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 Home Sales – San Gabriel Valley, Westside, are least-affordable slices of SoCal housing market..
Southern California Home Sales:
So Cal Not Affordable By Middle Class
The Good News Is … It’s Not Getting Any Worse
Trulia has released a new report, and the numbers are not good for the Southern California Real Estate market … at least as far as its relationship with the Middle Class is concerned. If we consider that a $54K a year houshold income is “Middle Class” … then the Middle Class is priced out of most homes in L.A. County. It’s also apparently priced out of most homes in Orange, Ventura, and San Diego counties as well.
Here’s a report from Tim Logan that appeared in today’s L.A. Times:
Los Angeles Times Nov 18, 2014, 6:00 AM PST
“The report also tracked affordability by area code within L.A. County. They found that in the 626 – Pasadena and the San Gabriel Valley – just 11% of median-income-earning households could afford a typical house. In the 310 – the Westside and beach towns – 14% could. In the 213 – Downtown and Central L.A. – that figure was 16% while in 818 and 747 in the San Fernando Valley, it’s 16%.” …
Interest Rates Are Mitigating Effects … But Can This Last?
Costs of ownership in the area are skyrocketing. It’s only the fact that interest rates have ramained at bargain basement prices that have kept them somewhat in check. But this is an effect that won’t last forever. Even though home price gains are slowing, they are still growing faster than incomes. Unless incomes can grow at a faster rate, homeownership in Southern California looks to become more of a dream and less of a reality for many in the future.
Southern California Home Sales – “More than a third of sellers in Orange County dropped their price in July. Los Angeles and Inland Empire sellers were not far behind, with some 25% of sellers in each metro dropping their listing price in order to get buyers in the door.”
Southern California Home Sales:
Sellers Are Lowering Prices
Seller’s Price Adjustments Indicate Changing Market
One of the first indicators that a market might be changing … or at least making adjustments … is the number of sellers making Pricing Adjustments to their listed properties. This is a good indicator that the seller and Realtor involved have made a determination that market conditions have changed since the property entered the market, and that they have changed enough to warrant a price reduction to put the listing more in line with market activity.
We’re seeing this kind of activity now. Actually, it’s being seen in most all metro areas across the country, and Southern California and the San Gabriel Valley are no exceptions.
Here’s an article by Josh Ritnimit from the Pasadena Independent:
Pasadena Independent November 4, 2014
“Homes for sale in the major San Gabriel Valley markets are no exception. As of mid-September, 35% of all Pasadena homes listed for sale dropped at least once in price and a staggering 40% of all Monrovia homes for sale had price drops. Not even the seemingly bullet-proof Arcadia market is immune. Of the 236 homes currently for sale in Arcadia, 76 have dropped their price – almost 32%!”
A Less Volitile, More Steady Market Is Good News
This is not bad news for the San Gabriel Valley real estate market. In fact, it’s good news. We’ve seen a fairly long period of really fast activity and steeply rising prices. Now, lots of activity and high value are good things, but even good things need to be tempered with moderation. When prices and activity rise too quickly, we get “bubbles” and resulting market volatility. Too much volatility and we get unpredictability and an unstable market. All rising markets need to make readjustments to maintain stability.
The fact that many sellers are making adjustments to accommodate a maket that is growing in a slower, more dependable manner is good news. A healthy adjustment to our recent market activity will provide some “breathing room” for buyers and sellers, and indicates we’ve got a good, solid foundation being built under the market for the foreseeable future.
Southern California Home Sales – “For the better part of this year, investors have been slowly trickling out of the home buying market, but in August they apparently cut off the cash flow in a big way.”
Southern California Home Sales:
Investor Activity Slows
Slower Market Activity As Investors Stand Aside
Yesterday we reported here that Southern California Real Estate Values were still growing, but are now growing at a much slower rate than we’ve seen recently. This is actually good news as it makes for a more stable, less volatile market.
Several factors have contributed to this slowdown of rising prices, but the most obvious of those is probably the fact that investor buyers have begun to stand aside somewhat. Here in the San Gabriel Valley, for instance, the market has been driven recently by investors … particularly international buyers from China … looking for overseas real estate investments and finding a spot they like here in Southern California.
Investor activity nationwide has slowed dramatically over the last month or so. However, the pullback by these buyers is not limited to individual international investors, but involves corporate buyers as well.
Here’s an informative article by Diana Olick, from CNBC :
“Just 12 percent of August purchases were by individual investors, down from 16 percent in August (of last year); investors had been making up nearly one-third of home purchases during the worst of the housing crash nationally, and in some markets they accounted for well more than half.”. …
Read More Here: http://www.cnbc.com/id/102021503
Will Traditional Buyers Now Step In?
What we’d like to see happen here is that the slowdown of investor activity would leave some “space” in the market that might be filled by first-time buyers and those looking to move up. But, there are many factors at play here and a variety of influences that contribute to the decisions of traditional home buyers when they consider entering the market. Only time will tell if these folks are ready to jump into the game.
Southern California Home Sales – “Southern California home prices increased at a slower pace in April as inventories improved and investor purchases waned, a research firm said Tuesday. ” …
Southern California Home Sales:
Price Rise Slows As Inventory Grows
The “Investor Frenzy” Calms A Bit
In looking at the most recent reports of last month’s market activity here in the Southern California Home Sales market, we find that the ongoing rise in prices slowed a bit as inventories grew. We can also see that the “frenzy” of investor purchases seems to be slowing a bit as well.
The Southern California area is showing a marked increase in the number of properties available when compared with last year. This is a reflection of the rising values, which have made it possible for some who wanted to sell but couldn’t … because they were still “upside down” in their property values … to actually enter the market this year. If the inventory continues to increase as we move into summer, that would make it a lot easier for the market to reach “average” activity levels … which we haven’t really seen in several years now.
Here’s an article from the Associated Press, as it appears on the KPCC – Southern California Public Radio website:
http://www.scpr.org Tue, 13 May 2014 18:54:15 GMT
The median sales price for new and existing single-family homes and condominiums was $404,000, up 1 percent from $400,000 in March and up 13.2 percent from $357,000 in April 2013, DataQuick said. It was the 25th straight month that the median sales price rose from a year earlier but the lowest annual percentage increase since September 2012. …
Market Prepares For A More “Stable” Summer
A “calm” market is a more stable market. We’ve been watching activity for a long time now that is more common to a “volitile” market than a stable one. However, market activity always fluctuates in “waves”. Periods of volatility are usually generated as markets search for a position of stability. If we can see a continuation of the increase in the size of the market inventory, and a bit of a pull-back in investor activity, this would encourage a slow-down of rising prices, a bit more welcome competition, and a more attractive market for the “average” resident home buyer. With that type of situation in place, we could be looking at a summer that just might return the Southern California real estate market to a more “traditional” footing.
Southern California Real Estate:
Highest Southland Price Ever At $102 Million!
“Un-sellable ‘Fleur De Lys’ Mansion Sells To Mysterious Buyer!
Well, whoever the buyer might be, and whatever the mysteries are, the fact remains that this is a very good sign for the future of Southern California real estate. SOMEONE is willing to sink this much money into the ground here in California for a residential property. That’s news that may seem frivolous at first, but really cannot be ignored … and it effects all areas of the Southland, not just the west side.
The property has been on and off the market for years now, and some were beginning to think it could not besold for anything approaching an acceptable price. The current sale would be the highest ever in California, but there was one for $117.5 million in Northern California last year which was also the highest ever for a singleresidential sale in the U.S.
There has been speculation that the buyer is Michael Milken, the infamous “junk bonds” trader who ran afoul of the SEC in the 1990’s. However, no one isconfirming anything as yet.
Here’s a video from CBS in Los Angeles, and an article from Lauren Beale in the Los Angeles Times:
http://www.latimes.com Tue, 01 Apr 2014 17:48:35 GMT
After an international bidding war, a Westside mansion often described as a French palace has changed hands for $102 million, making it the most expensive residential sale ever recorded in Southern California. As is often the case with high-end properties, the identity of the trophy home’s unnamed buyer has been obscured behind layers of lawyers, agents and a limited liability company. …
Upper End Homes Are Moving – A Good Sign For The Market
There’s an old phrase in the investment world that refers to “the Smart Money”. In real estate the “Smart Money” can usually be traced by following the Upper End market. This part of the market is populated with folks who make a business of investing and who also have people (advisors) who help them do it wisely. Using the upper end market as one barometer of the real estate market can be very wise. You can get a good sense of how comfortable the “smart money” folks are with sinking their funds into the ground of an area. That can tell you a lot about how knowlegeable people feel about the area’s economy and prospects.
In Southern California, the high end market is moving. This bodes well for the future of the Southern California real estate market and for the area’s economy in general.
Real Estate Values:
Inland SoCal Market Hotest In Nation
Inland Empire Home Sale Market Shows No Real Sign Of Slow-Down
Christopher Thornberg, the founding partner of Beacon Economics, has an optimistic view of the Inland Empire residential real estate market these days. At a recent “economic summit” in Riverside, Thornberg said he sees no real signs of any market slow-down at present and predicts both rising prices and brisk activity through 2014.
Raphael De Anda, another of Beacon’s economists, says the market view from an investment standpoint is also good as appreciiation is at “an all-time high”. This good news apparently extends to the entire Southern California real estate market, but the Inland Empiire does have the “affordability advantage”.
Inland SoCal Market Hottest In Nation
http://blog.pe.com/ Tue, 29 Oct 2013 07:06:10 GMT
REAL ESTATE: Inland SoCal market, hottest in nation … Press-Enterprise (blog)
At today’s Beacon Economics economic forecast conference in Riverside, Rafael De Anda will release a report that says this was not your imagination. Many new homeowners should …
Rates Since Report May Signal Good Holiday Buying Season
We’re finding good news throughout the Southern California real estate market. In residential real estate the market had appeared to slow a bit over the last couple of months and interest rates had begun to rise some. However, from a “technical” standpoint, the market now appears to be firming up again. Values appear as if they might be hitting support, and interest rates are now lower than they were at the beginning of October. These two indicators, factored together, indicate we may be entering a good “Buying Window” for savvy home buyers.
California Home Sales:
May Numbers Post A 7 Year High
Prices & Activity Hold High Numbers As Several Influences Bolster California Home Sales
The California home sales market is still posting impressive numbers. Buyers poured lots of cash into the market in May and activity posted a 7 year high while prices held a 9 year high.
There are many things bolstering the market right now. The economy is generally stronger than it was last year, mortgage rates are still relatively low, prospective buyers have built up a lot of demand over the last few years, and many folks are looking at the California home sales market and seeing a home as a good investment. There are those who feel that some or even all of these influences might be changing soon, but for right now they are contributing to a very strong market.
Here's an article by Gregory J. Wilcox in the San Bernardino Sun that will give you all the numbers:
"We're deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years' worth of pent-up demand. Plus there's a seemingly endless stream of investors and non-investors who pay cash and thereby avoid the loan-qualification process. How this all plays out is educated guesswork at this point," John Walsh, DataQuick president, said in a statement." …
What's The Future For California Home Sales?
There is agreement right now between most analysts that the California home sales market is finally healing. However, there is also uncertainty. There are those who foresee sunny days ahead and those who forecast outright doom. As usual, the reality will most probably lie somewhere in the middle of those two extremes. The market has sustained a long upward push from the depths at this point and a "resting" period, or even a compensating "pull-back" is certainly not out of the question. Only time will tell when this period begins and how long it will last.
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.