Impacts on California Housing and Real Estate

The 2015 California Association of REALTORS annual conference took place in Anaheim last week.  As always, the annual market forecast was given, and these are just some of the highlights from over 128 slides used in the presentation by the Association's Chief Economist:

• Millennials delaying “adulthood”: Getting married later or not at all; Student loans; dim job prospects.
• Homeownership rate for 18-34-year-olds still falling.
• Household formation is VERY slow.
• Baby boomers delaying “retirement” and staying put longer; they will love their loans when rates do rise.

     First time buyers:

·        Lack of a down-payment.

·        Lack of information about the home-buying process.

·        Average age of first time buyers is between 35 and 43 years.

·        Overall Market information:

·        In Los Angeles County, distressed sales are now 7.6% (August 2014) vs. 36% (August 2012), and figures are even lower in Orange County.

·        In 2007 and 2008, inventory was at 16 months, in August 2014 inventory supply is at 4 months.

·        California homeownership rate is lower than the U.S. rate, just above 50% vs. 65%.

·        Los Angeles metro region is one of 3 lowest housing affordability areas in the State, but the median California house payment and minimum qualifying income are still well below the peak market.

·        Decline in multiple offers.

·        Share of cash buyers is lowest since 2009.

·        Share of FHA buyers at 16% in 2014, but lowest figure since 2007.

·        One-third of the international buyers are from China, next are India and Canada.

·        Sales volume down and prices up (5%-14%) in all Southern California counties.

·        Millennial (ages 18-34) homeownership falling, and younger buyers continue to decline.

·        Three-quarters of millennials not married--this historically impacts household formation.

But, per a REALTOR survey of 18-34 year-old adults, "More than half (54 percent) gave homeownership an importance rating of “8” or higher on a scale of 1-10, with 1 being “not at all important” and 10 being “extremely important.”  The biggest advantages they see in homeownership are the freedom to do what they want with the property, privacy, and the satisfaction of ownership". And aren't those the reasons why people buy homes?

Last but not least is the projected picture for the coming year where the median home price on a statewide level will increase to $478,000; the housing affordability index will be at 27%, and sales volume will increase to a higher level than 2014.  

What do you think about where the market is headed?

2015 California Market Forecast

Governor Jerry Brown Signs Bill to Stop Tax on Loan Modifications

If the principal on your mortgage was reduced in a loan modification, a new law may lower your taxes. Governor Jerry Brown recently signed AB 1393 (Perea), legislation that will prevent homeowners from being charged state income tax when they’ve had a mortgage loan modified to reduce the principal. Under current law, the forgiven debt created by a reduction in principal as a result of a loan modification isn’t subject to federal income tax, but is currently taxable under state law. The law will become effective immediately and is retroactive to January 1, 2014. This is great news for homeowners.

What Is The January 2015 Market Doing in Long Beach, Cerritos, Lakewood and Rossmoor?

Here is a brief summary of January 2015 sales, compared to January 2014:

Long Beach - Median sales price for a single family home: $481,000 (up 5.8%), housing inventory down 22%, with only 2.2 months supply of inventory on the market.

Cerritos - Median sales price for a single family home: $602,000 (up 3%), housing inventory down 9% with only 2.1 month supply of inventory on the market.

Lakewood - Median sales price for a single family home: $443,500 (up 3%), housing inventory down 44%, with 1.4 months supply of inventory on the market.

Rossmoor - Median sales price for a single family home: $807,500 (up from $800,000), housing inventory still at 2.6 months supply of inventory on the market.

By checking points along the graph, prior months' sales prices are seen. Long Beach and Cerritos are down, Lakewood and Rossmoor are up. This is a live graph, and is updated with each month's sales.

Would you like to know what buyers" home buying motivations are? Buyers who purchased brand new homes did so because of fewer electrical and plumbing problems. Sellers who take this and other items into account when preparing their home for sale are less likely to get a laundry list of repairs desired by buyers.

NAR's 2014 Profile of Buyers and Sellers

California Home Equity is Up, But Distressed Owners Are Still Among Us

Distressed property owners have not disappeared totally.  A review of the Los Angeles County tax records today for the entire Long Beach area shows 257 residential properties in pre-foreclosure status.  Who's represented?  Property owners in all zip codes and while I didn't make an exact count, adjustable mortgages seemed to predominate.  This is unfortunate, because while many more owners are now benefiting from the upward trend in values, many are still affected by loss of job or short term jobs or lower paying jobs in the face of an upward increase in their mortgage, just to name a few reasons.

Owners who have attempted loan modifications may not have met all the hardship requirements, or they do not have enough income to refinance under today's more stringent-i.e., traditional-loan guidelines. And so, like the TV advertisements show us, they "freeze" up, unable to take action, and unable to come to the decision they might need to sell and relocate.  If you or someone you know falls into this category, short of finding a financial benefactor, the choices may be to sell, go into foreclosure, or continue to struggle if you possibly can.  One of the dividing lines for being eligible for loan modification or short sale assistance is whether or not your property value is still (much) lower than what you owe, OR you have experienced a qualified economic hardship.

Under a current California program, an owner may be eligible for up to $5,000 in transition assistance, loan principal reduction, unemployment mortgage assistance, and loan reinstatement assistance.  Also, Bank of America and other banks still offer their transition assistance programs for people in short sales. This program does not do loan modifications--for that you need to go directly to your servicer--but it does offer 4 other types of help.

For more information on this program, go to http://keepyourhomecalifornia.org, a program run by California Housing Finance Agency (CalHFA) with $2 billion in funds through the Hardest Hit Fund of the U.S.Treasury.  The site includes all information about eligibility, the participating servicers, and income requirements.  Over 43,000 California homeowners have been helped.