Southern California Home Sales – “The luxury market was the first to recover from the housing downturn, and now it’s a bellwether of slowing price growth for the rest of the market. Sales at the top end of the market continue to soar, but prices are downshifting …”
Southern California Home Sales:
Luxury Home Prices Fall Nationwide
Southern California Home Sales Are Among Most Drastically Effected
This week we’ve been taking a look at California home sales in 2015 and 2016. We’ve been highlighting how Southern California home sales have performed this year and what to expect from the California real estate market in the coming year. In general, we’re looking at a housing market that is growing in sales and value, but at a slower rate than before. In short, we appear to be experiencing a “rest” in the market. All in all, that’s a good thing.
There is one section of the California Homes for Sale market, however, that is not performing like the rest. Prices of Luxury homes fell during the 2nd half of 2015 for the first time since 2012. Over at Redfin, they have been analyzing this and have come up with some very interesting numbers. As you can see from the chart above, Los Angeles is among the hardest hit areas as far as falling prices of luxury homes.
There are several causes for this, and one is the slowdown of activity from foreign investors. Here in the San Gabriel Valley we’ve noticed a distinct pull-back of activity since the fall of the Chinese stock market and the crackdown of the Chinese government on money being invested overseas. With that slowdown, prices began to pull back in an effort to attract buyers.
Check out this detailed article by Alina Ptaszynski over at Redfin. We’ll conclude our analysis after the jump.
“Home prices in the luxury market fell 2.2 percent in the third quarter compared to last year, the first time prices for the nation’s most expensive homes have fallen since the first quarter of 2012. The luxury market, which we identify as the priciest 5 percent, was shown up by the bottom 95 percent, where prices grew 3.8 percent over the same period. The bottom 95 percent of the market has seen consistent price growth of around 4 percent in each of the past four quarters.”
Southern California Home Sales: Is Luxury Real Estate A Leading Indicator?
As I mentioned in earlier posts this week, there are a few … not many, but a few … analysts of the real estate market who are convinced that we are currently experiencing another “real estate bubble”, and that prices and activity are both about to fall. One of the things that they point to is the recent decline in prices in the area of Luxury homes. The upper end of the market has long been considered a “leading indicator” for the rest of the market. The top 5% market area was among the first to recover. Could this recent drop in prices among luxury homes signify a coming downturn in the rest of the market as well?
Personally, I don’t subscribe to the extremely pessimistic view of some. All markets adjust. No market simply moves upwards in a straight line. No market moves downwards in a straight line. Whichever way the market trend is going, there will be “retracements” and “market adjustments” along the way. What’s more important than these adjustments, is the trend itself. This market action among Luxury Homes is certainly a heavy adjustment, but it falls far short of signifying a trend reversal.
The Southern California Home Sales market … along with real estate in the rest of the nation … is on an upward trend. The fact is that Luxury Home prices had become very inflated and overblown by last June, and they have adjusted over the last few months. The rest of the market may be a bit overpriced, but not to that degree. Yes, we may see some adjustment in prices throughout the rest of the market over the next few months, but it’s not the bursting of a “bubble”. It’s not the reversal of the current trend. It’s the normal activity of a healthy market making needed adjustments, and after a brief pull-back the upward trend should continue.
Southern California Home Sales.
Southern California Home Sales in 2016 – “Most economists agree that housing prices and sales will continue to grow in 2016, just at a slower pace. Call it a slowdown, but not bad news. …”
Southern California Home Sales in 2016:
Five Predictions From Redfin
As we did in Monday’s post, today we’re presenting another set of predictions regarding Southern California Home Sales in 2016. These are a bit less specific to our own area here in the San Gabriel Valley. They come from the online real estate brokerage and analyst house, Redfin, and they are nationwide predictions. Even so, this 2016 Home Sales Forecast is likely what you’ll see in the Southern California home sales market next year, and it’s a mixed bag of news.
As with most analysts, the Redfin predictions do not forsee any “booming” going on. They are focused on the moderation of things in general. They find that the housing market, in general, will continue to grow, but at a slower pace than we’ve seen. This is actually better news for buyers. If the market maintains growth while moderating the rate of exchanges and the rise in prices, that’s good news for buyers, and indicates a healthy market long term.
Redfin’s 5 Predictions are:
1) Prices and Sales Will Grow 1/2 As Fast
2) Credit Will Ease A Bit
3) There Will Be More (and older) First Time Buyers
4) The Market Will Slow & We Will See Slower Closings As Well
5) Inventory Shortage Will Continue
The specifics of why Redfin is predicting each of these and just what effect the item will have on the market can all be found on the Redfin Blog post itself. This particular post was written by Nela Richardson, and she does a fine job of illustrating the “why’s and wherefore’s” of her 2016 housing market predictions.
“Next year holds a few interesting developments, some good for housing, some bad. Easier credit will bring in more buyers, but higher mortgage rates, continued low inventory and the wildcard of a presidential election will weigh down growth. All things considered, we see a fairly uneventful housing market next year.”
Southern California Home Sales in 2016: Slow and Steady
Our national and regional real estate markets have made a really dramatic recovery over the last few years. Dramatic recoveries create stress. As in any market, a “resting” period or a “retracement” becomes necessary. Buyers and Sellers look for a little “breathing room” where they can take a step back and not feel so rushed to get their timing right. This is the consensus of what we should expect for 2016. And it’s not completely unwelcome news. A “resting” market is usually a good indication of market health, and in the long run that’s good news for both sellers and buyers
It should be noted that not all sectors of the housing market perform the same. On Friday we’ll look at a sector of housing that’s not “hitting the marks” as well as the others. Since this sector is somewhat of a “leading indicator” of future general market performance, it bears looking into the reasons for its current under-performance. Join us for our next post where we’ll discuss the difficulties being experienced by the Luxury Home market these days.
Southern California Home Sales in 2016.
Southern California Real Estate Values – “Los Angeles home prices are leveling off at about 18% below their pre-crash peak … Broad slowdown in rising home prices reflects more ‘normal’ market, experts say”
Southern California Real Estate Values:
Case-Shiller Reflects Market Slowdown
The S&P / Case-Schiller market survey shows the housing market cooling nationwide faster than expected. That’s not to say that values are decreasing, they’re simply increasing at a much slower rate.
Now, that may not sound like a good thing, but in fact, it is. Real estate values in Los Angeles, the San Gabriel Valley, and nationwide have been experiencing great volatility for quite a while now. Very swift rise in prices, sustained over a long period of time, is the perfect prescription for “a bubble”. And we all know what happens with those.
A slowdown in price rise to a steady, slower, but sustainable rate, is a good sign that the housing market is solid. That’s the kind of growth we really like to see. It means the market is much more reliable than one that shoots to the sky and then plummets into the depths in reaction.
Here’s an article about the Case-Shiller numbers by Tim Logan, from today’s LA Times :
“Analysts say the slowdown reflects a market that’s transitioning to a more normal pace of appreciation than the big swings of recent years, and most agree that’s a healthy development. ‘There’s little on the horizon to suggest it will change soon,’ said Bill Banfield, vice president of Quicken Loans.”. …
Steady As She Goes
A steadily growing market brings a breath of relief to analysts and market watchers. Keep an eye out elsewhere in these pages today for some analysis of the influences currently at play in the market.
Housing Affordability – “Where can the middle class afford to buy a home today? Affordability has worsened in the past year, as home prices have climbed faster than incomes and mortgage rates have risen.” …
Middle Class Priced Out Of Much Of Southland
Pasadena & San Gabriel Valley Becoming Out Of Reach
We’ve been hearing the question lately, “Can I still afford to buy in your area?”
Actually, it’s an age-old question. Housing affordability is a concern everywhere and all the time. Of course, housing affordability eventually boils down to a question of what people can afford to pay … not necessarily what the price is. For instance, from 2008 through a couple of years ago the prices were uniformly and astonishingly low in almost all areas. BUT … the economy was so bad at the time and lending was so tight that no one but some lucky investors could afford to pay them anyway.
Trulia, the real estate data collection and reporting company has recently done a study of what areas of the nation are affordable and which are not.They’ve called it their “Middle Class Affordability Report”, and the idea is to outline which areas are actually available as housing to the Middle Class and which are now out of reach. The recovery in real estate has been widespread, but it has not been uniform.
HuffingtonPost 05/14/2014 8:17 pm EDT
However, in many markets, especially along the coasts, home ownership is out of reach for the middle class. Even having a college degree is no guarantee that home ownership is within reach in the priciest markets. There’s no easy way to make housing more affordable, though new construction can help.
Is The San Gabriel Valley Affordable?
As you could see in Jed’s article, seven of the ten least affordable markets are in California. The worst of those is San Francisco, with only 14% of homes in the Metro Area avaiable to the Middle Class. Coming in at second place is the Los Angeles area with only 23% of homes actually affordable, and Orange County is third and not much better at about 24% of homes that could actually be purchased by middle class homeowners.
Within the greater L.A. area, there are several areas that rank with San Francisco as unaffordable to the Middle class. Among those are the Pasadena / San Gabriel Valley area where, according to this Trulia study, only about 13% of homes are priced in ranges affordable to the Middle Class. That’s not a really good sign for our local market. According to this study we are simply too expensive here in the San Gabriel Valley for the Middle Class.
However, there are a couple of things to keep in mind here. The first is that markets don’t exist in vacuums. Different forces push them up and down and those forces come and go. In our area we have been seeing prices pushed upwards by the influx of investment money from overseas, mostly from China and Canada. Like all “trends” this one will also subside and wane to be replaced by another. When it does, that upwards pressure on prices will ease.
The other, and more important, thing to keep in mind is that the determination of whether a “Middle Class” buyer can afford a home is determined by several factors. The price of the home is only one. Also important is the amount of the average wage earned by a Middle Class worker. As people earn more they are able to pay more for housing. The economy has been recovering … but slowly. The rate of that recovery has not kept up, at this point, with the rise in real estate prices in our area. As the economy continues to rebound and earnings by the Middle Class increase, we should see the affordability of real estate in our area become more attractive.
California Home Sales:
Prices Soar Across Southland
California Home Sales Numbers Show Large Jumps
In Both Price And Activity
All across the Southland, the California Home Sales market is posting some really impressive numbers. Prices are way up, as anyone with any knowledge will tell you, but activity has increased as well. In the San Fernando Valley the median price of a home increased by 39% in May of thixs year over last year.
The good news is not restricted to resale market. Sales of new homes posted their highest rates in five years.
Here's the complete run down on California home sales from Gregory J. Wilcox in the Los Angeles Daily News
Prices in the Los Angeles metro area are up 19 percent from a year ago, according to a widely watched index released Tuesday. … In the San Fernando Valley, the median price of a previously owned home soared a record 39 percent in May and cracked the half million mark again, a trade group said. … And San Bernardino County’s median price jumped 28 percent last month, according to market tracker DataQuick…."
Are California Home Sales Numbers Bubble-Bound?
Some analysts have begun to worry that, with such good numbers posted recently, the California home sales market might be in the beginnings of another "bubble" experience. Actually, the fundamentals of the market are solid and so are the "technical" indicators. We should expect a slow down to the rise in prices and activity to begin to kick in within the next couple of months, but that will be normal and healthy market adjustment activity. Those who are seeing "bubble activity" in the California home sales market at this point, may be getting a bit "overblown" themselves.
California Home Sales.
California Home Sales:
Median Price Sees Largest Jump In 33 Years
At Least 34.5% Of California Home Sales In May
Were $500K And Up
More good numbers in California home sales in May were just reported. The California Association of Realtors reports that the state's median home price increased to $417,350 from $316,460 in May 2012. This is an increase of 34.5% over may of last year, and that's the largest year-over-year jump since February of 1980. Additionally, the percentage of sales over $500K increased.
Here's a Video from the National Association of Realtors with some good numbers from a couple of weeks ago:
More currently still, here's an article from Gregory J. Wilcox in the Los Angeles Daily News with those numbers and a lot more:
"The median price of a previously owned house in California soared 31.9 percent in May, the largest year-over-year increase in more than three decades as sales of more expensive properties increased and inventory remained tight …"
Other Factors Also Support California Home Sales
There are other good things going on in the California Home Sales market as well. The market numbers are currently being supported by fewer REO sales and continuing low interest rates. Good news in the coming months can be supported by the fact that Buyers are using more conventional financing strategies and are also investing higher down payments than they have previously.
California Home Sales.
Real Estate Values:
Is Housing In Bubble Trouble?
Some Analysts Believe The Recent And Swift Rise In Real Estate Values May Foreshadow Another Market "Bubble"
As anyone who reads these pages is aware, real estate values have been climbing quickly nationwide. After the "big dump" of a few years ago, the market bottomed, played around at those bottom levels for a while, and then began to climb as the economy started to improve and consumer confidence began to grow. With so many REO properties on the market at low prices, the Investor market became a driving force in the recovery of real estate values.
Some analysts now believe that we are seeing signs of another "bubble" in the market. This would not be good news for the future. While most are seeing a market in need of a "correction", the "bubble-seers" are more pessimistic. The correction they see coming is much more extreme, with real estate values again plummeting sharply. Are they correct?
Here's an article by Pat Mertz Esswein from "Kiplinger's Personal Finance". In it, Pat interviews Mark Vitner, Managing Director and Senior Economist at Wells Fargo:
"Follow @PatEsswein. Andy McMillan/Redux. Wells Fargo's Mark Vitner. Mark Vitner is a managing director and senior economist for Wells Fargo. He tracks trends in inflation and the U.S. housing markets, commercial real estate and regional economies.Kiplinger Personal Finance"
Real Estate Values Put Sellers In The Driver's Seat
With Investors pushing the market upwards, and the current lack of inventory, the future is unclear. It's difficult to tell right now who is correct as far as the future of real estate values … those who see a coming "correction", or those who fear we are headed for "bubble trouble". One thing is clear, however, and that is that currently it is a good time to sell. Whatever way you look at it, real estate values are up, homes are selling, inventory is not growing, and we're just moving in to what is traditionally called the "Selling Season".
If you're currently dickering about whether or not it's a good time to sell your home … it is. And, if you're looking for professional and aggressive assistance, why not give me a call? I can help you sell any type of home in any area of Southern California, and I'd be happy to provide you with all the facts and figures concerning your particular situation. So if you have the need, please don't be shy. Call me at the number on this website, and I'll be glad to help.
Real Estate Values.
Real Estate Values:
NY Commercial Posts Two Huge Deals
Commercial Real Estate Values In The Big Apple
Have Regained Losses And More
There's interesting news regarding commercial real estate values coming out of New York this morning. Two high-quality commercial building in the Big Apple are in escrow for a total of over $1 Billion. At $933 and $1,300 per square foot, these two sales are more good news concerning commercial real estate values in New York and, by extension, the markets in other similar cities as well … such as Los Angeles.
As we all know, when the values downturn happened a few years ago, commercial values went south with everything else. The economic downturn affected every sector of the real estate market … and everything else as well. Now, however, it can be said that in New York at least, which is a leading market and a fairly good indicator of what similar cities either are experiencing now or will shortly experience, quality commercial property has regained the losses incurred during the downturn … and then some.
Here's an article by Ilaina Jonas in Reuters with the particulars:
"Top-quality buildings have more than recovered the value they had lost in the downturn that followed the financial crisis of 2008. In April, the Green Street CPPI All-Property Index. which measures values of high-quality U.S. commercial real estate …"
What This Means To Commercial Real Estate Values
In The Near Future Is Still Difficult To Predict
So commercial real estate values have pulled up and over the levels of what they were before the downturn. At least they have in New York. Does this mean the "all clear" has sounded? No. Not really. While this is, of course, good news, analysts disagree as to where things go from here. Some believe that prices have risen too far and too fast, creating a market that is somewhat overblown. Others argue that as long as interest rates remain at historically low rates, prices will continue to rise as investors are will to take on more "cheap money" debt. So the feeling is we're either looking at a coming correction in commercial real estate values or a continued rise in prices.
Either way, if we take the long-term view, we can consider both to be good news. There is no sign that values are in a true "bubble" situation … where things could simply blow up and crash. No one expects that. A "correction" at this point simply means a slowing of the rate at which values are rising, and possibly a downturn of sorts for a period of time before real estate values begin to climb again. That's simply a healthy market balancing itself out, and not something to be feared. Whether we get a few months of correction or we don't, it appears that commercial real estate is becoming a healthier market than we've seen in a long time.
Real Estate Values.
Real Estate Values:
Low Mortgage Rates Making US Homes More Affordable
Real Estate Values & Mortgage Interest Rates Engaged In A Balancing Act
In these pages we have been reporting for a while now on rising real estate values here in California and around the country. The affordability of homes is still good because low interest rates on mortgages are offsetting the rising cost of housing.
However, many analysts are now seeing a crunch coming with any rise in interest rates from their current levels. The problem is that incomes are not rising along with real estate values. Incomes are remaining stagnant. That means that even if current interest rates remain the same, homes will become more un-affordable as prices rise out of the range of most buyer's income. Should interest rates begin to rise the problem will be even more serious.
Here's an article from PropertyWire with all the details:
"At the end of the fourth quarter of 2012, with mortgage rates in the 3 to 4% range, US home owners paid 12.6% of their monthly income on mortgage payments, down 36.9% from historic, pre bubble norms." …Property Wire"
Real Estate Values May Be Looking At A Correction Of Some Kind
The upshot of the article is that in all probability real estate values will have to level off and remain stagnant while incomes catch up. In some areas, where the rise in prices has been the steepest, values may even have to retreat some to adjust. Markets need to stay in "balance". The balancing act between real estate values, mortgage rates, and the incomes of home buyers is a delicate one, and it's reaching a tipping point. Look for prices to level off soon and possibly to pull back from current levels as the market waits for incomes to catch up.
Real Estate Values.
Real Estate Values:
Sacramento Home Prices Rising Above Water
Sacramento Real Estate Values Expected To Continue Upwards
Real estate values continue to rise statewide, and Sacramento is no exception. In fact, the capital region is one of the brighter stars in the market … at least in the rate of increase. There is a lot of talk as to just why real estate values are rising as they are, but the fact is that this market action is consistent across the state, and does not appear to be fizzling out.
Here is a report from Sanford Nax in the Sacramento Business Journal:
"Underwater homeowners are quickly rising to the surface in the Sacramento area. Zillow reports the cumulative increase of Sacramento-area home values at year-end 2012 is expected to be $14.8 billion…"
Real Estate Values Driven By Lack Of Inventory
The very quick rise in real estate values reported here is simple to explain, really. When investors realized the falling market had actually bottomed out, smart money jumped in and bought up the inventory. Now … with less supply of available homes … Sellers can demand more for their properties.
It's not likely that this rate of increase in real estate values will be sustainable. Probably not. But there is no indication that we are approaching a market reversal. Certainly a slow-down in the rise of values is probably happening right now, but it appears that will be a simple adjustment in a market that is on the rise overall.
Real Estate Values.