Commentary

LA Ranked Numero Dos for 2017

The economists at Realtor.com released a list of the top 10 real estate markets that will grow the most in 2017.  Our very own Los Angeles is ranked 2nd only behind Phoenix; Boston and Sacramento came in 3rd and 4th place.    There are two important metrics considered when ranking cities poised for the most growth and those are: price growth and transaction volume.   Home prices in Los Angeles will continue their upward trend with a projected growth rate of 6.9% and the number of sales to increase by 6%.  Homes are selling for more than last year and there will be overall more sales than there was in 2016. Below is the actual list:

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  1. Phoenix
  2. Los Angeles
  3. Boston
  4. Sacramento
  5. Riverside, California
  6. Jacksonville
  7. Orlando
  8. Raleigh
  9. Tucson
  10. Portland, Oregon

Economists at Realtor.com point to LA County’s low unemployment rate, a large population of millennials, a wealthy baby boomer population, and consistent home price growth since 2008 fueling all of this projected growth in 2017.  These factors are all contributing to LA’s sunny 2017 real estate forecast and everyone in the industry is cheering.   I’m delighted with this news.  As I mentioned in previous blog posts, I was concerned how the election outcome would impact the real estate market. That negative reality never materialized; at least not yet.  Consumer confidence remains strong and people are confident in buying and selling real estate in the area. 

You can see from the list that many of the growth is in the southwest region of the US; the same region that was hit the hardest during the housing crisis of 2008.    It’s fantastic to see the recovery pulling these real estate markets into high growth territory.   Interest rates are on the move so get your home shopping in sooner rather than later.  Happy Holidays, folks! 

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Announcing NestingUp – A Tool for Home Buyers and Their Agents

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My former colleague and I have been working very hard over the last year to create a new web tool for agents and home buyers.  We named the tool NestingUp and it creates cover letters for home buyers to help them get their offers accepted.  When buyers submit offers to buy homes, agents often generate a cover letter to supplement the paperwork.  NestingUp is a platform that allows agents to simply create cover letters for home buyers that adds pictures and videos of the actual buyers themselves.

Real estate industry professionals and consumers alike know how important it is to have fantastic pictures of your home when you’re selling.  People love to look at pictures of beautiful kitchens, bathrooms, yards, etc.  Well, we’re adding photos of buyers (the people themselves) to create the same impact on sellers.   We have been doing this for our clients for quite some time and there is definitely a positive impact on getting offers accepted with favorable terms.  Sellers like to look at pictures of buyers just like buyers like to look at photos of sellers’ homes. 

Home offers with a NestingUp cover letter stand out from the rest.  Check it out, folks. We’re incredibly excited for NestingUp for the positive impact it will have for agents and home buyers.  

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Trump and Real Estate

The decision was made and  Trump will be our next president.  The polls suggested there would be another outcome so I was just surprised as many others in California.   At a more personal level, it goes to show that we live in somewhat of a bubble here in Southern California.   There were signs for Trump/Pence all over people’s lawns throughout America and not a single one in my neighborhood.  Anyways, back to the real estate..

I was watching the markets around the world when the results were coming in.   The Asian markets were reacting negtrump-pictureatively to the signs that Trump was leading in Florida and other swing states.  US futures were also down during the early hours of election night.  I thought the markets were going to tank and my job as a real estate broker was about to evaporate overnight; well, at least temporarily.   But all of that never happened and I am honestly surprised as well as relieved. 

There were numerous clients who expressed their concerns that the election was going to negatively impact the local real estate market here in Southern California.   One family said to me right before she decided not to make an offer on a home: “There’s going to be something bad. Just watch”.  My immediate reaction was that I will have to wait until December to start showing her homes again and make offers.    One other home buyer that I was working with decided to postpone their home search in part from the election.

With interest rates ticking up post election, it will put downward pressures on the real estate market.  But there are no immediate signs of a real estate recession around the corner.   Consumers continue to make offers on homes and open escrows.   We are now hovering around peak 2006 price levels here in Southern California.  Yes, they can go up even more, but as history proves, they can also go back down.  We will all have to see what
happens.  

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Giving Buyers an Edge

Hey folks! The real estate market here in Southern California is as robust and competitive as ever.  This is a time that real estate agents, consumers and industry professionals refer to as a “Seller’s Market”.  Sellers today have an edge in all aspects of the residential transaction from negotiating a contract price to offering concessions or agreeing to a request for repairs.  What I am seeing today is fewer and fewer sellers who are accepting less than asking price and, more commonly, not offering make and repairs or concessions.    There are plenty of the buyers out there looking for a home and limited, affordable inventory out there.  So there are upward pressures on home prices and Buyers having to fork out more cash. 

 
Born out of the need to help my buyers get their offers accepted, I am developing a user friendly product that will give Buyers an edge.  It is a social media cover letter that will allow buyers to upload a photo or video and write a few words about themselves.  The social media profile can be shared and exported to the Seller’s or their agents.  Instead of writing an awkward paragraph about a buyer, the buyers can promote themselves as people.  The objective is to put a face to the Buyers so when Sellers sort through their many offers, the buyer who sent a photo or  video will stand out.  
 
The product is in the web development phase and we will be testing in late July.
 
Stay tuned!  
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Light Rail to Santa Monica Now Open!

Expo Picture for BLog

 

The light rail Expo Line is now up and running! As of May 20th, the new track connecting downtown to Santa Monica is running on a schedule for the public.  There has been a massive amount of anticipation for the new tracks that will connect the City of LA to the ocean.   It’s taken years and plenty of money to get to this point.  Metro advertised that it will take roughly 46 minutes to get from Santa Monica to downtown providing an alternative to driving.   There are seven new stops between Santa Monica and Culver City hitting many popular Westside stops.

A few hiccups were documented during the first week of operations including long delays and crowded trains. LA Metro updates their Twitter account frequently with updates on delays and service issues that interrupt service.  Try to check this before you start your journey. 

Other major US metropolitan areas experience gentrification when new metro stations open.  A solid example is the Washington D.C. area where developers constructed high rise apartments in the North East near the  new stops.  These neighborhoods were previously unsafe and poor.  The gentrification was fast and pronounced in these areas.    As for LA, I think it is safe to say that the real estate on the Westside will appreciate from the increase demand for housing near the 7 new Expo Line stops.   

Viva Los Angeles!

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3% Down Mortgages are Back. Yikes

Wells Fargo announced this week that it will launch a mortgage program where buyers will only need to put 3% down towards their home purchase.  The institution argued that the current state of the real estate market has sidelined low to moderate income buyers.   By easing strict credit restrictions in place since the Great Recession, more people will be given the opportunity to purchase their home through this new Wells Fargo program.  The program also allows buyer’s down payment to come from gifts and community assistance programs and not from their savings account(s).   The minimum FICO score to quality is 620, which is significantly lower than the average 750 on most home loans issued today.

The new 3% loans will eventually be sold to Fannie Mae so Wells Fargo will still have to adhere to tighter underwriting policies in place.  Buyers will likely need to show evidence of high monthly income to offset a credit score in the low 600s.  Nevertheless, it will now be easier to get a mortgage.

It is easy to cheer such a program since it gives a whole new group of Buyers the opportunity to enter the real estate market.  These low income consumers can now obtain a mortgage despite having a low credit score and no personal savings to put towards their down payment.  I can’t help but cringe when I saw this headline today when I was browsing real estate news.   The real estate market is robust at the moment with industry professionals and sellers benefiting from this golden period of high property values.  In my opinion, we are on track towards another major market correction and those that will suffer the most, like last time, will be these low to moderate income families. The same families who were crushed in 2008-2012 will endure the same fate in this next cycle.  And that’s because they are buying houses that they really cannot afford.

The last two blog posts have made a dark, sober turn.  Not even a picture included here to distract you,  It is important to take a moment to reflect on the current state of the market.   We’ll go back to Suzy Sunshine topics in the next few days.

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We’ve Come Along Way Since 2008

The time when large waves of foreclosures were hammering the real estate market from 2008-2012 are all but a distant memory now.  It was dark chapter in the lives of many homeowners in California and throughout the United States.  Average Americans were not able to afford their mortgages once they lost their jobs and home values declined.   There was an uncertainty and fear in the air for many years as it wasn’t clear how low home values would drop and when the economy would finally recover.  People and investors were navigating through a time of heightened uncertainty and I remember it quite vividly.   It was also a golden period for investors and real estate companies who were able to purchase properties at incredible discounts.  There were clear winners and losers of this last real estate cycle.

The wave of foreclosures that hit in 2008 and continued through 2012 was unprecedented.   Back in 2009, 1 in 10 homes in Nevada and 1 in 50 in California were in the foreclosure process. Fast forward a few years and it’s a more rosy picture.   As of  May 2016, the national foreclosure rate was 1.1 percent according to CoreLogic, which is the lowest in years. That was the same rate as it was in 2007 before the financial crisis of 2008.   What’s more, there was a 23% decrease from 2015 to 2016 in the number of households in some stage of the foreclosure process.  We are trending well even the last 12 months.  The economy is robust, unemployment is low, and people are confident to participate in the real estate market.

The lessons from the last recession should not be brushed under the rug.  Yet today there are advertisements everywhere for homeowners to take out 2nd mortgages or Home Equity lines of credits.  The real estate market today is great and I am noticing practices that got us into this mess start to resurface.   After working through the last recession, my advise to homeowners is to be cautious about taking on more real estate debt than you have to.  Home values will decrease again when the next recession hits.  And yes, another recession will happen.   The next recession is around the corner so don’t get caught with a home that is fully leveraged (underwater).   Be prudent and don’t take out a 2nd mortgage or HELOC so you can go on a trip, upgrade your house, etc.   Expecting home values to keep rising is foolish.   There will be a correction again.  Let’s enjoy this current period of growth in the real estate market, but never forget the lessons from the last recession.  Be prudent, folks.

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Seal Beach is THE Family Neighborhood of LA/OC

 

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Seal Beach is a quaint coastal community at the northwest corner of Orange County.  If you haven’t heard of it before that’s because it is really tiny with a population of about 24,000 spread over only 11 square miles.   Relative to other Southern California cities, Seal Beach is small and very safe.  The city cannot grow anymore because of the geographical boundaries, water primarily, that surround it.  Throughout the decades Seal Beach continues to retain its small town charm.  

The San Gabriel River is just north of Seal Beach and it also divides Los Angeles County from Orange County.  To the west of Seal Beach is the Pacific Ocean and to the south is marsh land.  If you like water, then Seal Beach is a great city to buy a home in.   The ocean moderates the temperatures so it is fairly enjoyable much of the year.  You don’t need air conditioning except during those abnormally hot heat waves that have hit Southern California these past few summers.  You can cool off at the City’s beach that is never crowded because of the limited parking.

Main Street through Old Town is the area where there are boutique shops, restaurants, bars, coffee shops, nail salons, and medical offices all are clustered around.   It is a relatively quiet and extremely friendly commercial area with mostly families and couples shopping and dining along the street.  Main Street is not the destination for loud bar hoppers; they head south to Huntington Beach for a wilder bar scene.  It’s safe and family friendly, but there are bars on Main Street like O’Malley’s to quench your thirst if you’re up for it.  

Seal Beach is part of the Los Alamitos School District, which is one of the top performers in LA and Orange Counties.  The schools are exceptional and that is a major pull factor that brings families to buy homes in Seal Beach and the adjacent Rossmoor community.   Great schools stems in part from great parenting and other socioeconomic factors all of which are positive in Seal Beach. 

Given the ideal climate, excellent schools, safe family neighborhoods, and a great beach, home prices in Seal Beach are high and are increasing.  There is strong demand to move to this part of town, but it is well worth it if you are able to afford it and looking to resettle out of LA.   The median home price in Seal Beach is roughly $800,000.   Contact Haus California to help with your home buying in Seal Beach! Happy Saturday, folks!

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Home Buying Season and Tips for Buyers!

 

Homebuying Blog Pic

 

The home buying season of 2016 has kicked off in Southern California.  Spring and summer are traditionally the busy seasons for home sales.  There are several reasons for this including families looking to relocate into a new neighborhood, move into a larger home, downsize or upgrade their features.   Whatever the reason(s) are for buyers and sellers, they typically enter the market between April and October throughout the United States.

There is no doubt that the market is competitive right now as supply remains constrained and demand is strong.  The imbalance between supply (decreasing) and demand (increasing) places upward pressure on home prices.  The Statewide median home price in California broke $500,000 for the first time in nine years according to the California Association of Realtors (CAR).  Below are variables that affect prices with data provided by CAR and Fannie Mae.

  1. Inventory: the supply of available homes on the market is operating at 60% of normal levels.  There are fewer homes on the market.
  2. Mortgage Rates: The 30 year rate for a mortgage is 3.58% as of May 2016.  The rate was 3.84% this same time last year.  Debt is cheaper than historical averages thus pushing more buyers into the market.
  3. Sales to List Ratio: 99.3%.  Tight inventory and strong demand means home buyers are essentially paying list price for homes.

This is all great news if you want to sell your home as you will likely get multiple offers from strong buyers.  The time right now is what we call a “seller’s market”.  If you’re a buyer, then this time can be more challenging to get what you want.  Buyers should expect to put their best foot forward with their initial offer and don’t expect Sellers to give large concessions during the transaction.    

Here are some tips for Buyers right now:

  1. Save more money for a strong down payment. The larger the down payment the stronger your offer appears.
  2. Do not ask the Seller to make small, miscellaneous repairs to the property. Don’t ask for all of the appliances if the Seller doesn’t want to include them in the sale. 
  3. Pay your own closing costs, which will be roughly 1-3% of purchase price.
  4. Be willing to pay the difference between appraised value and purchase price if there is a discrepancy in value.
  5. Be flexible and compromising!

 

This is an exciting time in residential real estate.  Good luck to buyers and sellers and let our team at Haus California help you make the move. 

 

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When the Next Recession Hits….

Hey folks! I created a new website that is full of useful information for homeowners when the next recession hits. After working years in distressed real estate, I learned all the options owners exercise when home values decline and/or income slows.  Check it out:

http://ehaug8.wix.com/mysite

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