Sunday, January 6, 2019
Monday, November 26, 2018
Wednesday, November 7, 2018
California voters on Tuesday rejected a controversial ballot measure known as Proposition 10 that would have expanded local government authority to enact rent-control laws on residential property, according to an NBC News projection.
Opponents of Proposition 10 claimed that the measure would worsen the state's chronic housing crisis and lead to more than 500 local rental boards setting just how much homeowners could charge to rent out their home.
More than $100 million was spent on the fight over Proposition 10, with opponents spending more than $76 million and backers shelling out about $26.2 million, according to state campaign finance records. The real estate industry, including major landlords operating in California, led the fight against the measure by donating significant amounts of money.
A PAC affiliated with the California Association of Realtors contributed about $8 million to fight the ballot measure while more than $5 million apiece came from New York-based real estate private equity firm Blackstone Property Partners, Chicago-based apartment real estate investment trust Equity Residential, and Essex Property Trust, a California-based real estate investment trust.
The proponents of Proposition 10 received most of their money from Los Angeles-based AIDS Healthcare Foundation, a nonprofit organization which donated about $23.2 million. Michael Weinstein, president of the foundation, helped lead the effort to get the voter measure on the November ballot.
The ballot measure sought to repeal California's Costa-Hawkins Rental Housing Act, a state law enacted in 1995 that weakened municipal rent control ordinances. The law specifically applied to rental control on single-family homes as well as on all housing built after Feb. 1, 1995.
California's renters typically pay 50 percent more for housing than renters living in other states, according to an analysis by the state's nonpartisan Legislative Analyst's Office. It also found that rents in some parts of the state are more than double the national average.
Sen. Bernie Sanders, the liberal Vermont independent and a potential 2020 presidential candidate, supported the ballot measure. He argued that local governments should have the right to set rents to ease the affordable housing crunch and protect tenants against huge rent increases.
Saturday, October 27, 2018
Sunday, September 16, 2018
Home prices in the United States have never been higher. In January, housing values eclipsed their 2006 pre-crisis peak and since then have only pushed higher, according to the Case-Shiller home price index.
The culprits are a crazy tight job market, rising wages and the fact that the homeownership rate is rising again after bottoming in 2016.
But storm clouds are gathering as the Federal Reserve pushes interest rates higher, part of its ongoing fight to keep a lid on inflation. Higher rates weigh on home affordability -- and thus depress demand. Here are three growing headwinds the housing market faces:
Thanks to the resolve of Federal Reserve chairman Jerome Powell, who is resisting President Trump's calls for a slowdown of the rate hike pace, monetary policy continues to tighten. That's pushing up long-term interest rates, with the 30-year Treasury yield pushing back over the 3 percent threshold recently, up from less than 2.7 percent in December and a low of 2.1 percent in the summer of 2016.
Looking at the 30-year fixed mortgage rate, rates are at 4.5 percent right now, up from 3.8 percent last September and lows around 3.3 percent in 2012 and 2013.
As a result of rising mortgage rates and higher home prices, Gluskin Sheff economists estimate that housing affordability has crashed to lows not seen since 2008, well off the highs seen in 2011 and 2012 when a combination of lower prices and lower rates helped put an end to the housing collapse.
A slowdown in new home construction during the housing crisis resulted in a backlog of demand for brand-new homes. Builders have responded to consumer appetite for newly constructed homes, which has helped pushed up the average price of a new home from a low of $250,000 in late 2011 to a high of $402,900 in December, before cooling slightly.
Thursday, August 23, 2018
After several years of rich home price gains, the market appears to have found a limit to what people can afford. Sellers are finally responding by lowering prices more often.
Approximately 14 percent of all listings in June saw a price cut, that's up from a recent low of 11.7 percent at the end of 2016, according to a new report from Zillow. In addition, home price growth is slowing in nearly half of the 35 largest U.S. metropolitan markets.
Rising mortgage rates and affordability are behind the change. As the housing market recovered from its epic crash in the last decade, home prices began to gain slowly. And then they suddenly took off in the last
The simple reason was supply and demand. As millennials aged into their homebuying years, homebuilders did not and are still not meeting the rising demand. In addition, millions of single-family homes lost to foreclosure were purchased by investors and turned into single-family rentals, further depleting the for-sale housing stock. The market was thus suffering a critical shortage, just as demand was taking off. Prices had nowhere to go but up. Until now.
"The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever-so-slightly," said Zillow senior economist Aaron Terrazas. "A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price-points and primarily in markets that have seen outsize price gains in recent years."
While Terrazas admits it is too soon to call this a buyer's market nationally, "the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend."
All real estate is local
And of course all real estate is local, so certain markets are tipping faster than others. In San Diego, 20 percent of all listings had a price cut in June, up from 12 percent a year ago. In Seattle, which continues to be the hottest market in the nation, 12 percent of all listings had a cut, the largest share in nearly four years.
In Austin, Texas, also a very strong housing market thanks to a recent influx of technology jobs, more homes are seeing price cuts as well.
"We saw intense bidding on homes over the past few years, but that is calming down with more inventory in the area," said B Barnett, a real estate agent at Reilly Realtors in Austin. "Our inventory of homes is going up with new construction, and it is helping transfer power back to the buyer."
Barnett, who said about 60 percent of her clients are relocating into the Austin market, is still seeing multiple offers, but there are fewer bidding wars, meaning prices are no longer out of reach. Buyers, she said, are getting negotiating power back and some are even able to get repairs in the deal. For the past few years, in most hot markets, buyers had to take what they could get — no contingencies.
There are still some markets where prices gains are increasing, but those are markets that have seen smaller price growth in the past few years. San Antonio, Phoenix, Philadelphia and Houston had fewer listings with a price cut in June compared with a year ago.
Among the largest housing markets, San Jose, CA, Indianapolis, IN and Charlotte, NC could see price growth slow the most over the next year, according to Zillow.
Thursday, August 16, 2018
In the California real estate market the “b” word is on the minds of many: bubble. With reports of sharp declines in home sales, shrinking inventory and rising home prices, it might be an understatement to call California’s situation a puzzle, and one that may have implications for the entire country.
June marked the slowest home sales month for California in four years. The state saw an almost 10 percent year-over-year drop in transactions, according to a report by CoreLogic. This number stood in sharp contrast to the record-breaking cost of new and existing houses. The median price, across the state, rose to an all-time high of $500,000.
California’s trends might be exacerbated, but they’re not out of line with what’s going on in the rest of the country, says Eric Sussman, adjunct professor in accounting and real estate at UCLA Anderson.
The tax bill changes limiting home equity loan interest and property tax deductions, lack of affordable housing supply, wage stagnation and higher interest rates are all problems California shares with the rest of the country, Sussman points out.
However, California is unique in many ways, which means it might not be the most accurate barometer for judging the rest of the housing market.
“California is California. People are always going to want to come here. We’ve got 40 million people. We’re the fifth-largest economy in the world. Global capital is going to come here. In that way, we’re different,” Sussman says.
Prices are up, sales down and unemployment is low
Prices are up, sales down and unemployment is low
Like California, national median home prices are at an all-time high, hitting $276,900 in June. This is a 5.2 percent increase from a year earlier, according to the National Association of Realtors, or NAR. Existing national home sales were sluggish, falling 2.2 percent in June from a year ago.
Meanwhile, the economy is strong. The national unemployment rate has fallen to 4 percent, which is the same on the state level for California. One problem is wages aren’t keeping pace, says Sussman.
“The real wage growth is squat. It’s been persistent for some time. You’ve got wage growth running, nominally, at 2.5 percent and inflation running at 2.5 percent so you’re treading water,” says Sussman. “Those are national trends, they’re just magnified in California.”
California is getting more expensive all the time, wages aren’t keeping pace
In California, price parity is higher than most of the country, according to a report by Money. The results were gathered by calculating the Census Bureau’s median income from the 2015 American Community Survey using the regional price parity method.
This method shows how much cash will buy in any given area. For example, in California the median income was $64,500 but the actual value was $56,878 when you factored in cost of living.
Although California is typically more expensive than the rest of the country, it does share the wage growth problem that the U.S, as a whole, is facing, says Danielle Hale, chief economist at Realtor.com.
“Affordability is really important in the housing market. From an economic theory perspective, when unemployment is as low as it is right now we tend to see wages start to pick up,” says Hale.
“This is a question that’s been puzzling economists: Why aren’t wages growing faster? It’s hovered just under 3 percent. As mortgage rates start to move up we might see affordability become a problem nationwide.”
Even the frenzied Silicon Valley market has mellowed
One place where home sales were legendary for their risky offers, stripped of contingencies to woo sellers with full dance cards, is Silicon Valley. Inventory is fattening and sales are slowing.
“At our peak, in my area, if you listed a home you could count on getting 15 to 20 offers. We’re still in a market where we’re getting multiple offers, but things are changing,” says Robert Whitelaw, broker/owner of Whitelaw & Sons Real Estate Services in Morgan Hill, California.
“One, not just anything will get multiple offers. If you have a crappy house, the odds are it’s going to take you longer to sell. And that wasn’t always the case. You could sell absolute crap really quickly. The other part of it is you’re getting less offers, maybe four or five.”
Lack of construction and too much focus on the high-end market are two major problems, says Whitelaw.
Housing starts dropped by 12 percent nationwide in June, according to a joint report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development last month.
In California, single family residential construction is rising, up 16 percent in June from last year. But these gains aren’t enough to meet demand. In 2005, there were 150,000 single family residential construction starts compared with 58,000 in 2017, a 61 percent drop.
“We have seen increases in construction but not at what we need. At 2007 it was at a high point. We’re not even at 30 percent of normal construction levels,” says Whitelaw.
“I got an email from a builder recently. It was the oddest email, it read: ‘Now affordable housing at the low $1.3 millions.’ The construction folks seemed to have played out their hand when it comes to high-end construction. The really sad thing is that, in the really high-priced homes, the folks that bought them are likely going to have to sell for less than they paid for them.”
In the last recession, California’s home prices were gut-punched, taking a 42 percent hit in home values from the peak of the recession to the bottom, according to a report by CoreLogic. Since the worst days, California home prices have risen by 78 percent, just 2 percent higher than the pre-recession peak.
Nobody can predict whether history will repeat itself, but today’s buyers might want to prepare themselves to stay in their homes for many years to come.