Dear Friends and Neighbors,
It’s official; the market has turned and we are in a correction.
It’s the topic I’ve mentioned numerous times and that everyone asks me about. Now it’s no longer a topic of conjecture but rather an item of fact.
The U.S. economy is in an expansion that shows no sign of slowing. Unemployment (for those looking for a job) is at its lowest rate of 3.7% since 1949, as reported in the Wall Street Journal today. The stock market continues to march forward, wages are inching up due to the lack of qualified candidates, and Amazon and other major companies (and the city of Los Angeles) have finally raised their minimum wages to $15.00/hour.
With all of this good economic news, how do we know that the real estate sector is turning? The answer is in the news and the statistics reported all around us as agents. Vice-president and Chief Operating officer Beth Styne of Coldwell Banker recently discussed this specific issue with a group of agents, and made the following points:
• We have not yet reached the peak of $594,530 for median sales in May of 2007 with the most recent monthly median sale of $584,460.
• 30% of California properties have had price reductions.
• The affordability rate is down to 27% in the greater Los Angeles area, down from a high of 51% in 2012.
• The new home sales are up 3.5% from August nationally but up 12.7% year-over-year.
• Housing permits are advancing at a slower rate YTD.
• In LA county, closed units are down 20.9% (year over year) from 6,465 to 5,113.
• But pending transactions (those in Escrow) are down 41.3% year-over-year.
• Most economists are forecasting that housing starts will dramatically drop with a Yes vote on Proposition 10, repealing restrictions on rent control laws.
• Inventory is increasing with an uptick of 5.3% in California.
• The average price of $903,725 is up 4.8% primarily due to the lowest inventory in 15 years in California.
• Notice of Default and Foreclosures are on the rise.
• From California to Colorado, we have the highest rate of homelessness in history.
• Residential real estate investment is down 1.1% in California YTD.
• West Los Angeles is no longer a first time buyer’s market, which as a policy statement is a terrible commentary.
• The absorption rate on the high end has moved up 108.7% to 9.6 months, which is the time it will take to sell off the existing inventory without any additional housing coming on the market.
• New tax policies will affect the $2.0M to $7.0M market which is the bread and butter of this town.
Or How About These Clues?
–In an article titled “Pace of Home-Price Increases Again Slows”, the lead paragraph starts “Home-price growth slowed in June for the third straight month, welcome news for buyers. Rising interest rates, along with elevated prices resulting from a lack of inventory, are putting the brakes on price increases after gains had grown significantly faster than both incomes and inflation for most of the past two years.” (WSJ Aug 29, 2018)
–“Existing-home sales fell 0.7% in July from June to a seasonally adjusted annual rate of 5.34 million units, the National Association of Realtors said Wednesday. The drop marked the fourth straight month of declines.” (WSJ Aug 23, 2018)
–In an article titled “Are Los Angeles home prices finally about to dip?” it states “Sellers slashed prices on 14.1 percent of homes in Los Angeles and Orange counties in June, up from 11.1 percent in January. The median value of those reductions was 2.6 percent of the original listing price.” (Curbed LA Aug 17, 2018)
–“Existing-home sales in the single-family space came in at 4.75 million in July, a 0.2 percent decrease from the 4.76 million in June, and a 1.2 percent decrease from the 4.81 million the prior year,” Lawrence Yun, chief economist at NAR (rismedia.com Aug 22, 2018)
–In an article titled “Home listing prices are flat or falling in these 10 cities – has the market reached its peak?”, the researcher states “In six of the nation’s 100 largest housing markets, the median listing price has remained unchanged or dropped from 2017 levels…and in another four markets, the median listing price has risen by less than 1% year over year.” (Market Watch June 17, 2018)
–On the commercial side of the equation, “Buoyed by the strong economy and continued healthy demand, average U.S. multifamily rents rose $2 in August to $1,412, p 3.1% year-over-year and 10 basis points from July. Rents have grown steadily all year, and have reached record highs seven months in a row.” (Multifamily National Report by Yardi, August 2018).
–Our manager, Loren Judd, said it best. “If anyone is hesitating to sell their property today, you tell them it will be worth less in two months and even less two months after that.”
–If you’re considering selling your home, call us. You deserve good advice, which we can give you. We need to discuss a more focused strategy that will help you stay ahead of the curve.