding relatively steady but buyer demand seems to have surged. In fact, against the odds, bidding wars are making a comeback on the real estate market, and while that’s great news for sellers, it poses a challenge for buyers.


Bidding wars are back

A good 53.7% of home purchases were subject to bidding wars in June, according to Redfin (NASDAQ: RDFN), which is surprising at a time when the economy is sluggish. But a big reason for that could boil down to the fact that there’s not a lot of inventory on the market today.

What makes our current recession unique is that it was spurred by a health crisis, not economic uncertainty. As such, many would-be sellers may be holding off on listing their homes due to the tricky logistics involved. At a time when open houses require thorough planning and subsequent sanitizing, sellers who aren’t in a rush to find buyers are likely putting their plans to list their homes on pause. That, in turn, leads to a shortage of available homes to buy, which explains why those looking to purchase are being pushed into a situation where they’re forced to outbid one another. In fact, Redfin reports that in May 2020 (a time of year when listings tend to be abundant), the number of homes for sale was down 18.9% from the same time last year.

Furthermore, historically low mortgage rates could be driving more people to buy homes. On July 16, the average rate for a 30-year fixed mortgage dropped to 2.98%, the lowest on record.

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When does it pay to engage in a bidding war?

In hot markets, bidding wars are often inevitable, both during periods of steady economic activity as well as recessions. But does that mean it’s worth engaging in one?

To some extent, it might be. If you’re looking to buy a home in the suburbs of a major city, now’s a good time to do so. Many city dwellers are reeling from the COVID-19 lockdown and may be itching to abandon urban life in the coming months. As an investor, you have a solid opportunity to make money by flipping a house outside a major city quickly or buying a rental. If that’s the situation you find yourself in, participating in a bidding war could make sense.

But remember, the more you pay for a home, the more it impacts your bottom line, so what you don’t want to do is get in over your head and overspend on a home you’d likely be able to snag for a much more competitive price a year or two down the line. Therefore, do your research to see which markets are currently experiencing bidding wars and why. If the market you’re targeting usually isn’t loaded with buyer competition, it could pay to bide your time and wait things out.

WRITTEN BY MAURIE BACKMAN FOR MOTELYFOOL.COM

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The 4th of July events still happening in SoCal this year

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FROM THE LA TIMES: NOTE-Many 4th of July events are now being canceled, or are expected to be canceled, due to the recent spike in coronavirus cases: Check websites, and social media before you head out so you’re not disappointed. And don’t forget your mask.

For fans of fireworks shows, this Fourth of July will feel like a rather subdued affair. Many traditional events in Southern California have been canceled due to the ongoing pandemic. Below, THE LA TIMES has compiled a list events that are still on as well as virtual events you can safely enjoy from home.

Outdoor Fourth of July events

Note that the Santa Clarita 2020 Spirit of America Fireworks Spectacular and the Rancho Cucamonga Community Fireworks Show, which had earlier been billed as some of the few outdoor fireworks shows in the area this year, have been canceled.

Avalon’s 4th of July Celebration. If you can make it out to Catalina Island, the city of Avalon is hosting a celebration on July 4. The day begins at 10 a.m. and activities are planned until 9 p.m. lovecatalina.com

A Front Yard 4th of July in Huntington Beach. This year’s parade will tour neighborhoods throughout Huntington Beach. The city also is hosting a home-decorating contest. hb4thofjuly.org

Drive-In Movie at the Rose Bowl. The Rose Bowl will screen drive-in-style movies on weekends this summer starting July 2. Tickets are per vehicle, and parking spots are assigned on a first-come, first-served basis. A full list of films and times is available on the website. tribecafilm.com

Fourth of July Extravaganza at Vitello’s. Alfresco dining in the Vitello’s parking lot in Studio City, 7 p.m. on July 4. vitellosrestaurant.com

Virtual Fourth of July events

Grand Park + the Music Center 4th of July Block Party. Performances and more on Grand Park’s streaming platforms. July 4th (time TBA). july4.grandparkla.org

Fontana’s 4th of July Virtual Celebration. The city has taken the most memorable snippets of previous Fontana fireworks shows and compiled them into one show. The virtual watch party begins at 5 p.m. on local TV channels, the city website, YouTube or Facebook. The city also is hosting a recipe contest. fontana.org

2020 RunnerMania Virtual Running Festival. The virtual festival has a 5K race, a half marathon and a 24-hour ultra marathon, which involves completing as many miles as possible over 24 hours. Participants competing in the 5K and the half marathon are expected to complete their distance over the weekend starting July 3 and ending July 5. (This relies on the honor system: You self-report your mileage and time.) Registration required. thevirtualrunchallenge.com

Monterey Park Virtual Celebration. Decorate your home for Fourth of July and submit pictures. Photos will be included on the city website and shared on social media. montereypark.ca.gov

Feels Like Summer by DJ Illanoise. An immersive audiovisual livestream with a theme of “summer in Los Angeles” by DJ Illanoise, an L.A.-based DJ and podcast producer. Organizers said they are streaming all day on July 4. Tickets are $10. Net proceeds benefit Los Angeles food banks. feelslikesummer.la


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