California Rent Control Returns to the Front Burner

Rent control is back on the front burner in California as lawmakers consider a bill that would cap monthly increases statewide and Gov. Gavin Newsom weighs in to support a "renter protection package".

The push in Sacramento for rent control comes as a new effort is underway to put a rent-control measure on the California ballot. Developers and landlord groups, who helped defeat a rent-control initiative last year, are preparing for another fight.

“We are adamantly opposed to this proposed ballot initiative and will spend whatever it takes to defeat it,” Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, said. “It is a re-tread of Proposition 10, which California’ voters soundly rejected in November 2018.”

More than 17 million Californians live in rental properties, and it isn’t unusual for tenants to pay more than 50% of their incomes toward housing. Some also have linked the state’s growing homeless population to the housing affordability problem.

“The California Dream is in peril if our state doesn’t act to address the housing affordability crisis,” Newsom said in a statement Thursday.

he Democratic governor has a goal for California to add 3.5 million housing units by 2025. He released his statement after the California Assembly’s Housing and Community Development Committee voted 6-1 to advance Assembly Bill 1482 a statewide rent-control bill.

However, some have suggested recent rent stabilization proposals from state legislators could worsen the Golden State’s housing problem by creating disincentives for builders to invest in rental units.

Authored by Democratic Assemblyman David Chiu, AB 1482 would limit rent increases at 5% annually plus inflation. It also would expand protections to nearly 15 million Californians who do not live in units subject to any local rent controls.

“We have millions of tenants who are one rent increase away from being able to put food on the table, get health care, or at the risk of becoming homeless,” Chiu, the housing committee chair said Thursday during a legislative hearing on the measure. “Our anti-rent-gouging bill is a critical protection that will help renters while still allowing landlords to make a healthy return.”

Landlord groups charge that some local rent-control ordinances in California started with inflation-adjusted standards similar to AB 1482 but then made it tougher for property owners to recapture rising expenses since as utility rates, trash and recycling fees, as well as property taxes and special assessments.

“Placing blame, of course, on the rental housing industry is an easy answer,” Debra Carlton, a senior vice president at the California Apartment Association, said Thursday at the hearing.

She added: “Our concerns have always been to make sure that, whatever we do, we are not going to make a bad situation worse. We certainly don’t want to scare off development.”

Meantime, there’s also a push to get a measure on the 2020 statewide ballot in California that would allow local jurisdictions to put rental control ordinances on properties at least 15 years old. The state’s Costa Hawkins Act currently limits the ability of cities to apply rent control to older units.

The proposed initiative follows nearly 60% of California voters in November rejecting a controversial ballot measure known as Proposition 10 that would have expanded local government authority to enact rent-control laws, including on single-family homes, townhouses and condominiums.

The real estate industry, including major landlords operating in California such as Blackstone, led the fight against Proposition 10.

“We agree steps should be taken to address housing affordability in California, but virtually all independent economists agree this measure would exacerbate California’s existing shortage by discouraging new construction and reducing new investment in affordable housing,” said a Blackstone spokesperson in an email statement.

San Francisco Rents Hit New Meteoric Heights for One Bedroom

The median monthly rent in San Francisco for a one-bedroom unit is now $3,700.

Yeah, really. This means San Francisco is still the most expensive rental market in the world.

According to the April national rent report from apartment search site Zumper, the dwindling supply in the area’s real estate market paired with the continued net migration to the Bay Area is driving up the median rent. The median rent price for a one-bedroom unit increased $10 from last month, reaching a new high of $3,700.

“As we get into the spring months and the beginning of the hot moving season, we only expect this number to continue to rise,” Zumper said in its report.

The bright side? Median rent for a two-bedroom unit in the city fell 0.6% to $4,600.

Elsewhere in the U.S., rents remained relatively stable, according to the report. The nationwide median rent for a one-bedroom unit increased a half percent to a median price of $1,214, a 2.8% boost from 2018. The median rent for a two-bedroom unit rose 0.6% to $1,445, a 2.5% increase from this time last year.

From the report:

The top 10 markets had no change to the rankings and there were mostly flat monthly growth rates overall with a small handful of cities seeing change of more than 3% either up or down. Year-over-year growth rates saw a similar trend as the number of cities with double digit year over year growth rates have decreased substantially from previous months.

California Home Sales Begin Upward Rise

California home sales bounced back in February after hitting the lowest sales level in more than 10 years the previous month. According to the California Association of Realtors, February’s annual sales level was the highest in six months, and the monthly growth in sales was the highest since January 2011.

According to information collected by C.A.R. from more than 90 local Realtor associations and MLSs statewide, sales of existing, single-family detached homes in California totaled 399,080 units in February, up 11.3 percent from the revised 358,470 level in January and down 5.6 percent from home sales in February 2018 of 422,910. February’s decline was the smallest since July 2018.

“Lower interest rates and stabilizing home prices motivated would-be buyers to get off the fence in February,” said Jared Martin, C.A.R. president. “With mortgage rates reaching their lowest point in a year, housing affordability improved as buyers’ monthly mortgage payments became more manageable. Instead of the double-digit growth rates that we observed a few months ago, monthly mortgage payments increased by 2.7 percent, the smallest increase in the last 12 months.”

The statewide median home price dipped 0.6 percent to $534,140 in February from a revised $537,120 in January. The median was up 2.2 percent from $522,440 in February 2018.

In the San Francisco Bay Area, home sales in six of the nine Bay Area counties fell from a year ago, while Alameda, Marin and San Francisco counties recorded annual sales gains. Santa Clara County home sales were down 10.6 percent from February 2018, but up 12.7 percent from January 2019.

Home prices in Marin, San Francisco, San Mateo and Santa Clara counties remained above $1 million, but all of the counties recorded annual price declines. The February 2019 median price for a single-family home in Santa Clara County was $1,170,000, down 1.3 percent from the January median of $1,185,000 and down 15.4 percent from the median of $1,383,500 in February 2018.

All major regions recorded an increase in active listings, with the Bay Area posting the highest increase at 41.9 percent. Active listings increased in three of nine Bay Area counties by 50 percent or more, with Santa Clara County leading the way at 62.9 percent, followed by San Mateo (59.7 percent) and Alameda (50 percent).  Santa Clara County’s Unsold Inventory Index was 3.1 months in February, compared with 3 months in January and just two months in February of 2018.

“Indicators point to a promising spring home buying season for both buyers and sellers. Buyers have this great window of opportunity with more homes on the market, lower interest rates and home prices stabilizing,” said Alan Barbic, president of the Silicon Valley Association of Realtors. “Sellers will benefit from this historically busy time in the market with renewed buyer interest after last year’s waning activity.”

The 30-year, fixed-mortgage interest rate averaged 4.37 percent in February, up from 4.33 percent in February 2018, according to Freddie Mac. The five-year, adjustable mortgage interest rate also increased in February to an average of 3.87 percent from 3.60 in February 2018.

San Jose, CA Remains the Highest Priced Home Market

SAN JOSE, CA -- In a long-awaited positive sign for home shoppers, the U.S. housing market began the year with more homes than the year prior for the first time in at least half a decade, Zillow reported. 

Inventory rose 1.2 percent in January to a little more than 1.6 million homes. After falling year-over-year for 44 months straight, inventory has increased during four out of the last five months, the Seattle-based real estate analysis firm added. 

The San Jose metro market remained the hottest, most valuable market in the United States. The Silicon Valley market median home value stayed high at $1.25 million -- over $1 million more than the national average of $223,900, despite the national figure seeing a half percent increase and San Jose's dropping about that much from November to December.

The devil is in the details, with the market area covering the following cities:

• Mountain View at $1.87 million
• Sunnyvale at $1.82 million
• Santa Clara at $1.38 million
• Milpitas at $1.1 million
• San Jose $1 million

Zillow economist Jeff Tucker cites the law of supply and demand as the reason for prices staying high. There's a limited supply of inventory, so when that goes down, prices go or stay up. That's despite a slight leveling of prices dropping recently by 2.4 percent. Inventory plummeted last year to 1,600 homes in the San Jose metro area and has almost doubled this year.

The softening has brought on more houses being listed -- signaling a leaning toward a buyer's market that provides more choices and less pressure among buyers.

"It allows buyers to find the right fit," Tucker told Patch. "The change makes it more palpable for home shoppers."

Market activity traditionally slows slightly in winter but is preparing to pick up in the spring.

"San Jose remains the most expensive metro area in the country," Tucker said. 

Is $1.25 million justified or is it a symptom of a bubble?

Tucker explained it depends on whether someone is willing to pay -- it's as simple as that.

As long as a whole crop of billionaires and millionaires rear their heads in tech land as a result of the latest and greatest invention, the houses will be sold for what the market will bear.

"We've seen tech companies grow enormously in this market including the value of the employees in the last few years," he said.

And consider the Silicon Valley lies in a market full of venture capitalists who will fund the ideas.

The resounding trend shows an industry that not only innovates -- it matures. These are not the days when 10 to 20 young tech bucks would pile into a three-bedroom ranch house and work through the night with visions of IPO dreams.

This young industry only decades old has come a long way. Case in point, that same $1.2 million home would have gone for $500,000 in 2000.

For those who make their living in the South Bay every day, the justification is clear.

"What is the average salary? Housing is directly linked to the job market," Santa Clara County Association of Realtors President Gustavo Gonzalez told Patch.

It seems every day a tech firm is announcing an expansion. Take Google. The search engine giant hasn't stopped with expanding in its home base city of Mountain View. It has two projects in San Jose and more plans in New York City.

"Certainly people are paid more here. We have a large population of individuals for whatever reason work and have all the money they need," he said, referring to tech workers seeing their company's stock surge from zero to $50 share in short timeframes.

If anything, Gonzalez contends the cities have not kept up with the housing demand. He's unimpressed with the project calling for a 20-story building, when he knows deep down the demand is so great the area requires 100 floors of housing.

"We need to build higher, and we need to go substantially bigger," he said.

And even if buyers believe they can't afford the house, there are now new options. Both Gonzalez and Tucker view the advent of Airbnb home sharing as an option to help pay for extravagant mortgages.

While some criticize the company for taking away inventory from long-term renters, Gonzalez sees the trade-off benefit to home buyers. As far as the sellers, he contends many have "unrealistic expectations" about how much to sell for.

"I see that as a way for someone to buy in the (San Francisco) Bay Area," he said. Gonzalez is both a real estate agent and rental property manager.

As for rents, Zillow's overview launching the year shows a market area able to command inflated rates as well. In the five cities encompassing the San Jose metro area, rents run from $3,394 to $4,122 a month in comparison to a national average of $1,460

Eight Easy Ways to Increase the Value of Your Home Before Sale

A polished home exterior creates an inviting experience for visitors or passersby, which is especially important if your home is on the market.

Check out our tips to get the most curb appeal for the lowest cost — while turning your neighbors’ heads and getting prospective buyers to your door.

1. Clean Up

The easiest way to enhance curb appeal is dedicating a weekend to deep cleaning your home’s exterior.

Sure, you’ll want to trim bushes, sweep and mow your lawn, but there’s more to curb appeal than keeping a tidy front yard. Turn the nozzle on your garden hose to the strongest setting and clean off your driveway, sidewalk, windows and fence.

If dirt and grime are caked on your home’s exterior, you can rent a powerwasher for around $50 to $75 a day. Just avoid areas with caulking, like windows and doors, because you can strip some of the sealing. And as tempting as it may be to powerwash your roof, don’t do it —  you may damage the shingles’ coating.

When it comes to your windows, spraying them with a garden hose isn’t enough. For maximum sparkle, clean your windows outside and inside. Instead of relying on a glass cleaner, try a mix of detergent diluted in warm water.

2. Add Shutters

Shutters are an easy way to accentuate the size of your windows. They make your windows look larger and add visual interest by disrupting a bland exterior wall. For maximum curb appeal, choose a shutter color that contrasts with your home’s color to make it pop.

3. Paint Accent Areas

Paint is a quick and easy curb appeal booster. Instead of painting the entire exterior of your home, focus on the trim, door and shutters.

You can typically find a gallon of exterior paint for $20 to $30. But before you decide on a color, consider home exterior color trends, along with your home’s natural style.

4. Give Your Door a Face Lift

If you don’t love your front door, you don’t need to dish out loads of money to replace it. Think beyond paint — consider adding molding, which offers a decorative frame for your door that welcomes visitors.

You can also add metal house numbers, which you can find for as low as $5 a number. And if seasonally appropriate, consider adding a wreath to your door as a bonus.

5. Replace Your House Numbers

If you’d rather not add house numbers to your freshly painted door, here are some alternative DIY ideas:

• Paint a terra-cotta planter with your house number and place it by your doorstep.
• Add house numbers to a post planter near your front porch.
• Use your front porch stair riser’s real estate by hanging or painting numbers there.

6. Update Your Light Fixtures

Replacing your exterior light fixtures is another curb appeal must. You can usually find outdoor sconces for around $20 at home centers. Just make sure your new light fixtures have the same mounting system. And if you want to save on lighting, a fresh finish can do wonders. Try spray-painting them — a can of spray paint costs around $10.

7. Keep Porch Furniture Neutral

Just as you would aim to simplify the interior of your home so shoppers can envision themselves living there, the exterior of your home should be neutral and welcoming too.

Put your pink flamingo and wind chime collection into storage, and focus on porch decor that offers pops of color and character. You can find brightly colored outdoor chairs or throw pillows for $20 to $30 each.

8. Don’t Forget the Small Things

These low-budget fixes make a big impact, so don’t forget the little details!

• Upgrade your mailbox: Install a new mailbox for under $100, or spray paint your existing mailbox.
• Plant a tree: A charming tree can up your curb appeal for as low as $20.
• Build a tree bench: If you already have a tree you love, build a bench around it! Great for napping, picnicking or just hiding exposed roots, a wraparound tree bench costs only what you spend on boards and screws.
• Install flower boxes: For around $20 each, flower boxes are a quick way to add some life and color to your windows. If flower boxes sound like too much work, try a container garden in pots by your front porch.
• Hide eyesores: Place a small lattice fence or a side of paneling around your air conditioner, and hide your trash bins behind a small fence. You can also hide your hose in a pot or storage bench.

The 2019 Housing Market is Waiting on Millennials

As the year begins, the U.S. housing market doesn’t look very bright. Demand will likely stay depressed through 2019: Supply shortages are keeping prices high, especially in gateway cities where much of the job growth is occurring. Add to that higher interest rates, which are keeping existing homeowners from moving up the property ladder.

However, demand could get a bump from millennials looking to move from renting to owning their homes, and in markets like Atlanta where the number of new homes is rising. “It’s not going to be a great year for the housing market — prices are way over the market peak,” said Wharton real estate and finance professor Susan Wachter, who is also co-director of the Penn Institute for Urban Research. “What’s going to keep this market growing are millennials and the affordable Southeast.”

“We’ve seen prices go up and up in the places where the jobs are, where people want to be,” said Keys, who is also a faculty research fellow at the National Bureau of Economic Research. “And those are the places where it’s hardest to build. We’re not seeing as much supply coming online.” A few small exceptions are in the apartment sector and dense residential development, he noted.

Wachter said she saw clear evidence of a “buyers’ strike” at the high end of the market. She pointed out that median home prices have been steadily rising. As of December 2018, the median listing price for a home in the U.S. was $275,000, while in San Diego, Calif., that was nearly $680,000, according to real estate firm Zillow. “Who can afford a down payment of 10% on a $700,000 dollar home – $70,000?” she asked.

Interest rates have been rising, too, adding to the pressure on home prices, although they have eased in recent weeks. “A combination of higher interest rates and higher prices are the real concerns going forward, [even as] we’re still in a low-interest rate, low-mortgage rate environment,” Wachter said. “The real problem is high housing prices. They’re just too damn high.”

For those who find themselves priced out of home ownership, renting is also getting expensive. “Rents are higher than they were in real terms in 2007,” Wachter noted. This is not because of a follow-on effect from high home ownership prices, but rather “the underlying cost of labor, land and materials in delivering the housing to the market.”

Interest rates have been rising, too, adding to the pressure on home prices, although they have eased in recent weeks. “A combination of higher interest rates and higher prices are the real concerns going forward, [even as] we’re still in a low-interest rate, low-mortgage rate environment,” Wachter said. “The real problem is high housing prices. They’re just too damn high.”

For those who find themselves priced out of home ownership, renting is also getting expensive. “Rents are higher than they were in real terms in 2007,” Wachter noted. This is not because of a follow-on effect from high home ownership prices, but rather “the underlying cost of labor, land and materials in delivering the housing to the market.”

Divergent Trends

According to Keys, the essence of the affordability problem is “about people living paycheck to paycheck.” The long economic expansion after the 2008 recession, low unemployment rates and steady GDP growth rates “mask a lot of the challenges that many households face,” he added. “There are places where even those who are employed in relatively solid, stable jobs can’t afford the housing.”

Wachter agreed the disparities are stark. “It’s the hot markets where the jobs are, but they are most challenging to buy into,” she said. “Wages have not kept up with housing prices, particularly in the markets where the jobs are.”

Wachter saw “a bifurcated market,” where housing demand is slowing at the high end because prices are too high, but is strong in other segments because of millennials. Millennials predominantly are still renting, she noted, but “this is their peak age to switch to owning — they’re 30-31. So there’s a demand for that starter home among them.” However, even starter home prices have risen substantially, and so have rents, she added. “It’s hard to save for that home while you’re spending so much on rent.”

Prices of starter homes are high because high interest rates are deterring existing homeowners from making their next home purchase, Keys pointed out. Mortgage rates have risen above 5% in recent months, while many homeowners have locked in at rates of 3.5% or 4%. “That will limit their willingness to move up a notch on the ladder. You’re going to wait until you need the four-bedroom house, until you’re really overstuffed. So, you’re going to have this this housing lock effect, and that’s going to tie up more households in those starter homes.” He said he expects to see homeowners opting for renovations instead of moving into bigger homes.

In any event, Keys is relying on millennials to pick up much of the slack in housing demand this year. “The millennials will be the saving grace for the housing market in 2019 — if there is a saving grace.” He noted that homeownership rates among millennials “have really shot up” in the past two years especially.

The Southeastern markets still have adequate supply of affordable housing and are seeing decent demand growth. Wachter noted that housing starts have increased in the Southeast, while they have plummeted in the west. “Not only do we have a bifurcation across income groups, we have a new geographical bifurcation going on – the more affordable markets are in the Southeast, and Atlanta is a good example of exactly this, where we see growth still occurring.”

Similarly, some markets have seen steady increases in housing supply that could help lower prices. Keys pointed to Las Vegas, where the available inventory has steadily increased in the past six months to 82% higher year over year. Denver, too, has seen inventory increase by 45% over the past year, he added. “Usually, that much supply in the market will lead to a softening of prices.”

Supply constraints apart, high home prices are also a reflection of rising construction costs seen in more expensive materials like Canadian lumber or Chinese steel and a shortage-driven increase in labor costs. “We’ve had a decline in undocumented labor for about 10 years since the housing bust, and a tightening of the borders makes it that much more difficult,” said Keys.

According to Wachter, tighter regulation is another factor influencing home prices. “The demand is in the markets that are already heavily regulated,” she added. “The demand is where the jobs are, and the jobs are increasingly in growing urban centers. And that’s where it is extremely difficult to build [because of] increasing regulation.”

California Real Estate Markets are Changing...Very Slowly

California has come a long way since the housing market hit bottom in 2008. By February 2009, REO sales comprised 60 percent of all home sales, equity sales 30 percent and short sales 10 percent, according to California Association of Realtors senior vice president and chief economist Leslie Appleton-Young.

The keynote speaker at the annual Silicon Valley Association of Realtors Economic Seminar & General Membership Meeting held this month, Appleton-Young said today’s market is the reverse — equity sales comprise 98 percent and REOs just 1 percent.

The economy looks good. Unemployment is the lowest in 40 years. Consumer confidence is the highest in 18 years. Inflation remains low.

Growth, while good, has its side effects. The Feds have raised interest rates eight times since December 2015, may raise rates one more time by the end of the year and up to four times next year. Appleton-Young said the 2019 outlook is for higher interest rates, which will impact housing affordability even more. To add to this, the tax reform law has made homeownership less of an incentive.

Appleton-Young said the country is entering the 10th year of positive economic growth, but the pace of growth is decelerating. By next year it could return to a 2.4 percent level of growth.

California needs 180,000 units a year and is currently at a deficit of three million units. The state is losing its working class and millennials to other states that are building more homes and homes that are affordable.

“The question is, how long can the economy be strong if housing is not?” asked Appleton-Young out loud. Quoting C.A.R. CEO Joel Singer, she said, “At some point a supply problem becomes a demand problem.”

The C.A.R. chief economist believes California will continue to outpace the rest of the country, but job growth will suffer because of affordability. The homeownership rate is falling on a year-over-year basis. It is believed that California will become a majority renter state by 2025.

“We need to build more housing, redefine attitudes toward density, and build adequate infrastructure,” said Appleton-Young.

With its strong economy and expansion of its tech sector, Appleton-Young believes the Bay Area is the most solid in weathering the changes. “Silicon Valley is the hub of economic growth. You are it!” she exclaimed.

“The Bay Area is the juggernaut of growth in income and jobs,” added Appleton-Young. “Prices are not going down, they are just rising slowly. We are in a slow squeeze, but it’s not a cataclysmic. I don’t see the economy faltering.”

Summarizing the state of the market, Appleton-Young told Realtors, “We’re going from great to good. It’s a change you have to talk about with consumers.”

Expect a 7 percent pullback in sales next year, she said, noting Realtors need to counsel and educate consumers about the market. Since interest rates are rising, it is a good time to buy and it is a good time to sell.

“Sellers need to be straight up with their price and not play games,” said Appleton-Young.