We are in the midst of an affordable housing crisis where The Crown on Kings Road in West Hollywood is asking over $2,500 for a 400-square-foot studio apartment and most people can’t afford it.
It’s not ok for a city to have an entry-level rental that so many people just can’t afford. Something has to change.
So how do we provide more affordable housing? (And I’m not talking about the 20% of “affordable housing units” that developers have to set aside for low-income people in a building with 10 or more units.) The best way to increase housing that is more “affordable” for all is to simply build as many small units as possible — units on the free market that are not priced so high.
A proposal out of Sacramento to put denser housing near transit has divided Californians. But a similar program is already underway in the city of Los Angeles.
It’s an incentive program called “Transit-Oriented Communities,” and it’s encouraging developers to build more housing units—including affordable ones available to tenants with qualifying incomes—near major public transportation stops.
Experts agree that to combat a housing shortage, one that has fueled rising rents and real estate prices, Los Angeles needs to build, build, build. Affordable housing is in especially high demand and its growing increasingly harder to find. More than 8,500 units that are income-restricted now are expected to become market-rate over the next five or so years, and it’s estimated that LA County would need to add 517,000 income-restricted units to meet existing demand.
Homebuying in Los Angeles in 2020 is off to a busy start. Agents and real estate observers say that in the “lower” end of the market—where homes are priced below $1.5 million—the early action might be indicative of the year ahead.
“It’s tighter in the lower price thresholds for sure,” says Jonathan Miller, whose real estate and appraising firm, Miller Samuel Inc., tracks home prices in Los Angeles. “Unless there’s a change in economic conditions in some material way, it’s hard to make an argument that things are going to change all that much in 2020.”
In a nationwide survey investment strategists and real estate experts predicted that prices will cool off or even fall in some of the West Coast’s priciest markets this year, including Los Angeles, where the median price of a single-family home was $650,000 in November.
But Los Angeles brokers say they expect prices to stabilize or grow at a slower pace than they did in 2018, when price records were notched month after month. Even though buyers have more power over transactions than they did two years ago, it didn’t swing 100 percent in their favor.
What is working in their favor? Low interest rates. What’s not? Low inventory. Plus, the economy is so robust, there are plenty of buyers.
That means home shoppers should expect to compete with multiple offers in popular areas like the Westside and in “transforming neighborhoods” in Northeast Los Angeles and South LA, regions where home prices grew the most over the last decade.
You’re going to see between $799,000 and $1.4 million be the hottest price points. Buyers need to be prepared to make competitive offers, that could mean submitting offers for over asking price. But that’s not the only way to get creative, perhaps remove loan or appraisal contingencies also don’t expect a perfect house or ask for exorbitant credits on the request for repairs.
And, if you still keep getting out-bid, look for houses that have been sitting on the market for a long time, a sign that they might be overpriced. Embrace homes that might not be well-staged or stylish and consider doing some work on the property to make it suit your tastes.
Millennial buyers want to feel that they can just bring their toothbrush... they can’t imagine doing work. It would be good to look for places that need work and add value. If that’s the case, there are financing options to build renovation costs into a home loan. For example, an adjustable-rate mortgage, while not always ideal, will typically have lower monthly costs in the first few years, which could allow buyers to save more money for repairs.
Also, if you’re a first-time buyer keep in mind that you’ll likely live in the home for at least half a decade. Ask yourself will this work for me for the next five to seven years? It opens up so many possibilities.
In 2015, Chris Pouy’s realtor told him West Adams would be the next “it” neighborhood. Once he checked it out for himself, he didn’t have to be convinced. Central to the Westside and Downtown LA, its streets are lined with tall, bending palm trees and dotted with charming bungalows fronted by grassy lawns.
Pouy owned a loft in the Toy Factory, but the Arts District was getting “bougie,” and he wanted a home in a different neighborhood, this time with a backyard. He put offers in on six or seven houses—and was outbid on all of them.
“I had no idea it was going to be so competitive,” he says.
Then he found a three-bedroom, two-bathroom Craftsman with a swimming pool in neighboring Jefferson Park. It was listed at $599,000, and he remembers thinking: “If I don’t get this one, I might miss my window.” He wrote a letter to the seller and offered to match their highest offer. He scooped it up for $645,000. Today the property is estimated it could sell for $982,000.
Economic uncertainty and affordability issues to subdue California home sales
LOS ANGELES – Low mortgage interest rates will support California’s housing market in 2020 but economic uncertainty and affordability issues will mute sales growth, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). (Scroll down the page and look for yellow banner.)
C.A.R.’s “2020 California Housing Market Forecast” sees a small uptick in existing single-family home sales of 0.8 percent next year to reach 393,500 units, up from the projected 2019 sales figure of 390,200. The 2019 figure is 3.1 percent lower compared with the pace of 402,800 homes sold in 2018.
The Federal Housing Administration announced that it is increasing its loan limit for most of the country in 2020. The 2020 FHA loan limit will be $331,760—a $17,000 increase from 2019’s loan limit.
In about 70 designated high-cost counties, the FHA’s 2020 loan limit will climb to $765,600—a $40,000 increase from 2019. Alaska, Hawaii, Guam, and the U.S. Virgin Islands will have higher limit ceilings than the rest of the country because of higher construction costs, the FHA says. Those areas will have a 2020 FHA loan limit of $1,148,400.
The Los Angeles housing market is not a hospitable one for first-time buyers.
Only 25 percent of all LA residents can afford a median-priced home, according the California Association of Realtors. It can be even harder for first-time buyers, who don’t have a property they can sell to cover the cost of a down payment.
But some programs at the local, state, and federal level can help buyers purchase their first homes—and many of them provide borrowers with help to make those costly down payments.
When it comes to mortgages, VA loans are about the best you can get. With no down payment, no mortgage insurance, and super-low interest rates, they save homebuyers significantly—both up-front and over the long haul.
And while VA loans have historically been underutilized, it seems Millennials are looking to buck that trend. In fact, according to data from the Department of Veterans Affairs, the share of Millennials using a VA loan jumped 14% over the last year alone.
VA loan activity jumped with Generation Z buyers, too, and combined, the two generations accounted for 45% of all VA purchase loans originated in the past year.
According to the Freddie Mac's latest Primary Mortgage Market Survey, the U.S. 30-year fixed-rate mortgage (FRM) averaged 3.66 percent.
"The housing market continues to steadily gain momentum with rising homebuyer demand and increased construction due to the strong job market, ebullient market sentiment and low mortgage rates," said Sam Khater, Freddie Mac's Chief Economist. "Residential real estate accounts for one-sixth of the economy, and the improving real estate market will support economic growth heading into next year."
Freddie Mac News Facts
Lately I’ve been hearing more people say the American Dream is dead. Or the American dream of owning a home isn’t possible for everyone.
The American dream is about a lot of things like raising a family in a nice neighborhood, owning a business, advancing to the top of your field, etc. We all have our own ideas about the American Dream.
But when it comes to building wealth, you can’t beat home ownership and building equity. It is almost impossible to get ahead by saving alone.
Saying “no” to home ownership is big mistake.
One statistic that I often site is that the net worth of homeowners across the US is around $240,000 BUT the net worth of renters is $5200. (National Association of Realtor statistic)
Why? Because when you pay your mortgage you are paying off your loan. When you pay rent, you are paying someone else’s loan. In other words ZERO is going back into your pockets (not to mention the tax benefits lost and the equity growth).
Here’s a great article that explains more about why Real Estate is the best way to build wealth (posted earlier on my blog)
While low mortgage rates have made it cheaper to buy a home, finding the right property remains a challenge for home buyers, realtor.com® writes in its October 2019 housing report. Would-be buyers are finding that a worsening inventory shortage is heating up competition in the housing market this fall.
“Owning a home continues to be a priority for buyers as we head into the cooler months of the year,” says George Ratiu, realtor.com®’s senior economist. “Driven by the tailwind of sub-4% mortgage rates, the steady demand for housing is drying marketing inventory at an accelerating pace. With dwindling supply, prices maintain their upward pressure, [exacerbating] affordability challenges for first-time buyers.”
City officials are looking to help the scores of Angelenos who make too much money to qualify for affordable housing but are still paying too much for their living quarters.
The Los Angeles City Council voted unanimously Tuesday to have city staffers figure out what percentage of Angelenos fall into this category and use that number to find out how much existing housing is within their financial reach.
“Right now, the largest share of Angelenos are getting the smallest share of new housing,” says Councilmember David Ryu, who introduced the motion asking the city to look into this housing gap. “We need to flip that math.”
A top-notch credit score can open a lot of doors. With it, you can get access to the best loans at the lowest rates and most favorable terms, which can save you a lot of money. You are more likely to be approved for credit. And you can get approved for the most rewarding credit cards that allow consumers to benefit off the spending they already do.
What Is a Good Credit Score?
There are hundreds of credit scoring models out there, and you likely have multiple credit scores depending on the model being used. Many models use a scoring range between 300 and 850. In such models, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered excellent. Most credit scores fall between 600 and 750.
Mortgage rates dropped to their lowest level since October 2016 due to weaker economic data over the past week.
The 30-year fixed-rate mortgage averaged 3.49% during the week ending Sept. 5, down 9 basis points from the previous week, Freddie Mac reported Thursday.
Rates for 30-year home loans have only increased nine times so far this year — otherwise, they have dropped or remained flat from week to week.
The 15-year fixed-rate mortgage moved down 6 basis points to an average of 3.00%, according to Freddie Mac. The 5/1 adjustable-rate mortgage averaged 3.30%, falling 1 basis point.
California is on the verge of having statewide rent control.
Assembly Bill 1482—which will bar landlords from hiking rents more than 5 percent, plus local inflation, in one year—was approved this afternoon in the state Assembly on a 46-22 vote. Inflation varies by region, but averages about 2.5 percent in California.
The bill now heads to Gov. Gavin Newsom’s desk; he has said he will sign it.
Assembly member David Chiu (D-San Francisco), who authored the bill, says the rent cap is designed to prevent “rent gouging” and “egregious” increases.
The 2008 financial crisis brought the global economy to its knees and sent American home prices into freefall. For anyone who managed to hang on to their job, savings, and credit score, the aftermath of the crisis was a prime opportunity to buy a house at a bargain price.
The Great Recession is the only economic downturn millennials have lived through as adults, so, naturally, they might think that the next recession—which more and more economists believe will hit by 2021—will present a chance for many millennials to finally join the ranks of homeownership.
It doesn’t bring me joy to report that this is unlikely to be the case.
The last recession was an anomaly in more ways than one, and its effect on the housing market is the biggest outlier relative to other recessions. The 2008 recession didn’t cause the housing market to go into freefall. The housing market going into freefall caused the recession.
Home prices in LA County surged to $635,000 in July, shattering an all-time record for the second month in a row.
The county’s median sale price rose 2.8 percent since June and a full 5 percent since July 2018, a new report from real estate data tracker CoreLogic shows. That was the largest yearly gain since November.
CoreLogic analyst Andrew LePage says in a report that the bump in prices may be due in part to falling mortgage interest rates, which have reduced monthly costs for homebuyers who aren’t making all-cash purchases.
Across all of Southern California, sale prices rose 2 percent year over year. But LePage points out that average mortgage payments dropped 7 percent in the same time period due to declining interest rates.
In Los Angeles, home price increases continue to be accompanied by sluggish sales. Last month, 6,965 homes sold countywide—exactly one fewer than in July 2018, despite the fact that this year the month had one additional business day for sales to process.
Across all of Southern California, sales during the month were 2.9 percent below average (excluding the bubble years leading up to the 2008 Great Recession).
In LA County, median sale prices eclipsed the $600,000 mark for the first time in May 2018. LePage says that how high home values grow will probably be determined by a combination of “mortgage rates, buyer confidence, job and income growth, and inventory levels.”
Though many economists expected mortgage interest rates to climb in 2019, they’ve instead dropped, creating a lending environment favorable to buyers—but also encouraging price growth. LA’s median sale price in July was a full $17,000 higher than a month before.
Photo Credit: abc7
Builders in Los Angeles County are reported to be on track to completing nearly 10,000 new homes before the end of the year. The 9,400 units of housing on the way in the second half of 2019 is higher than the number of units constructed in all of 2018—or 2017.
Most economists agree that building new housing is a key part of addressing steep rental prices and home costs throughout the state. Gov. Gavin Newsom pledged last year to oversee construction of 3.5 million new homes by 2025. If distributed according to population, that would leave LA County responsible for contributing nearly 900,000 residences to that total.
Hispanics are posting the largest homeownership gains of any ethnic group, new Census Bureau data shows. The wave of growth is a far cry from four years ago when the Hispanic homeownership rate reached a 50-year low. Since then, ownership among this segment has risen 3.3 percentage points, Census Bureau data shows.
To be clear, whites still have higher levels of overall homeownership. The Hispanic homeownership rate is at 47.4%, which still remains well-below the 73% rate for non-Hispanic whites in the first quarter. But it’s the growth in ownership rates among Hispanics that housing analysts are predicting could have a significant impact on the housing market over the next decade.
Since homeowners and renters require employment to make housing payments (with rare exception), the jobs recovery is key to the housing recovery. Over 4.5 million people are employed in Los Angeles County as of March 2019. This is 222,200 more jobs than at the 2007 peak.
Los Angeles’ jobs recovery rate has slightly trailed the statewide employment recovery in recent years and has begun to slow. From March 2018 to March 2019, the number of jobs grew by a meager 1.3%. This is roughly the same level of job growth experienced statewide.
Crissi Avila will teach you how to buy smart. We’ll look at location, development, and turnover so you can spot opportunities long before most even start considering them.