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Susan Andrews
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SIX THINGS YOU SHOULD KNOW ABOUT THE GLOBAL HOUSING MARKET IN 2018

Fitch Ratings recently released a new global housing market forecast, and the U.S. remains one of the top-performing markets in the world. As 2018 gets into full swing and sales numbers begin to accumulate, here are six important things to know about the market forecast for the coming year.

1. Prices Continue To Climb

Housing prices in the United States have risen steadily for a number of years, leading many to speculate that a downturn was imminent. However, the Fitch forecast, which examined 22 individual markets, projects the U.S. will see the sixth-best pricing growth over the next year. In 2017, the U.S. also held the sixth spot on the pricing list, experiencing gains of five percent across the nation. The latest forecast predicts that number will drop slightly in 2018, going down to 4.6 percent. Even with a dip in price escalation, analysts aren’t sounding the alarm for a housing bubble.



2. United States Assessment

The non-comparative U.S. analysis provided by Fitch comes with no surprises. “Nationally, U.S. price-to-income ratios are close to the 25-year average, but several cities in the West are overvalued,” the report explains. Affordability issues in California are no secret, while many regions across the country are seeing prices closer to the normal range.

Reports of this magnitude often fail to underscore local issues and trends, but the data collected and analyzed presents conclusions similar to many forecasts that pertain exclusively to the American housing market.

3. Ireland Tops the List

Like the U.S., Ireland is expected to see a reduction in pricing gains from 2017 to 2018. However, that drop will be from 12 to 10 percent, allowing the Irish to keep the top spot in the international housing market. The number two spot on the list is a four-way tie between Germany, Canada, Portugal and The Netherlands, yet those countries should only see five percent gains - half of what Ireland expects in the next year.



4. Norway Slumps

Norwegians are hoping this report isn’t entirely accurate, as indicators have Norway housing prices dropping by five percent this year. With Fitch predicting median gains of 3.5 percent for the 22 surveyed markets, Norway is on the wrong side of the trend and has earned the bottom spot on the Fitch rankings.

5. Notable Numbers

Aside from the United States and Ireland, the other top markets of 2017 belonged to Canada, The Netherlands, Mexico and Denmark. While the median price increase for surveyed regions was around four percent, these markets saw increases of 9.1, 7.5, 6 and 5.5 percent, respectively. On the other side of the spectrum was Greece, where the market saw a two percent drop from the year before.


6. Full Assessment

Even though these international markets have plenty of distinct variables to contend with, Fitch is able to offer words of wisdom/warning for all members of the global housing market: “We expect prices to stabilize or drop modestly in overheated markets in several cities in 2018, but if corrections are only limited after several years of very high growth, the risk of large price declines in future downturns remains.”

Overall, the outlook for the majority of housing markets is still sunny. Nevertheless, the prospect of significant decline is very real; in some cities, the upward trend is expected to reverse sooner than later.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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IS CALIFORNIA’S HOT ECONOMY CAUSING A HOUSING CRISIS?

Real estate sales continue to bring in massive revenue across the nation. In California, however, a housing crisis is affecting the real estate market and may soon trigger economic issues as well.

The crisis is centered on affordability, as it’s incredibly difficult for those who fall under the middle-class umbrella to find reasonably priced homes and apartments. Around the U.S., the median price for a house is around $250,000. In California, the median is twice as high. As a result, homelessness is on the rise throughout the state.

Developments are still being built at an impressive rate, especially in cities like Los Angeles. However, LA is seeing more and more working-class citizens moving into renovated vehicles and parking their “homes” in remote areas. The same is being seen in Silicon Valley, a region that’s famous for producing wealthy tech workers.

Because of the outrageous home prices, more people are extending their commutes. Heather Lile works at a San Francisco hospital as a nurse and earns a very good living, but she still travels 80 miles to work each day from Manteca. “I make really good money and it’s frustrating to me that I can’t afford to live close to my job,” she says.

As much as residents are bothered by the extreme costs, people living in California are perhaps more fearful for how this crisis might affect the overall economy. Politicians at every level of California’s government are engaged in the housing debate, and a recent push for rent control has been gaining momentum. Meanwhile, many established organizations are coming under fire for upholding zoning regulations that have hampered affordable developments.

The issue is taking center stage at the Capitol, as Sacramento legislators are aiming to take action in communities where neighborhood groups have succeeded in shooting down building projects that could have increased housing availability.

Legislation regarding these issues will likely be voted on before the fall, as Governor Jerry Brown and several head lawmakers have been negotiating a number of proposals and packages were approved by the state Senate.

One of the bill’s sponsors is Democrat Scott Wiener, a San Francisco senator. “The explosive costs of housing have spread like wildfire around the state,” Wiener says. “This is no longer a coastal, elite housing problem. This is a problem in big swaths of the state. It is damaging the economy. It is damaging the environment, as people get pushed into longer commutes.”

Ironically, this potential economic crisis is a direct result of the economic boom California has experienced. Unemployment has dropped steadily and the state is bringing in increased tax revenue. However, economic and population growth are now running head on into the state’s unwillingness to develop in the way experts recommend. People have been heading West for decades in hopes of making California their new home. While housing prices have always fluctuated, the recent financial boom combined with minimal development is resulting in what is seen as one of the worst housing crises in history.

Since the beginning of the economic recovery, prices in major California cities - San Francisco, Los Angeles, San Diego and San Jose - have increased by around 75 percent.

Scott Wiener’s bill is in good company; well over 100 housing measures have been bounced around in California’s Legislature in 2017. Something that sets Mr. Wiener’s bill apart is how it addresses zoning, an issue most see as one of the biggest threats to development. The legislation specifically targets the environmental and procedural protections that have been abused as communities attempt to curb building projects.

Gov. Brown is hoping to negotiate this bill as a part of more sweeping legislation intended to increase housing development for families that are struggling the most. This housing package may also increase the state’s overall spending on housing projects in the state.

While the proposed measures are new, it will not be the first time California’s government has taken steps to encourage local building. Last year, Gov. Brown worked on a measure that would have created a directive for communities to develop reasonably priced housing projects, but strong opposition led to that bill never seeing the light of day. As is often the case, numerous groups with various vested interests objected to the measure. California has a strong caucus of people looking to limit development as a means of protecting the state’s natural allure.

Santa Barbara Mayor Helene Schneider is providing one of the voices of opposition. “It’s giving developers a great gift and not giving residents and voters a chance to cast their opinions about what happens in their own neighborhood.”

Across the state, however, politicians are seeing some sort of governmental intervention as inevitable. As affordability continues to worsen, elected officials are left with few choices. A San Francisco Democrat named David Chiu heads up the Assembly Housing and Community Development Committee, and he believes his colleagues all understand what is at stake. “There is a consensus that there is a crisis and we have to address it.”

Senator Wiener has also been reminding colleagues of the effort that helped Californians address water shortages a few years back. “We’re at a breaking point in California,” says Weiner. “The drought created opportunities to push forward water policy that would have been impossible before. Given the breadth and depth of the housing crisis in many parts of California, it creates opportunities in the Legislature that didn’t exist before.”

In addressing the crisis, lawmakers are being forced to address issues that have long been a part of the state’s development. California’s scenery and vast expanses draw people from all walks of life. Those who live in the state now are always looking to protect those elements. Now there is a strong case against maintaining that protective attitude, as a new generation of California workers who cannot afford to live in the state where they are employed attempt to make their voices heard.

In addition to residents, younger politicians are also joining the cause. Eric Garcetti, the mayor of Los Angeles, has expressed a belief that those who intend to obstruct development are not doing their part in working for the good of all Californians.

Since the last century, there has been a procedure for how housing units are determined and developed, including how many buildings will be made available for low-income families. These rules apply statewide, and the latest legislation will target the cities that have been delaying development through various appeals processes. Some communities have become very adept with how they choose developers and bury projects in red tape.

Mr. Wiener’s bill will target building projects which are already in the works, or have already been approved; developments that need specific permits will still be handled by the respective cities. However, the power to review city plans will enable the government to authorize more projects that can’t be derailed by community organizations.

A project in Los Gatos, not too far from Santa Cruz, offers an example of the behavior Wiener is trying to eliminate. Development was held up for years after the 320-home proposal was rejected by the city. An ensuing lawsuit brought the matter in front of a judge, who ordered the city to resume inspecting the proposal, but this was already years after the project should have been completed.

Cities will also be forced to maximize zoning space, as project are often built too small and end up leaving a dead zone in which no future buildings can be developed.

Nowhere in the United States do first-time buyers have more trouble purchasing a home. California is also one of the worst regions in the country for low-income residents to find any type of housing. This is all true in spite of the fact that California is atop the nation in wages and adjusted poverty rate.

Among the many causes of the affordability crisis is Proposition 13, a 1978 initiative that limited property taxes. The bill created various loopholes for businesses and has had the overall effect of motivating homeowners to stay put and hold on to absurdly low tax rates.

BuildZoom is an enterprise in San Francisco that pairs contractors with prospective homebuyers. The company’s chief economist, Issi Romem, sees a direct correlation between Proposition 13 and a decrease in building. “California is a beautiful place with great weather and a terrific economy. To accommodate all those people you need to build a lot, and the state’s big metro areas haven’t since the early ‘70s,” Issi says. “To catch up, cities would need to build housing in a way that they haven’t in two generations.”

The areas most affected by housing issues are generally coastal regions where land is in short supply. However, studies show that cost is a bigger problem than land scarcity. Since the beginning of the market’s collapse and the recession, California has only built around 300,000 new housing units, which is well below what economists believe the state needs.

“Cities have proven time and time again that they will not follow their own zoning rules,” notes Brian Hanlon, who works as a policy director for a housing commission known as the San Francisco Yimby Party. “It’s time for the state to strengthen their own laws so that advocates can hold cities accountable.

Even with plenty of concrete examples of this accountability problem, city officials are wary of the blowback that might come from community groups if they force development. Residents in small neighborhoods stand in firm opposition to developing new apartment complexes, even if that’s exactly what’s needed to combat affordability issues.

When cities do permit development, it’s often awarded to the wrong projects. In Brisbane, a town south of San Francisco, commercial construction has been encouraged while housing projects have been denied. “We have cities around California that are happy to welcome thousands of workers in gleaming new tech and innovation campuses, and are turning a blind eye to their housing needs,” says David Chiu.

In the eyes of some, San Francisco’s tech industry is ground zero for the untenable housing costs. The boom of Silicon Valley has sent rent prices through the roof and has spawned a heated debate regarding commuter issues and gentrification. Berkeley City Councilwoman Lori Droste is one of many elected officials trying to combat this problem. “Cities that deny housing are contributing to skyrocketing rents, unfair evictions and homelessness.”

While no one is denying the need to address the crisis, plenty still stand in opposition to the bill sponsored by Scott Wiener. Many legislators believe that this law will put too much power in the hands of the government while giving cities less authority and hampering the ability for small communities to maintain their identity.

Santa Rosa Mayor Chris Coursey sides with his constituents. “People here feel like this is a special place, like people in any town or city do. And they want decisions about the future of the community to be made by people in the community who they can actually talk to about this.”

In Southern California, State Assemblyman Richard Bloom doesn’t see his community in Santa Monica trying to block new housing projects. “More and more people are becoming well aware that we have a housing affordability crisis on our hands,” Coursey says. “The issue is just reaching critical mass with the Legislature and the public.”

While elected representatives and community members work to find a middle ground, it remains unclear as to how these pressing issues can be resolved. The only certainty is that a problem exists and it must be addressed quickly. If the housing crisis continues to grow, it will soon lead to greater crises throughout the state.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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On May 24, Freddie Mac provided a monthly Outlook offering insight into positive housing market trends. The analysis explained why hampered economic growth hasn’t kept the real estate market from surpassing last year’s numbers.

Freddie Mac releases its Outlook report at the end of each month. Some of the main highlights from the May analysis include:

Mortgage rates should be expected to increase a minimal amount between now and the end of 2017. Rates had dropped roughly .25 percent between March and May, sitting steady at around four percent.
March saw the most existing homes sales in any month since 2007, just prior to the housing crisis. Brokers were also pleased to see a higher number of new home sales than had been projected. This year’s first quarter experienced the most total home sales since 2007, and the numerical data suggests that more than six million homes will be sold in 2017, a small increase from a year ago.
The most recent analysis shows mortgage originations from the first quarter beating expectations by $60 billion. This is thanks in large part to a strong refinancing market, and experts are predicting that originations will top $200 billion in 2017.
For the first time since the final quarter of 2008, nearly 50 percent of refinance borrowers withdrew cash in the first quarter of 2017, a five percent increase from late 2016. While the numbers are striking, it’s important to note that the share of refinancers taking out cash is still far from the 89 percent share seen in 2006.

Throughout the first half of 2017, there has been a fair amount of speculation as to whether or not the market was starting to recede. The affordability issues affecting certain parts of the country have been seen as an ominous warning by some, while decreased existing home sales have also raised red flags.

Because economic growth has been somewhat sluggish, trepidation amongst real estate investors has been on the rise. However, studies like this one indicate that the housing market is not yet succumbing to any sort of economic slowdown.

Sean Becketti, a chief economist at Freddie Mac, sees a very positive housing outlook. “Despite weak economic growth, housing got off to a good start in 2017 because low mortgage rates have given the spring homebuying season a pleasant surprise. Mortgage rates started March just above four percent and have mostly drifted lower since then, even falling below four percent. With home sales, housing starts and home values up, 2017 is shaping up to be the best year for housing in over a decade.”

Becketti’s point regarding mortgage rates is an important one for those who worried the homebuying season would be stunted. While certain regions have seen increased renting and decreased buying, the favorable rates have created an appealing market for the majority of spring shoppers. With strong first quarter numbers and solid indicators for quarters three and four, the optimistic projections for the year seem to be on track.

Even with housing sales approaching 2007 numbers, it appears there is still room for growth in the market. It also looks as though the housing market will continue churning in spite of any economic stagnation.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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WHAT ARE THE CAUSES AND CONSEQUENCES OF HOUSING AFFORDABILITY?

While housing prices keep many optimistic about California’s real estate market, the effects of the affordability crisis continue to mount and seem to be rather widespread.

The first, most obvious consequence is reduced homeownership; affordability is bad enough that a massive number of people are simply priced out. Beyond that, a decrease in housing options is forcing middle-class California’s to cross state lines in search of more affordable living. With blue-collar workers taking their trade skills elsewhere, it’s likely the economy will take a hit.

Unfortunately, the pricing problem has no clear or easy fix. California has yet to find a way to produce modest housing at a rate that can compete with the state’s constant population growth. While the economy has been growing concurrently, the distribution of wealth has done nothing to curtail affordability issues.

Meanwhile, the national economy is still being largely driven by the housing market. When compared to the California, most other states have nowhere near the same problems with affordability. Bad policies and faulty incentives have existed in the Californian housing system for too long, and now those issues are finally coming to a head.

While there are no simple solutions, there are actions that can help mitigate the crisis and hopefully reverse the affordability trend. Steps can be taken in both the public and private sector to potentially alleviate the situation.

One of the primary steps would be to ease up the roadblocks that often stall development. At the state level, the California Environmental Quality Act (CEQA) could be comprehensively reformed to curb overreach without leading to lax environmental regulations. This could open the door for increased permitting and project approval.

Another significant issue that could be rectified has to do with public opinion. The widespread attitude of “not in my backyard” is responsible for much of the opposition to any type of local building. Addressing this issue is much easier said than done, as residents are never quick to endorse change within their own neighborhoods.

In order to affect public opinion and lessen this resistance, California residents must be made to understand that an economic downturn is all but inevitable if the issues of affordability and inventory aren’t rectified. Even if measures to fix these issues are pushed by state officials, little can be done without the support of the consuming class.

A third, equally important step is to improve how people are educated about the housing market. While price tags are scaring middle-class families away, there are plenty of programs available to help first-time homebuyers. Surveys show that of the nearly 70 percent of millennials claiming they would buy houses with a low down payment, only 19 percent were aware of the Federal Housing Administration and other programs specifically meant to assist with financing.

If more Californians knew how mortgages and financing worked, the market would greatly benefit. If more people knew it was possible to buy a house in the state, they wouldn’t be relocating and taking jobs and revenue with them.

In addition to educating about finance, there are also banking solutions that could help prospective homebuyers. One change would be to find safe ways to extend funding to those who have weak credit or limited banking history. Steps could also be taken to make purchasing a home easier for independent contractors and people without traditional employment records.

It should be considered entirely possible for California, a state full of financial innovations, to implement these changes. Some strategic, outside-the-box thinking could allow for thousands of people with atypical careers to find affordable housing.

More people must recognize the affordability problem as an actual crisis. If that happens soon enough, Californians may be able to find solutions and avoid real economic issues. If solutions continue to be delayed by harmful policies and inaction, the state could see the problem get much worse.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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WHY ARE SO MANY HOMEOWNERS STAYING PUT?

A good portion of the real estate market is made up of homeowners who uproot and purchase their second or third house. More and more often, however, people are deciding to stay put instead of upgrading their homes.

One such example is Greg Rubin, who spent a large portion of 2016 thinking about buying a larger house. After 17 years in the same abode, Greg wanted to expand from a two-bedroom to a home with space for guests, a workshop and some additional office space.

Mr. Rubin is the owner of California’s Own Native Landscape Design in Escondido, CA. “My girlfriend would like to get a larger house, but right now, I’m staying put,” he says.

At present, it seems as though people like Greg Rubin are more the rule than the exception. Fewer homeowners are moving these days, which is putting a strain on the real estate market and overall economy. This trend is also causing increased competition among prospective homeowners, as it becomes harder to find available property. The spring season hasn’t been as robust as usual and real estate brokers are seeing less in the way of commission.

This movement of people remaining in their homes instead of looking for an upgrade began largely in response to the recession. Businesses like Rubin’s landscaping firm saw a drastic decrease in revenue in the years following the market’s collapse, making the idea of purchasing a home seem very farfetched.
Millions of others found themselves living in houses where the value plummeted below what was owed to the bank.

These factors, as well as several others, led to a huge rise in the median homeownership period, which reached eight and a half years in 2016. In 2008, that number was only three and a half years. This is according to information from Moody’s Analytics and First American Financial.

With the economy mostly recovered, some have assumed homeownership tenure would return to numbers closer to those 2008 levels. However, many experts are predicting that, even with reduced unemployment and major growth in housing prices, this new standard for length of stay will continue for at least another 10 years. If this holds true, the main culprit would likely be increased interest rates.

The housing bubble led to historically low rates for mortgage refinancing, so millions of people, like Greg Rubin, now pay between three and four percent interest on their home loans. To take on a new mortgage now, even for a similarly priced house, would come with a much high interest rate. According to Zillow, with $500,000 30-year fixed-rate mortgage, increasing the interest rate to 5.5 percent would up monthly payments by an estimated $700.

While interest rates were as low as 3.5 percent in October, they’ve recently risen to over four percent on 30-year mortgages. The expectation is that these rates will creep toward five percent before the end of the year, as the Fed has indicated that rates will likely increase further. The more interest rates go up, the less likely homeowners are to consider a move.

According to Zillow’s chief economist, Svenja Gudell, this trend is still on the upswing. “Once mortgage rates climb to 5 or 5.5 percent, we are going to start to see the lock-in effect really take hold,” Gudell says.

In addition to interest rates, other scenarios are playing out and influencing the housing market. As Congress moves toward tax reform, those in real estate are cautiously eyeing the removal of homebuying incentives as outlined in President Trump’s tax plan. There is also some overall economic skepticism that could affect what steps the Federal Reserve takes in the coming months.

Above all, housing trends like this are strong indicators that the U.S. economy has not entirely recovered from the crisis of 2008. Even with the subsequent reforms and policy changes, the market is still far from what it was in 2006.

Despite steady population growth and measurable economic recovery, the sale of existing homes is still nearly 25 percent off from where those numbers were before the collapse. Single-family home starts are only halfway recovered, as that statistic was measured in March at an annual rate of 821,000. The largest generation in U.S. history (millennials) has been steadily moving into the workforce, but that has yet to provide a real housing boost.

Mark Zandi is the chief economist at Moody’s Analytics, and he doesn’t necessarily believe the market will return to its previous peak. “We are coming out of a deep, dark hole called the housing bust, but we are a long way from normal, and we may never get back to normal, if normal was the average person stayed in their home for four or five years. We’re at eight-plus now, and even under the best circumstances, maybe we get to six.”

The Institute for Housing Studies at DePaul University released a study in 2014 which predicts more homeowners will stay put in cities with pronounced job growth and affluent neighborhoods. Because lenders tightened credit standards in the recession’s aftermath, refinanced mortgages skewed toward those who had better credit and lived in more desirable areas. With interest rates back up, those people have little incentive to move.

It’s worth noting that the overall cost of moving also has some effect on the current homeowner’s tenure. Packaging, furniture and all the other related fees add up quickly, and people who are still recovering from the recession are less likely to take on those expenses.

In addition to hampering the real estate market, the interest rate lock-in trend could have other economic ramifications. In many cases, the motivation to take a job in another city has decreased because the cons of home buying outweigh the pros of the new position.

“People aren’t moving from weak economies to better economies,” Mark Zandi points out. “They aren’t moving from jobs that aren’t as suited to them to jobs that are. When moving becomes more difficult financially, the economy becomes less fluid.”

This change is very noticeable for real estate agents. Glenn Kelman is an executive at a national brokerage firm called Redfin, and he’s noticed a definite decline in inventory. “People who buy a home and sell their home are the meat and drink of the real estate business, but increasingly, we’re only getting half the sales from them,” Kelman says.

People are buying more cheap properties that need to be renovated, and the existing-home shortage is spreading from the bigger cities to the surrounding areas and traditionally less-expensive markets. Bidding wars are becoming more and more common. Kelman notes that more and more homeowners are choosing to become landlords instead of selling, turning more buyers into renters and taking business away from brokers.

The National Association for Realtors measures a 60 percent decrease in homes for sale since 2007. With such limited inventory, more young couples choosing to rent instead of buying.

Eric and Amanda Olson are the renters of a two-bedroom apartment in Chicago. The Olsons have lived in this rental for several years, even though they have looked for a house each spring for the last few years. At the outset, they kept the search to homes in their general vicinity, near Wrigley Field. As the search continued and buyer competition increased, the couple started looking in other parts of town and even outside of the city limits.

Eric, who has a good job working in information technology, has grown discouraged. “There is no inventory - we’re talking four or five houses in our price range a week. Some of those are houses with holes in the floor, holes in the roof - and even those are flying off the market.”

It’s easy to look at home prices and feel as though the market has made a strong recovery. Digging a little deeper, you can see the lingering effects of the housing crisis, and it’s clear that people are still feeling repercussions.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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HOW ARE NEWER ONLINE LENDERS CHANGING HOME BUYING?

Securing a mortgage through a bank, especially for those with less-than-stellar credit, can be a difficult task. Fortunately, the rise in alternative lending is providing lots of mortgage options outside the traditional channels.

Non-bank lending ramped up as a response to the housing collapse and subsequent financial shakeup. Since then, these types of mortgages have transformed the industry. In addition to providing more transparency with mortgage rates, applying for these home loans can often be completed online in a matter of minutes.

While big banks still play a role in the mortgage market, they are no longer the driving force in the industry. Traditional lenders have to deal with high potential for legal ramification and generally low profit margins. Increased regulations in response to the housing meltdown have made mortgages far less appealing to the big lenders.

Taking the space the banks used to occupy are a variety of alternative lending options:

Brokers acting as financial advisors, helping consumers find the best mortgages and rates.
Smaller lenders who can overlook issues like damaged credit.
Online lenders who are able to expedite loan approvals and payouts.

Technological advancements and changes in lending practices over the last decade have allowed the alternative mortgage market to rapidly expand. For borrowers looking into alternative financing, it’s important to know that there are a variety of options within the industry.

Perhaps the most common search result when looking for a online mortgage provider is some form of middleman. This is the simplest way for a startup to get involved in the market, and there are small, medium and large mortgage marketplaces scattered about the web.

LendingTree and Zillow are two of the most popular sites, with Mortgage Hippo and eLoan being other well-know lead generators. The business model for these companies is relatively simple: after using an algorithm to determine a borrower’s risk rate, the applicant is presented with a list of suitable lending options. The borrower then chooses which source or sources he or she will take money from, and the marketplace site collects its lead fee.

Mortgage marketplaces are relatively hands off in the actualization of the mortgage. Meanwhile, online brokers take the process a step further by advising borrowers on how to select a provider. It typically costs more and is more time consuming when a broker is involved, but mortgage seekers get much more support with this option.

Mortgage originators that operate exclusively in the digital space are becoming increasingly competitive in the lending world. Quicken Loans has surpassed many standard lenders to become one of the country’s most prolific lending companies. With the recently added Rocket Mortgage option, Quicken Loans is offering such a quick turnaround on mortgage approval that this site is the first place many people head to.

Long waits for loan approval was an industry given for many years, which is why the expedited approval offered by some online lenders is so revolutionary. Whereas bankers used to have to review applications and crunch numbers, alternative lenders simply apply algorithms that quickly determine risk levels.

At present, the home loan market is healthy enough to sustain the multitude of investors and financiers working in the industry. Because of this, companies that specialize in other lending practices have started adding mortgages to their offerings.

As some lenders look to take as big a slice of the pie as possible (Loan Depot has branched out to all 50 states in only five years), others are choosing to remain more specialized. Lenda is one such example, serving only a handful of states, but providing direct financing and multiple lending options.

Another important focus for many alternative lenders is consumers who have poor credit. The fines, lawsuits and regulations that came in response to the housing crisis forced big banks to shy away from approving loans for risky borrowers. Since mortgages are often sought by first-time homebuyers with subpar credit, lenders willing to overlook those issues have become the top option in this market.

These lenders are essentially what mortgage bankers used to be: small operations, serving local businesses and consumers. With less money on the books, smaller lenders deal with fewer regulations and don’t have to be as apprehensive when it comes to a borrower whose credit isn’t very good.

Being turned down by standard banks has also led many people to seek funding from credit unions. In 2015, over eight percent of mortgages in the United States were issued by credit unions, which was nearly twice as much as in 2010.

While the non-bank options are generally locally owned, some have managed to expand to serve on a national level. Nonetheless, these lenders don’t operate like the online loan providers and still take more time processing applications, often requiring borrowers to visit a branch in person before getting approved.

Even though alternative mortgages are a fairly recent phenomenon, the Federal Reserve estimates that this industry accounts for just under half of the nation’s home loans. Technology continues to improve the ease with which loans are originated and the market becomes increasingly competitive with each passing year.

While more and more companies move toward digital applicants and document processing, there are still providers doing things the old fashioned way and having plenty of success. In many cases, even after filling out an application online, borrowers still have to see a notary or lawyer to have things finalized.

Deciding which option is better - a mortgage marketplace or a direct lender - relies entirely on one’s personal preference and financial standing. If you’re a first-time homebuyer and don’t understand the process, you may choose extra guidance over simplicity and work with a broker. For those mostly interested in expedience, online marketplaces are the way to go.

While it might take a little bit of research to figure out which mortgage provider is right for you, homebuyers should take comfort in the fact that there are now more borrowing options than ever before.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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HOW OPTIMISTIC IS THE CURRENT REAL ESTATE MARKET?

Consumer confidence is an important factor in the housing market. In a recent Gallup poll, 61 percent of Americans said they feel confident that housing prices will continue to climb over the next year.

This is the highest measure of real estate optimism since 2005, and the number is up six points for what Gallup released last year. This positive outlook has been rising steadily since the market’s crash and recovery - 2009 was the low point when only 22 percent of American adults felt there was a chance that housing prices would go up.

That negative view dominated the real estate world from 2008 through 2012. It wasn’t until 2013 that large numbers of residents started predicting prices would rise, and 2017 is the first year that the percentage of people expecting gains climbed above 60 percent.

The first year Gallup included this question about value speculation was in 2005. That year also saw the highest number of optimistic responders, with 70 percent expecting prices to go up. Home values went on to hit peak prices in 2006.

The current numbers are right on trend with the last decade, as home values have gone up steadily since 2012, after declining from 2007 until 2011. This year, while a majority predict continuing increases, there are still 28 percent of people who foresee no change and 10 percent expecting prices to go down.

These assessments do vary depending on region. In the Western states, nearly 75 percent of people expect increases, whereas just over half of those living in the Midwest and Eastern states expect sustained value growth. Not surprisingly, the West saw some of the biggest price jumps in 2016.

The varying expectations are a continuing regional trend, as Western U.S. residents have predicted housing price increases more commonly than the rest of the country for the last few years.

Along with a majority belief that prices will keep rising, two-thirds of Americans also think the market is currently buyer-friendly. The remaining percentage think now is not the best time to buy, and these numbers are fairly consistent with Gallup’s findings from the last two years. The percentage of people saying it’s a good time to buy is down slightly from the 70 percent mark hit between 2012 and 2014.

The belief that now is a good time to buy is virtually always the opinion of the majority in America. It was only from 2006 to 2008, as the initial signs of crisis were becoming evident, that just 50 percent of people said investing in a house was a smart decision.

These numbers indicate consumer opinions are driven by both the growth of the market and the personal belief that houses make for a strong investment. Most polls show the majority of Americans consider real estate the top option for investing their capital.

Unlike the predictions on pricing increases, these time-to-buy statistics are not regionally dependent. Instead, the divide is between homeowners and renters. 74 percent of people who own a home say now is a good time to buy, while only 56 percent of people renting feel the same way.

While most Americans speak favorably of home buying, fewer residents currently own a house now than in years past. Prior to the crash, 72 percent of adults claimed home ownership. That number is now notably lower, averaging at 61 percent since 2015.

The drop in ownership may be driving down the number of people who say now is the right time to buy. There’s also the issue of affordability, as many people are either priced out or don’t believe the current high prices are sustainable.

A major takeaway from the Gallup numbers is how Americans are very aware of housing trends. Since values have risen steadily over the last half-decade, most residents predict that trend will continue. People might not be quite as optimistic as they were in 2005, but the percentage is as high as it has been since the crash.

One of the main concerns now is whether the U.S. is looking at another housing bubble. Fortunately, even though prices are nearing their 2006 numbers, lower interest rates and fewer high-risk mortgages are keeping most of those fears at bay. However, changes in either of those factors will definitely raise some red flags.

By all measures, both from Gallup and the American people, now seems to be a decent time to buy a house. Of course, with the 2007 crash still a recent memory, most prospective buyers are being cautious with this decision.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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WHAT’S DRIVING LOWER PENDING HOME SALES IN CALIFORNIA?

March marked the third time in as many months that pending sales by California homeowners continued its downward trend.

According to the California Association of Realtors, the poor sales performance is largely due to limited availability and high cost. Even with closed escrow sales strengthening in recent months, the shortage of houses on the market, combined with continually increasing prices, has clearly impacted the market’s growth.

Responses to the March Market Pulse Survey showed that many realtors have noticed a slight uptick in general business, which is expected this time of year. There were more presentations and open house visits in March, marking the third straight month of this type of activity increase.

The following data relates specifically to pending sales:

The sales numbers, adjusted for the season and examining signed contracts, show the Pending Home Sales Index (PHSI) in March dropped 4.5 percent from the previous year, falling from 112.5 in 2016 to 107.4 in 2017. That’s compared to a 2.9 percent decrease from February 2016 to February 2017.
This most recent decline is the largest of year and it comes at the outset of what is usually the busiest time of year for homebuying. This indicates that spring and summer sales will continue to be stifled by a dearth of listings, as availability has dropped more than 10 percent since March of 2016.
Going region by region, Southern California is currently the state’s leading area for sales, with both the highest numbers in closed escrow sales and lowest percentage drop in pending sales (non-seasonally adjusted). Two counties, Los Angeles and Riverside, actually experienced modest growth in pending sales with increases of 1.6 percent in LA County and 3.1 percent in Riverside. Meanwhile, other southern regions such as Orange County, San Diego County, and San Bernardino County saw decreases in pending sales that ranged from 3.6 to 8 percent.
Still holding the top spot in areas most affected by the sales decrease is the Bay Area. San Francisco suffers from a profound housing shortage and ever-falling affordability, and March marked the sixth month in a row that pending sales have gone down from the previous year. These statistics apply to every regional county, and the overall plunge from March of 2016 to March of 2017 was 10.1 percent. The two counties hit hardest were Monterey, with a pending sales reduction of 17.3 percent, and Santa Cruz at 16.4 percent. Other counties of note were San Francisco, Santa Clara and San Mateo, which saw sales fall 15.9 percent, 14.9 percent, and 8.6 percent, respectively.
Even the Central Valley couldn’t escape the pending sales drop, as the index went from 96.3 in 2016 to 91.0 in March of this year. Kern County managed a slight increase with pending sales ticking up 0.4 percent, compared to a 3.7 percent dip in Sacramento County.
Market Velocity, which shows sales in relation to monthly replacement listings that go online as properties are purchased, doesn’t offer any immediate hope. This pricing indicator implies that high costs are driven by low supply, meaning that prices should continue to rise in the coming months.
Even with this data, CA realtors responding to the Market Pulse Survey have expressed optimism regarding the upcoming season. The increase in general market activity and multiple offers since February has sellers confident that things might not be as bleak as some of the numbers indicate.

Homes that sold for a price above the initial asking increased by 5 percent, up to 39 from 34 percent in March of 2016. At the same time, real estate selling below asking price went down from 33 to 32 percent. Properties that actually went at asking price was down to 29 percent, five points lower than it had been in March of last year.
The percentage paid above asking price stayed the same between 2016 and 2017, remaining at a premium of 9.2 percent.
Homes coming in under asking price saw improved numbers as well, selling at 8 percent below as opposed to 10 percent in March of 2016.
March was the third straight month in which the percentage of multiple offers on properties rose, reaching its highest level in over a year. Almost 75 percent of for-sale properties elicited multiple offers, a substantial increase from the 50 percent mark set in March of 2016.
Properties which received more than two offers dropped only slightly, coming down from 49 percent in March of 2016 to 45 percent this year.
Homes receiving the most attention in March were those priced under $200,000. This section of the market showed the largest increase in multiple offers, especially in homes receiving three or more bids, where the share rose 16 percent since March of 2016.
With prices adjusting to the market, only 19 percent of properties reduced their prices in March of this year, compared to 21 percent in 2016.
According to this survey, 37 percent of realtors cite limited property as their main concern going forward. That number slightly edges out the 34 percent who are most concerned with the continued downtrend in affordability and high interest rates. The other issues causing the most worries are the housing bubble, regulations, slowing growth in the economy and financing difficulties.
Overall, 64 percent of realtors have high expectations for future market conditions, which is up 4 percent from 2016.

Even with strong data suggesting that pending sales won’t be increasing over the summer, California realtors have found a number of reasons to be optimistic about the coming year. However, with affordability and availability varying so much from one region to the next, it’s not surprising to see differing opinions about future sales.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.
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HOW WILL IMMIGRANTS’ STRONG DESIRE FOR HOMEOWNERSHIP SHAPE U.S. HOUSING MARKETS?

Immigration is a pressing matter for many Americans, though not always for the same reasons. Within the world of real estate, the topic of immigration has everything to do with future housing markets and developments.

For the next few decades, housing markets will fluctuate significantly as immigrant families choose where they plan to settle. The Terwilliger Center for Housing at the Urban Land Institute released a study regarding the impact of immigrant housing in the U.S., with special attention paid to the changes expected as more foreign-born persons move into and purchase property in suburban areas.

The study, entitled Home In America: Immigrants and Housing Demand, analyzes growth in urban housing that directly relates to United States immigration in the aftermath of the Great Recession. Contrary to what many people believe, the U.S. has seen more immigration from Asian nations than Latin America over the past seven years.

According to Terwilliger Center Executive Director Stockton Williams, “Immigrants have helped stabilize and strengthen the housing market throughout the recovery. Immigrants’ housing purchasing power and preferences are significant economic assets for metropolitan regions across the country. This suggests the potential for much more growth attributable to foreign-born residents in the years ahead.”

The most notable findings from the report include:

The strongest housing markets in the nation, such as San Francisco, would not have experienced nearly so quick a recovery had it not been for the immigrant housing market.
Weaker markets, such as Buffalo, NY, would have fared even worse if not for the foreigners who bought and rented property in the last decade.
Suburban areas seem to have the strongest draw for foreign-born renters and buyers. This is true for both high-income and low-income families, as immigrants move to the suburbs in search of affordable housing, as well as employment and a more appealing lifestyle.
Single-family homes are highly sought after by foreign transplants. The more time immigrant families spend in the states, the more inclined they are to purchase a home that offers more privacy. This is a solid indicator that persons immigrating to the U.S. will continue to affect the real estate market in a variety of ways.
More often than not, immigrants looking to become homeowners tend toward buying existing homes. The market for previously occupied housing is mostly driven by baby boomers moving into smaller houses as they looked toward retirement.
Immigrant housing demand is a large factor in the market’s current growth, just as it was instrumental in fending off the market’s collapse. Because of this, any laws passed in the U.S. that relate to immigration may directly influence the makeup and growth of both urban and suburban developments.
It is in the best interest of the areas with growing immigrant populations to support and sustain this trend. Expansions in local retail, education, and other important amenities will allow communities to grow and reap the benefits of this important industry.

This study was conducted by assessing five metropolitan areas that are seen as current and former hubs for immigration. Foreign-born residents in these cities were asked about their preferences with regard to geographical location and housing style.

The subject cities were chosen to represent the various paths by which immigrants come to this country. For example, San Francisco was selected as a steady hub that has maintained its immigrant population for well over a century. In contrast, Buffalo was studied as a U.S. gateway that has seen less and less traffic as the manufacturing industries of the early 20th century have tapered off.

The other cities include Houston, which has experienced its most steady immigration in the aftermath of World War II; Minneapolis, a city that had seen a decline in immigration before re-emerging as a popular destination in the 1990s; and Charlotte, where immigration is a much more recent phenomenon that is actively changing the landscape of the city.

An important factor in this report is the outpacing of native-born population growth by the immigrant population from 2006 through 2014. That time frame is specific to the years just prior to and after the market crash and recovery. This trend applies to all cities except those that have only recently emerged as popular gateways.

The Home in America study also includes data regarding choice housing for immigrants. This portion focused on the popular suburban categories that RCLCO defined for the Urban Land Institute:

Challenged suburban area
Middle-income suburban area
High-end suburban area
Greenfield suburban area - lifestyle
Greenfield suburban area - value

The top three categories have fairly simple distinctions. For an economically depressed suburb, there is limited population growth and homes are less valuable. Both the middle- and high-income suburbs have a variety of housing options and respectable locations, and the high-end housing is often closest to the top job providers.

As for the Greenfield suburbs, these are areas just outside larger cities. Greenfield lifestyle suburbs are typically near upper-class areas that have been established within the last decade or two, while value suburbs are generally more affordable and in closer proximity to economically disadvantaged areas.

Comparing the five different metropolitan areas included within the study allows real estate speculators to analyze how these trends might affect growth in similar locations in the coming years. In cities like San Francisco that have long been seen as foreigner gateways, one can expect immigrants to continue occupying all of the various suburban regions, with the most substantial number collecting in more depressed areas.

Meanwhile, the largest number of foreigners who have immigrated to Houston live in middle-income suburban areas, and Buffalo sees the largest percentage of immigrants living in the wealthier suburbs (in larger numbers than non-immigrants, in fact). Minneapolis and Charlotte, both cities with emerging immigrant populations, are at the other end of the spectrum - the majority of migrant families in these two cities live in economically challenged areas.

The Home in America study suggests that immigrant populations have clear potential when it comes to elevating local economies in the more depressed suburbs. The report also points toward immigration as a key stabilizer in middle-class suburban neighborhoods, and a catalyst for economic growth in high-end areas.

Quoting the report directly: “If recent shifts in immigration flows continue, an increase in higher income immigrants - including rising numbers from China and india - could accelerate the demand for homeownership among the foreign-born population. Without sustained immigration, the housing market could weaken and in many markets the impact could be dramatic.”

While this study indicates different things for different cities, it certainly makes clear the impact immigrating homebuyers can have on the real estate industry. No matter where you live, this is an ongoing development that will continue to affect the housing market in all metropolitan areas.
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WHAT TOPS HOME BUYERS WISHES IN 2017?

Like any market, real estate is at the mercy of trends that grab the attention of prospective buyers. In 2017, it seems consumers are most taken with useful outdoor areas, ranch-style houses and modern kitchens.

A recent survey done by realtor.com indicated that house size isn’t really the driving issue. Just over 50 percent of those surveyed were looking for a three-bedroom house, and around 75 percent wanted to have at least two bathrooms. Survey data was collected in March, with the goal of providing information before the summer housing rush begins.

"The insights from our most recent consumer survey provide a glimpse into what buyers are looking at today," says Sarah Staley, an analyst at realtor.com. "While we often think of dream homes as being big and bold, that's not what we're hearing from potential buyers today. These insights can help guide potential sellers in deciding which rooms or features to invest in before listing their homes."

A noticeable trend is that homebuyers want to be able to do more with the space they have, and not just have more space. Garages are increasing in popularity, as are updated kitchens and backyards. In fact, most shoppers are looking for property that includes some combination of those three features.

Families looking for a new house seem most interested in the backyard and the kitchen space. Geography is also important for families with children, as these people are usually as much interested in the local schools as they are some of the home attributes. Aside from location, yard space could be the top factor for families with younger kids.

As for the most popular type of home, there is a clear favorite. Ranch-style houses were the preferred home for 42 percent of shoppers. The next style on the list - contemporary houses - came in at 28 percent. Behind contemporary, home buyers are currently most interested in Craftsman and Colonial.

Whatever the preferred style, the kitchen is still the room that garners the most interest. Four out of five shoppers ranked the kitchen as a top-three room in the house. The next highest rankings were for master bedrooms and living rooms, attracting 49 and 42 percent of shoppers, respectively. Those statistics apply to shoppers of all ages, with the exception of people over 55, who prefer garages to living rooms.

Currently, the number one goal for those looking to a buy a new house is privacy. This is seen in the rising popularity of single-family homes. It’s worth noting that this data is primarily driven by people between the ages of 45-64.

Meanwhile, millennials cite family needs and finances as the top reasons for buying a home. Within this group, events like marriage and having a child are the main catalysts for house shopping. For those between 35-44, finding a better school district was another notable objective.

While millennials shop for houses to accommodate growing families, people over 45 are frequently downsizing their homes. Almost all people in this age group, and subsequent age groups, include planning for retirement as one of the main reasons to look for a new place to live.

There is another clear divide as to what types of property people look for during their younger versus later years. Younger individuals are more likely show interest in townhouses and other, similar developments; older homebuyers are more inclined to look for single-family homes.

There are plenty of trends driving the current real estate market, and it’s helpful to see what styles and features are the most popular. At the same time, it’s important to study the metrics in order to understand the full picture.

If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.

Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.

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