Wednesday, February 19, 2014

Rising Rents Hurting California's Affordability

A combination of rising rents and falling government aid for affordable housing has dealt a blow to California's lower-income residents, according to a new study.Nearly 1 million extremely-low-income California households lack affordable, habitable homes, a need most pronounced in Southern California, a report released Tuesday found.

The foreclosure crisis displaced many homeowners, driving up demand and prices in the rental market. As the crisis eased over the last year, the housing recovery sent home prices soaring.
Incomes have failed to keep pace. The state's median rent rose more than 20% from 2000 to 2012, while median incomes fell 8%, the report from the California Housing Partnership Corp. said.

Meanwhile, state and federal funding for below-market housing plunged 79% over the last five years, the study said. “It’s creating a rapid change in our housing stock -- away from providing affordable, low-income housing toward housing the rich,” said Matt Schwartz, president of the California Housing Partnership.

Diminished government funds have reduced the production of new affordable units, stalling projects, he said. "It has dramatically lowered the number of developments that can proceed," Schwartz said.
Particularly hurtful, the study said, was the loss of redevelopment funds after local redevelopment agencies shut down two years ago. The agencies, which kept a portion of local property taxes, generated about $1 billion annually for affordable housing across California, but the state shuttered them to help ease its budget crisis.

The nonprofit, created by state lawmakers to preserve affordable units, proposed several policy recommendations to ease housing burdens for Californians, including an immediate injection of dollars from the general fund to focus on housing those at-risk of homelessness because of rising rents.

The report also urged passage of a bill that would create a permanent state source for affordable housing funding. The bill, SB-391, would impose additional fees on recorded real estate documents, except for those involved in a sale. Last year, the state Senate passed the bill and it is currently in the Assembly. The bill has drawn opposition from the California Assn. of Realtors.

“In a state where housing affordability is low, the last thing government should do is to enact an arbitrary new real estate tax on real estate recordings,” the Realtors group said in a statement. “The call for renewed support for affordable housing is laudable, but Senate Bill 391 is the wrong approach.”

The shortage of affordable units for very low-income Californians is especially pronounced in Southern California, despite the region’s relative affordability compared to the tech-flush San Francisco Bay Area. Schwartz said he didn’t know the reasons behind the disparity, but said a greater number of lower-income residents in the Southland could play a role.

There were 19 affordable units available per every 100 extremely-low-income renter households in Los Angeles County, the study said, citing an analysis of five-year Census Bureau estimates from 2006 to 2010. In San Francisco, there were 37. Orange and San Diego counties each had 18 available affordable units for every 100 poor households.

If the current trends continue, Schwartz said it would be devastating for lower-income households and California as a whole."At some point we are going to run out of available, low-income workers because no one is going to have a place to live," he said.

Wednesday, February 5, 2014

Monterey County Real Estate Market Returns to the Fundamentals

“We simply couldn’t keep going at this rate,” said Sandy Haney, the chief executive officer of the Monterey County Association of Realtors. In fact, the number of home sales statewide fell for the fifth straight month in December, according to the California Association of Realtors.

The economics of real-estate trends are complex; there are many factors that influence both home prices and the number of home sales. Leading the pressure locally is the limited inventory of homes sales. Leading the pressure locally is the limited inventory of homes in Monterey County. A decreasing supply with a constant demand equals rising prices.

For example, at the end of November in Monterey County, the inventory stood at a little under 850 homes. A month later the inventory was down to 717 with the total number of sales remaining basically flat. The median price – half sold for more, half sold for less – stood at $469,900 at the end of December. A month earlier it was $422,000.

“Homes under $300,000 are flying off the shelf,” she said. “On one of these homes we had 11 offers.”
The reason sales in the higher end are slower and much more active in the lower range is the result of several influences, experts say. Interest rates have begun to edge back up, making larger mortgages more expensive. Also, a bevy of new laws that took effect Jan. 1 have collectively clamped down on loan requirements lenders must now follow. Qualifying for a larger mortgage is far more difficult today than in 2007.

In a normal market we are transitioning back into – a homeowner would build equity in her home and then sell it to move up to a more expensive property she’s been eyeing, Haney said. But when the market collapsed in 2008, so much equity was lost – trillions of dollars nationally – that prospective sellers either don’t have enough equity built back up or they are gun-shy about making the move.

“There is a lot of caution in the market,” Haney said. “The sellers that have been through the [2008] market and didn’t lose their homes are still uncertain if the time is right to move up.”
Exacerbating the inventory problem is the falling number of so-called distressed sales, including short sales and sales of foreclosed homes. After six years, the number of foreclosures is falling dramatically as they continue to work their way through and out of the market.

That’s also a reason area Realtors are forecasting a transition period in 2014 – moving from an unstable, irrational and unsustainable market to one that is governed by the basics and fundamentals.