Friday, June 15, 2018

San Jose Real Estate Tops Nation with Highest Sales Price Growth Rate

The typical home that sold in May went under contract in 34 days, according to Redfin. May broke April's record of 36 days, which was the fastest month recorded going back to 2010.  Amid the speed, the national median home sale price rose to $305,600, a 6.3 percent increase from May 2017 across the 174 markets that Redfin tracks.  
The number of newly listed homes for sale increased 4.3 percent compared to May of last year, driving a 3.6 percent increase in the number of homes sold. However, the overall supply of homes declined 5.4 percent during the same time period. Just 2.5 months of supply remained at the end of the month, compared to the six months that generally signals a balanced market.
Among homes that sold in May, 27.6 percent sold above their list price, the highest percentage, indicating strong competition for the few homes available. At the same time, nearly a quarter of homes for sale had a price drop in May, the highest percentage of price drops since September of 2017. 
"Prices are still increasing, but not at the same rate we saw earlier in the spring," said Redfin senior economist Taylor Marr. "The record percentage of homes sold above list price is at odds with the higher percentage of price drops in May. This tells us that while it's still very much a seller's market, price growth and rising mortgage rates may be pushing buyers to the limit of what they're able to pay."

For the seventh month in a row, San Jose topped the nation with price growth over 25 percent. The supply of San Jose homes fell 13.8 percent compared to last year. That drop is actually the smallest decline in a 16-month stretch of inventory declines, an indication of the intensity of San Jose's inventory shortage. A bit of good news for San Jose buyers: the number of homes newly listed in May ticked up 11.2 percent compared to last year. 
After a prolonged period of inventory declines, some metro areas are finally seeing more homes hit the market. Washington, D.C. and Portland, OR have now had four months in a row of year-over-year increases in inventory. Seattleinventory increased for the second month in a row, up 17.4 percent in May compared to last year.
"Two months of growing inventory is a positive sign for Seattle buyers, but the previous 43 consecutive months of inventory declines won't be reversed overnight," said Jessie Culbert, a Redfin agent in Seattle. "Even so, we can already feel a slight easing in the market. Homes are still selling quickly and often over-asking, but where last May a seller may have gotten 15 to 20 offers, this May it was two to five."
Other May Highlights
  • Denver was the fastest market, with the typical home going under contract in just six days. Seattle and Tacoma, WAwere the next fastest markets at seven median days on market, followed by Boston and Grand Rapids, MI at eight median days on market. 
  • The most competitive market in May was San Jose where 83.8% of homes sold above list price, followed by 79.6% in San Francisco, 76.2% in Oakland, 63.1% in Tacoma, WA, and 61.9% in Seattle.
  • San Jose had the nation's highest price growth, rising 27.6% since last year to $1,250,000. Tacoma, WA had the second highest price growth at 19.6% year-over-year, followed by Memphis, TN (16.9%), Las Vegas, (15.9%), and Rochester, NY (15.4%). 
  • No metros saw price declines in May.
  • Thirteen out of 73 metros saw sales surge by double digits from last year. Warren, MI led the nation in year-over-year sales growth, up 38.5%, followed by Baltimore, up 31.8%. Camden, NJ rounded out the top three with sales up 24.7% from a year ago. 
  • Buffalo, NY saw the largest decline in sales since last year, falling 17.2%. Home sales in Rochester, NY and Baton Rouge, LA declined by 16.6% and 12.8%, respectively.
  • Indianapolis had the largest decrease in overall inventory, falling 37.7% since May of last year. Rochester, NY (-37.1%), Buffalo, NY (-32.8%), and Milwaukee (-22.9%) also saw far fewer homes available on the market than a year ago. 
  • Portland, OR had the highest increase in the number of homes for sale, up 35.3% year over year, followed by Detroit(28.4%) and Allentown, PA (24.4%).
Pricing Strategy
  • To see trends in sellers' pricing strategies, Redfin compares the list price to the Redfin Estimate, Redfin's automated home-value estimate. When sellers consistently price their homes below the Redfin Estimate in a market, this can indicate a common strategy to deliberately underprice to create a bidding war. 
  • The median list price-to-Redfin Estimate ratio was 93.2% in San Francisco, the lowest of any market. This indicates the typical home for sale in May was listed at 94.1% of its estimated value. Only 5.9% of homes in San Francisco, CAwere listed for more than their Redfin Estimate. 
  • Conversely, the median list price-to-Redfin Estimate ratio was 102.4% in Miami and 102.1% in West Palm Beach, FL, which means sellers are listing their homes for more than the estimated value in those metro areas. In Miami, 84.7% of homes were listed above their Redfin Estimate, the highest percentage of any metro.

Friday, June 8, 2018

Bay Area Rent Prices Beginning to Soften

For Bay Area renters struggling to afford apartments that keep getting more expensive, the latest numbers could seem too good to be true — the region’s runaway rent prices finally may be starting to level off.
San Jose is looking at the slowest start to the summer rental season in years. Rents in San Francisco are flat-lining. And Oakland saw a minuscule increase in rent prices last month.
That’s according to a new study by apartment search website RentCafe, which found the Bay Area is part of a nation-wide trend — while rents continue to increase, they’re doing it at a significantly slower pace. Experts say the slowdown suggests that in the near future, renters may finally find relief from the sky-high prices that are forcing people to flee to the Central Valley and beyond in search of cheaper housing.
“Renters are looking at an optimistic start of the rental season,” the RentCafe researchers wrote in the report released Thursday.
The average rent in San Jose last month was $2,692, or 2.1 percent more than at the same time last year, according to the report. That’s the slowest annual growth rate the city has seen since 2011 — a major milestone for a region where prices seemed to be climbing ceaselessly. The average rent in Oakland was $2,617, a 2.5 percent increase from the year before, which marks the second slowest growth rate the city has seen since 2012. The average rent in San Francisco was $3,453, a 0.6 percent increase, and the second-slowest growth rate the city has seen since 2011. San Francisco saw a cooling off last year, when rents actually dropped 3.3 percent from May 2016.
John Protopappas, president and CEO of Oakland-based real estate development company Madison Park Financial Corporation, predicts this is the start of a major slowdown in the Bay Area’s rental market. It’s all about supply and demand, he said. In Oakland alone 7,000 housing units are under construction, and as those finished units flood the market, Protopappas expects the city’s rents to drop 20 or 30 percent in the next two or three years.
“It’s going to become a renter’s market instead of a landlord’s market,” he said.
But the broader Bay Area continues to add more jobs than houses, and until that changes, prices won’t drop enough to have a significant impact on residents, said Mathew Reed, policy manager of SV@Home, an organization dedicated to supporting the creation of affordable housing in Silicon Valley.
Nevertheless, the recent numbers are good news, Reed said. A 2 percent annual increase in rent prices is healthy, as it mirrors the rate of inflation, he said.
Meanwhile, flat-lining rents could impact real estate developers with plans for new buildings.  As construction costs continue to rise — some say a whopping 50 percent in the past five years, due largely to a shortage of workers driving up wages for skilled labor — new buildings won’t be erected if rents don’t keep pace with rising costs.
“It will slow down development until we get back to an equilibrium,” Protopappas said. “But it will take years … in the meantime it’s going to be a renter’s market for a long time.”

Wednesday, May 30, 2018

SF Housing Spike is the Third Largest in the Nation

Southern California-based data company CoreLogic released its quarterly National Home Price Index Tuesday and found that San Francisco’s home price bounce since 2017 was the third highest in country.
Over the past two months, sources like the California Association of Realtors and Paragon Real Estate Group peg the median asking price of a San Francisco home at a record $1.6 million, nearly double what it was just five years ago.
So, it’s not surprising that CoreLogic’s Case-Shiller Index indicates an ongoing typhoon of housing expenses too, although the way that the Case-Shiller process calculates value does make for a few extra telling conclusions. Among them:
  • The index’s 20-city composite score, which “measures the value of residential real estate in 20 major U.S. metropolitan areas,” was up 6.8 percent year over year in the first quarter. In San Francisco, however, it was 11.3 percent.
  • That 11.3 percent appreciation is number three in the nation, behind only Seattle (at 13 percent) and Las Vegas (12.4 percent). SF’s overall index score of 261.8, however, is higher than both of those cities, coming in second only to LA’s highest-in-the-nation score of 278.27. The national score was just 198.94.
  • For what it’s worth, SF also had one of the highest price spikes month over month in the index, up 2.1 percent. That’s second behind only Seattle’s 2.8 percent. Month to month comparisons are necessarily more volatile, so their ups and downs are not always that consequential, although the fact that those two cities in particular top the list is hard to ignore in the face of longer term trends.
  • Possibly the most important part: Investment site Investopedia notes that the Case-Shiller method measures “the prices of single-family, detached residences” by “[comparing] the sale prices of the same properties over time.” This means that the index excludes almost all of the most recent construction in the city—condos and first-time sellers almost exclusively—and that the price jump reflects what’s happening with longtime SF metro area stock. This is why LA’s overall score beats out the Bay Area’s despite having a lower median price in most other measures.

Saturday, May 19, 2018

The Fight for Costa Hawkins Will be On the November Ballot in California

A renters’ revolt in California could be heading to the November ballot as a campaign to lift decades-old restrictions on rent control reported Friday it had gathered more than enough signatures to qualify.
Organizers are planning rallies in Sacramento, Oakland and Los Angeles on Monday as they hand in the signatures, which must be counted and verified by election officials before the initiative makes it on the ballot.
“People are paying a higher percentage of their income toward housing than they ever have before. That is not normal,” said Amy Schur, campaign director for the Alliance of Californians for Community Empowerment, one of the groups behind the initiative. “The current crisis is such that it is absolutely unsustainable.”
Propelled by the pain of sharply rising rents, the initiative, if it qualifies, is sure to set the stage for an expensive clash between renters and the trade association representing landlords, which sponsored the state law that renters are trying to repeal. The law, known as Costa Hawkins, makes it illegal for cities to apply rent caps to any properties built after 1995, when it was passed — or earlier. If a city adopted rent control in 1980, as Oakland and Berkeley did, everything built afterward is exempt from rent control.
The law also bars cities from passing rent-control ordinances on rented condominiums or single-family homes, or from adopting a policy known as “vacancy control” — limiting the increases that landlords can charge to new renters.
“It certainly will be a high stakes battle,” said Steve Maviglio, a veteran political consultant hired by the opposition who expects the “yes” campaign to spend as much as $30 million. “We’re going to have to compete with that to educate people about why this will essentially freeze housing construction for apartments in the state.”

Asked about the estimate, Schur shot back that her campaign would surely be outspent by “the corporate landlord industry” fighting to keep the restrictions intact. But, she added, her organization was training armies of renters — including 200 in Sacramento this Sunday — on how to talk to their neighbors about rent control and get out the vote.
“This is, in fact, the only policy solution that promises to address this crisis quickly enough to avert an even greater disaster in our housing market,” she said.
Tenants’ rights advocates and community groups initially lobbied state lawmakers to repeal Costa Hawkins, but a bill to do so failed to pass its first committee hearing in January.
At the hearing, which drew more than 1,000 people on both sides of the debate, some lawmakers said they worried that lifting the restrictions could actually hurt tenants by further squeezing the short supply of rentals and driving up prices.
But advocates for the repeal, including Assemblymen Richard Bloom, D-Santa Monica, and David Chiu, D-San Francisco, argued that renters facing enormous rent hikes they can’t afford need immediate help, and that cities need more tools to help them stay in their homes.
An Apartment List survey released this month found that Bay Area suburbs had the highest prices for two-bedroom rentals in the country, with Danville apartments leasing for $5,400 a month, Cupertino for $5,050, and Los Altos for $4,690. And a new national study by the UC Berkeley Terner Center for Housing Innovation has found that tenants renting single-family homes make up the fastest-growing segment of the housing market — the type of rental that cannot be subject to rent control under California law.
Repealing Costa Hawkins would not change existing rent control policies or bring rent caps to cities that don’t already have them. Rather, it would allow local officials to expand renter protections in ways prohibited under current law.
Funding for the repeal initiative is coming largely from Michael Weinstein, president of the AIDS Healthcare Foundation — the same man behind the failed 2016 ballot measure, Proposition 60, that would have required the use of condoms in pornographic films.
The campaign needs to submit 365,880 signatures by late June to qualify the initiative for the ballot; a spokesman says the group has more than 565,000.
What is Costa Hawkins?: It’s a decades-old California law that makes it illegal for cities to adopt certain kinds of rent control ordinances.
What are the restrictions?: Single family homes and condominiums are exempt from rent control under this state law. So is any apartment built after 1995, when Costa Hawkins was passed, or in some cases much earlier. If a city adopted rent control in 1980, for example — as Oakland and Berkeley did — then that is the cutoff; everything built afterward is exempt from rent control. Costa Hawkins also prohibits cities from regulating how much a landlord can raise the price after a tenant moves out, a policy known as vacancy control.
How many cities in California have some form of rent control?: At least 15, according to the Department of Consumer Affairs, including Berkeley, Beverly Hills, Campbell, East Palo Alto, Fremont, Hayward, Los Angeles, Los Gatos, Oakland, Palm Springs, San Francisco, San Jose, Santa Monica, Thousand Oaks, and West Hollywood. Campaigns are underway in Sacramento, Santa Cruz and in Santa Rosa.

Saturday, May 12, 2018

"Cracks Appearing" in Southern California's Real Estate Market

Southern California house hunters are putting 9 percent fewer existing homes into escrow this spring, a dip that caused one analyst to make “Cracks Appearing” the title of his latest report.
ReportsOnHousing tracks regional homebuying patterns found in real estate broker networks: supply (active listings); demand (new escrows in past 30 days); and “market time” (a measure of selling speed of days it takes a typical listing to enter escrow).
Steve Thomas, the man behind ReportsOnHousing, wrote: “Noticeable cracks have appeared that illustrate a cooling market. It is not as if housing has suddenly tilted in favor of buyers. No, there are still multiple offers and plenty of homes flying off the market and into escrow just moments after the FOR SALE sign is pounded into the front yard. Buyers are still frustrated by the lack of available homes on the market below $1 million. Sellers are still in the driver’s seat. Nonetheless, trends have surfaced that highlight a cooling marketplace.”
Take the four-county region covered by the Southern California News Group. Thomas’ data from May 3 shows demand at 13,669 new escrows — down 1,341 sales contracts in 12 months or 9 percent. That’s also off 5 percent vs. the previous five years at this time of year.
Four-county supply of 29,118 listings was down just 46 residences in a year but 5 percent lower vs. ’13-’17.
That translated to local homes taking slightly longer to sell. Estimated market time in Los Angeles, Orange, Riverside and San Bernardino counties was 64 days — listing to escrow — up from 58 a year earlier and equal to the early-May average of 64 days in 2013-2017.
Here is how the market for existing homes fared, by county, as measured by May 5's ReportsOnHousing:
Los Angeles County
Market time: 57 days vs. 52 a year earlier and an average 57 days in 2013-2017.
Supply: 10,902 listings, down 55 residences for sale in a year or 1 percent; and down 5 percent vs. ’13-’17.
Demand: 5,691 new escrows, down 577 sales contracts in 12 months or 9 percent; and down 7 percent vs. previous five years.
Orange County
Market time: 61 days vs. 54 a year earlier and an average 56 days in 2013-2017.
Supply: 5,434 listings, up 47 residences for sale in a year or 1 percent; and down 2 percent vs. ’13-’17.
Demand: 2,675 new escrows, down 337 sales contracts in 12 months or 11 percent; and down 11 percent vs. previous five years.
Riverside County
Market time: 79 days vs. 75 a year earlier and an average 85 days in 2013-2017.
Supply: 8,163 listings, down 210 residences for sale in a year or 3 percent; and down 8 percent vs. ’13-’17.
Demand: 3,112 new escrows, down 257 sales contracts in 12 months or 8 percent; and down 1 percent vs. previous five years.
San Bernardino County
Market time: 63 days vs. 57 a year earlier and an average 68 days in 2013-2017.
Supply: 4,619 listings, up 172 residences for sale in a year or 4 percent; and down 1 percent vs. 2013-17 average.
Demand: 2,191 new escrows, down 170 sales contracts in 12 months or 7 percent; and up 5 percent vs. 2013-17 average.

Thursday, May 3, 2018

5 Reasons Why California Real Estate is So Expensive

Why are California housing costs so high? At its most basic level, it’s a story of supply and demand — lots of people want to live here, and there aren’t enough homes to go around.
But there are lots of uniquely California factors — from the shape of our coastline to Prop 13 — that have attached a painfully expensive price tag to the California dream. The median price of a home is now well over half a million dollars--that number is about $240,000 nationally. More than 20 percent of Californians pay more than half their income for housing.
Here are five reasons the state’s housing market got so out of whack.  
Reason #1: We haven't built enough housing. 
Experts who study California’s housing crisis argue about lots of things. Is rent control good or bad? Will that new shiny high-rise going up in your neighborhood help or hurt housing costs? How much should we blame “not in my backyard” NIMBYs for our problems?
But there is one principle the vast majority of housing experts agree on: Over the past few decades, California hasn’t built enough housing to keep up with the number of people who live here. The state housing department estimates that we need to build 180,000 new housing units a year to keep prices stable. Over the past ten years, we’ve averaged less than half of that.

 Even when new construction was booming in the early and mid 2000’s, new homes and apartment buildings weren’t being built in coastal cities where the vast majority of Californians work. While places like the Inland Empire and Central Valley saw a building craze, places like San Francisco and Los Angeles basically flatlined. 
We’re also not keeping up with other states.
Places like New York and Massachusetts have built a lot more housing per capita than we have in recent years. That hasn’t made those places cheap, but it has helped to alleviate some cost pressures.
Reason #2: Demand to live and work and own in urban California has reached a breaking point, and part of that demand is global.
Over the last decade, Californians have increasingly tried to cram themselves into major urban centers that are already jammed with residents.
The Bay Area is the poster child here. Between 2000 and 2007, Bay Area cities accounted for only four percent of the state’s total population growth. Between 2010 and 2017, nearly 20 percent of all new Californians were either being born in or moving to the Bay.

 While the tech industry certainly bears much of the responsibility for that trend, the increased demand to live in California’s urban cores extends beyond Silicon Valley. The urban parts of L.A. and San Diego have all seen a major increase in people wanting to live and work there, which means increased competition for rental housing.
And we’re not just talking about apartment rentals. The number of single family homes occupied by renters grew by more than 400,000 over the last ten years, while the number of owner-occupied units dropped during the Great Recession and has yet to recover.
So who owns these houses? The vast majority are “mom and pop” investors and wealthy individuals buying one or two additional properties. Foreign buyers, primarily from China, have also become increasingly enamored with California real estate. Last year, nearly one in four California single family homes were sold in all-cash transactions, an indication of investor appetite for California real estate.
Overall, investors are a relatively small part of the housing market, especially when viewed from a statewide lens. But in certain local markets, investors compete directly with California families for homes.

Reason #3: Prop 13 Dilutes the Cities desire to support new housing growth.

Why hasn’t California built enough housing to keep up with its population?
Most housing researchers agree that part of the reason is Proposition 13, the landmark 1978 ballot initiative that capped how much local governments could collect from property taxes. While intended to protect California homeowners from unmanageable property tax bills, Prop 13 has produced a host of unintended consequences.
Imagine you’re a city, sitting on a huge plot of vacant land. You could zone that land for housing or for commercial use, like a hotel or a Target. Your city obviously needs more housing--prices are sky high.
Easy decision, right? Nope.

 Prop 13 has made development decisions much more complicated. Because property taxes are capped, local governments have become increasingly reliant on other revenue sources. That vacant land is much more valuable to the city’s coffers if a big box retailer gets built on it, as opposed to a multifamily apartment building. Housing nerds call this the “fiscalization of land use.”
There’s debate about just how much Prop 13 is to blame for the state’s housing shortage. But talk to local elected officials and you’ll see the issue isn’t just a hypothetical dilemma.

Reason #4: In most parts of California the process of getting new housing up and running are expensive.
It can be hard to be sympathetic to developers. From time immemorial, it feels like they’ve complained about rules and regulations they say make it harder to build their projects. The builder who designed Stonehenge probably thought there was too much bureaucracy involved.

While it may be tough to trust developers, that doesn’t necessarily mean that they’re wrong. The process by which a piece of land is approved for new construction can be incredibly cumbersome, time-consuming and risky. While good data on exactly how much this adds to housing costs is hard to come by, typical approval time for projects in San Francisco is over a year, while in L.A. it’s eight months.That doesn’t include when land needs to be “rezoned” for residential development, which can take even longer.
Why the lag? Here’s the laundry list.
  • Multiple Layers of Government Review: A housing project often must go through multiple government agencies, including the planning department, health department, fire department, building department and perhaps most importantly, a city council
  • Lots of Avenues for “Not In My Backyard” Voices: The review process for new developments gives ample opportunity for local residents to express their opposition. Locals may fear that new housing projects will change the character of their neighborhoods, increase traffic and hurt their property values. If a city councilmember votes for new housing, he or she may have to face dissatisfied voters.
  • An Often Misused Environmental Law: The California Environmental Quality Act, or CEQA, requires that local agencies consider the environmental impact of a new housing development before approving it. That sounds like a worthy goal, but the law has often been abused to prevent new developments--even environmentally friendly ones with high-density housing and bike lanes. According to the nonpartisan Legislative Analyst’s Office, CEQA appeals delay a project by an average of two and a half years.
  • Local Growth Controls: Two-thirds of California coastal cities and counties have adopted policies that explicitly limit the number of new homes that can be built within their borders or policies that limit the density of new developments. Subtler growth controls include not zoning enough land for new development or requiring supermajorities to approve new housing.
Limited land plus tons of demand means high land prices. In many markets in California, the bulk of a single family home or apartment building’s value is in the land it is built on.

Reason #5: Builiding in California, with its steep mountain slopes and rocky topography is expensive.
 On the labor side, a shortage of skilled construction workers bears much of the blame. When the housing market crashed in the late 2000’s, construction workers left the industry in droves. And those same workers haven’t come back.
Construction today just doesn’t seem to have the same appeal to younger workers. Firms are struggling to recruit younger workers to supplement and eventually replace a graying workforce.

Building codes and environmentally-friendly design requirements in many California cities require different types of raw building materials to be used, some of which can be pricier than elsewhere in the country. And nationwide, the cost of vital resources like lumber and concrete are on the upswing.
There are plenty of reasons beyond the five we’ve mentioned here that help explain why California housings costs have gotten so out of control. The task of making California affordable again--or at least relatively affordable again--defies a simple silver-bullet solution.