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Home sales rebounded last month to highest level since 2005, shocking even the Realtors

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FROM CNBC REAL ESTATE: The pandemic-induced housing boom may not be over quite yet. Despite recent months of softening sales, buyers came back remarkably strongly in May.

Pending home sales, a measure of signed contracts on existing homes, jumped an unexpectedly high 8% in May compared with April, according to the National Association of Realtors. Analysts expected a 1% drop. This is the highest level of sales activity for May since 2005.

Sales were up 13% from May 2020, when the housing market was just beginning to come back from the coronavirus lockdown. Pending contracts are a forward-looking indicator of closed home sales.

“May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”

After falling quite sharply in April, the average on the 30-year fixed hovered in a tight range throughout May, giving some buyers at least a little relief on potential monthly payments.

But sky-high home prices have been a major concern. In April, the much-watched S&P Case-Shiller National Home Price Index was up more than 14% year over year, the largest gain in its 30-year history.

The Realtors report even higher gains in the median home price, some of which is skewed due to the fact that more of the sales activity is happening on the higher end of the market, where listings are more plentiful. The low end of the market is barely budging, as first-time buyers struggle for meager listings. Investors, the majority of whom use cash, are also more prevalent at the lower end of the market.

 

Weekly mortgage demand is falling, down nearly 7% on the week, according to the Mortgage Bankers Association — a sign that the housing boom might be starting to fizzle.

“While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said.

Regionally, pending home sales jumped 15.5% in the Northeast month to month. In the Midwest, sales rose 6.7%. Sales in the South climbed 4.9% from April. In the West, they rose 10.9%.

Tight supply of existing homes has been a major factor, but that supply did rise slightly in May compared with April, although it was still historically low. Supply of existing homes is about 20% below year-ago levels. Homebuilders have also not been ramping up production as quickly as the market is demanding.

Sales of newly built homes in May, which are also measured by signed contracts, fell nearly 6% from April, as builders continued to raise prices. The median price of a newly built home sold in May was up 18%, according to the U.S. Census. Builders have seen soaring costs for land, labor and materials. While the price of lumber has come down dramatically in the last month, it is still well above pre-pandemic levels.

WRITTEN BY DIANA OLICK FOR CNBC REAL ESTATE

LARCHMONT BLVD: Dialogue Continues Over Future enhancement of Larchmont’s character

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FROM LARCHMONT CHRONICLE:
Local stakeholders last month continued their dialogue over the future of Larchmont Boulevard.

As reported in April, questions have been raised over recent weeks as to whether parking spaces might be permanently replaced with outdoor restaurant dining now that pandemic-related restrictions are ending.

That also propelled discussion about perennial Larchmont topics like the existing limitations on certain types of businesses such as restaurants. Further, with Larchmont Boulevard celebrating its centennial year in 2021, it seems to many residents to be a good time to reevaluate how local neighborhoods interact with, and envision the future of, the historic shopping district.  

The Larchmont Boulevard Association (LBA) is spearheading the effort. It seeks an organized discussion through the committee it convened, headed by LBA board member Patty Lombard.

Of the group, Lombard tells the Chronicle that: “So far, we have a very small working group putting together a structure for an open, transparent community conversation on the current issues facing the street with professional assistance from Windsor Village resident and architect and urban planner John Kaliski, FAIA. Other members of the group are Heather Duffy Boylston with the Larchmont Village Business Improvement District and Gary Gilbert, representing the Windsor Square Association.

“Our working name is ‘Larchmont 2021’ and our focus is to facilitate the retail stability of the street and enhance Larchmont’s character.”

The working group’s approach is still evolving: “But we’d like to conduct a series of learning and listening sessions with experts on local retail streets and placemaking,” she explains.

“Once we fill in the details of the sessions, we will engage a larger working group of stakeholders representing the various other groups in the neighborhood, including the Hancock Park Homeowners Association, the Larchmont Village Neighborhood Association and others who have volunteered to help, to get their ideas as well. Once we have consensus on conducting the conversation, we hope to get the first session underway in June, either virtually, or in-person, or a hybrid, depending on the pandemic restrictions,” said Lombard.

Mayor Garcetti

“In a city whose unofficial motto is 72 and sunny, let’s make al fresco dining permanent,” said Mayor Eric Garcetti on April 20, proposing during his 2021 State of the City address an allocation of nearly $2 million in grants for restaurants in low-income neighborhoods to set up permanent parklets for outdoor dining. Will that include Larchmont?

Resident voices

The debate about the future of Larchmont also continued on the social media site Nextdoor as residents shared their thoughts about the Larchmont Chronicle’s April article: “I like the outdoor dining idea, it’s so much better than the way it used to be with tables scattered all over the place, sometimes making the Blvd. an obstacle course to walk down. Be great to make Larchmont more user friendly,” said Keith Johnson. “I miss the hardware store! It was so sweet. Small, but somehow he had everything I needed. Unfortunately the rents have skyrocketed, and I am concerned we’ll lose the small business owners/shops,” said Lisa Brause.

“I love having the outdoor dining. I think it will ultimately bring the Larchmont community together, especially for those of us who are lucky enough to live in the neighborhood. The businesses I most wish were on Larchmont: a small hardware store and a small food market,” wrote C. Pierson on the Chronicle website. 

Building unveiled

Speaking of improvements on Larchmont Boulevard, last month the longtime boarded-up Mirzrahi family-owned building at 227 N. Larchmont Blvd. was unveiled, freshly remodeled, with a glass and steel façade, and new for-lease signs posted. The late Albert Mizrahi purchased the building, which previously was the site of Prudential Real Estate, in 2007. The following year, Mizrahi told the “Los Angeles Business Journal” that he had rented the space to Wachovia Corp. for a bank branch to open in the fall of 2008. However, due to the sub-prime mortgage crisis that year, Wachovia was acquired by Wells Fargo, putting Mizrahi’s lease in dispute. The building was left vacant and boarded-up until now, more than a decade later.

WRITTEN BY BILLY TAYLOR FOR THE LARCHMONT CHRONICLE

REAL ESTATE: Southern California Home Prices Up 15%; ‘A Feeding Frenzy’:

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WRITTEN BY ANDREW KHOURI FOR THE LA TIMES: 

Southern California home prices soared in March, rising by double digits for the eighth straight month as a pandemic-fueled housing boom continues to go strong.

The six-county region’s median home price increased 14.5% from a year earlier to a record $630,000, according to data released Wednesday from real estate firm DQNews. The number of houses, condos and town homes that sold rose 32.2%.
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A mix of factors is driving the boom, which extends nationwide, real estate agents and economists say.

The housing market was heating up before the pandemic. Since then, mortgage rates have tumbled and people are looking for more space. Also, millennials are quickly entering their early 30s, the age when many people become first-time homeowners.

In Southern California, prices are rising in all corners of the region.

  • In Los Angeles County, the median price rose 17.2% to $750,000 in March, while sales climbed 33.9%.
  • In Orange County, the median price rose 10.6% that month to $835,000, while sales climbed 38.5%.
  • In Riverside County, the median price rose 17.9% to $476,750, while sales climbed 37.5%.
  • In San Bernardino County, the median price rose 18.3% to $429,500, while sales climbed 29.3%.
  • In San Diego County, the median price rose 15.3% to $680,000, while sales climbed 22.4%.
  • In Ventura County, the median price rose 12.5% to $658,000, while sales climbed 24.2%.

How much longer such steep gains will continue is a question both buyers and sellers are eagerly asking.

Richard Green, director of the USC Lusk Center for Real Estate, said falling mortgage rates during the pandemic enabled buyers to bid up the prices of homes while keeping monthly payments roughly the same. He doesn’t foresee people’s incomes allowing them to pay much more.

Other analysts believe the wild ride will continue unless the economic recovery reverses course or mortgage rates suddenly spike.

Analysts at John Burns Real Estate Consulting predict that, come December, prices in Southern California will be up by double digits compared with the same month in 2020. By December 2022, prices will probably have notched an additional gain of roughly 6%, the firm projects.

Rick Palacios Jr., the firm’s director of research, said low supply and an influx of investors into the market are among the reasons for those projections.

“It is a feeding frenzy right now,” he said of the market. “It’s incredibly competitive.”

READ THE ORIGINAL STORY HERE: ‘A feeding frenzy’: Southern California home prices up 15% – Los Angeles Times (latimes.com)

THE HOUSING BOOM: “It’s Not a Bubble. It is Simply Lack of Supply.”

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FROM AXIOS: Bidding wars, soaring prices, and fears that homeownership is becoming out of reach for millions of Americans. We’re in a housing frenzy, driven by a massive shortage of inventory — and no one seems to be happy about it.

Why it matters: Not all bubbles burst. Real estate, in particular, tends to rise in value much more easily than it falls. Besides, says National Association of Realtors chief economist Lawrence Yun, this “is not a bubble. It is simply lack of supply.”

By the numbers: America has a record-low number of homes available for sale — just 1.03 million, according to the latest NAR data. That compares to a peak of more than 4 million at the height of the last housing bubble, in July 2007.

  • The total number of active listings this week is down a record 54% from the same week a year ago, per Realtor.com. That in turn has helped to drive national prices up 17.2% over last year.
  • Almost half of homes now sell within one week of being listed, per Redfin.
  • In Austin, Texas, the median listing price has risen 40% in one year to $520,000.

6315LongviewAvenue.0002The big picture: Prices are being driven upwards by a combination of factors, including continued low mortgage rates, a pandemic-era construction slowdown, a desire for more space as people work increasingly from home, and a stock market driven increase in money available for downpayment.

  • rise in financial buyers — large corporations buying up homes to rent them out — is only making the market tighter, and decreasing the number of owner-occupied properties available.
  • What’s missing: Unlike the mid-2000s, this time around there’s no exuberant culture of condo flipping. While interest rates are low, lending standards are still tight, making it hard to buy a house you can’t afford.

The good news is that rents have not been rising nearly as fast as prices. They stayed roughly flat during the pandemic, and are now rising at perhaps a 4% pace, Yun says.

Homebuyers are the biggest losers. In order to win bidding wars, many of them are being forced to make rushed and risky decisions. Successful bids often need to waive any financing contingency or right to inspect the property.

  • That raises the terrifying prospect of putting down a large downpayment and then not being able to get a mortgage — and/or finding that the house requires hundreds of thousands of dollars in repairs.

The worst-case outcome, says Yun, would be if “rates remain low, demand picks up with new jobs, there’s no increase in supply, and the only thing that moves is home prices, until people get priced out. That would mean we are creating a divided society of haves and have-nots.”

  • The best-case outcome, on the other hand, would be a construction boom accelerated by President Biden’s infrastructure plan, which would create more supply and help to stop the rise in prices.

The bottom line: Housing prices are likely to remain high and rising for a while yet.

WRITTEN BY FELIX SALMON FOR AXIOS .COM

Southern California Home Prices Reach All-Time High in February

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FROM YAHOO NEWS & THE LA TIMES:

Southern California home prices reached an all-time high in February as buyers competed amid a shortage of homes for sale, adding to signs that pandemic home-buying trends are extending into 2021

The six-county region’s median sales price jumped nearly 15% from a year earlier to $619,750, according to data from real estate firm DQNews.

Sales surged 17.6% from February 2020.

The numbers, published Tuesday, show how a pandemic housing boom driven by historically low borrowing costs and by demand for more space is extending into 2021. Another factor: Many millennials are entering their early 30s — a time when many people purchase their first home.

The data show that the increase in demand, however, has not been met by a surge in listings, leading to bidding wars and subsequent higher prices.

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According to Redfin, the number of new listings coming onto the market in L.A. County during the four weeks that ended March 7 was just 4% higher than in the same period last year.

And with homes selling quickly in recent months, people had 13% fewer options to choose from over that period, the data show.

Daryl Fairweather, chief economist with real estate brokerage Redfin, said more homes aren’t coming up for sale because some owners don’t want to buy another home in a tough market, and some may have refinanced at record lows and are satisfied with their mortgage.

Some wealthy owners are also choosing to buy another house farther from their jobs, she said, but holding on to their old home, unsure where they want to settle down as the pandemic recedes and the economy starts to recover.

Builders are trying to ramp up to meet demand. But that takes time, and soaring lumber costs have made projects more difficult to get off the ground.

“New construction can’t keep up with demand,” Fairweather said.

Sales and prices are rising throughout the region.

  • In Los Angeles County, the median sales price rose 14.3% to $708,500 in February, while sales climbed 19.1%.

  • In Orange County, the median sales price rose 9.6% to a record $820,000, while sales climbed 13%.

  • In Riverside County, the median sales price rose 16.5% to a record $465,000, while sales climbed 18.3%.

  • In San Bernardino County, the median sales price rose 17.7% to a record $412,000, while sales climbed 21.5%.

  • In San Diego County, the median sales price rose 14.6% to a record $672,750, while sales climbed 13.8%.

  • In Ventura County, the median sales price rose 13% to $650,000, while sales climbed 23.9%.

A major factor in the sales and price boom has been a drop in borrowing costs during the pandemic, with the average rate on a 30-year fixed mortgage falling below 3% for the first time.

Rates have been on the rise in recent weeks and now average slightly above 3%. If the economy improves, rates could keep rising, but many experts expect borrowing costs to remain low by historical standards throughout 2021.

This story originally appeared in Los Angeles Times and written by Andrew Khouri



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