Key 2016 Remodeling Trends for the Los Angeles/Orange Counties Area--What is Cost vs. Value?

  The annual report is out on home remodel cost vs. value, conducted by Remodeling Magazine.  This is a valuable survey every year because the statistics vary according to the market and according to the region.  Return on projects were somewhat higher in the boom years, over 60%, and then fell under the 60% mark when the market declined.

Projects also vary in perceived value-- topping the list for 2016 was entry door replacement, especially into fiberglass doors.  Second story additions, master suites and kitchen remodels all increased this year in value, according to the real estate professionals in this survey.

Fiberglass insulation projects have been added for the first time to this report, a project not measured on an annual basis, but on a return extending over many years.  This project is estimated to give more than 100% return.

"In contrast, the five projects with the worst returns all scored cost-value ratios between 56.2% and 57.7%. From the bottom up, they are: midrange bathroom addition, upscale bathroom addition, upscale master suite, upscale bathroom remodel, and composite deck addition,"  according to the Remodeling 2016 Cost vs. Value Report (www.costvsvalue.com)  So not all upscale projects give the best return, and for some reason, neither do composite deck additions in this report.  Having seen enough termite damaged wood decks, composite decks would seen to be a great improvement in Southern California, but in this report, wood decks fare more favorably.

Replacements projects netted a few percentage points higher in return, 61%, compared to remodel projects which came out around 57%.

See the complete report online at Remodeling.
A free downloadable pdf report is also available online.

Where Is The Lowest Homeownership Rate in the Nation?

According to the U.S. Census Bureau, the lowest homeownership rate in the nation is right here in Southern California:  Los Angeles and Orange Counties.  In the second quarter of 2016, this region had 46.5% of residents living in a home they owned.  That's down from 49% and 48% from prior quarters.

According to First Tuesday Journal, the peak rate of 60.7% was reached in 2006, and the current 46.5% is well below California's historical average of about 55% homeownership rate--although bear in mind the low point was at 43.4% in 1940.  Today's California home prices have exceeded average incomes, and even though mortgage rates are still historically low at today's 4%, future rise in mortgage rates will help that rate continue to languish.

Mortgage rates which have operated in cyclical fashion according to the Fed's decisions about the national economy, plus the lingering effects of past bankruptcies and foreclosures on displaced homeowners, and the return of California's employment levels all have an effect on housing in this state.  An ongoing debate remains about whether young adults of the "millennial" generation are motivated to become homeowners, or not.  

One misperception among many hopeful buyers is that a 20% down payment must be obtained in order to buy -- that's false -- along with a lack of knowledge about financing options in general; another issue for many younger adults is the lack of savings combined with a higher rate of personal spending which prevents some from saving enough for a low-down-payment loan, such as a 3.5% FHA loan, and necessary closing costs.  Keeping credit scores in good shape, and understanding debt effects (i.e., keep debt on credit cards low, low, low), may do a lot to help offset impacts from necessary debt. 

For more information on facts of buying, please contact me!

Get the View on Some California Laws Coming Into Play for 2017 (or late 2016)

• Death of Occupant in a Property - there is already a law concerning this disclosure, but a new law effective September 25, 2016 clarifies it further by stating that the owner, his/her agent, or the buyer's agent,  is not required to disclose the death of an occupant of real property prior to three years before the offer to purchase or rent.  Also, no disclosure is required when an occupant was living with or died from AIDS-related complications.  
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• Effective November 27, 2016, FHA’s minimum owner-occupancy ratio for condo associations is reduced from the current 50 percent to 35 percent. FHA is ordered to streamline the entire recertification process for condo associations and make compliance “substantially less burdensome.”  Many condo owners and their Boards of Directors have not been aware that an FHA approval does not last indefinitely, and several years ago, required renewal every two years.  FHA has been criticized for certain requirements, because of many associations slipping out of certification seemingly unnoticed.  This cuts out a lot of selling opportunity for buyers and sellers of condos.  FHA is also required to make the recertification process "less burdensome" in order to attract more associations into the process.  Overall, this is good news.
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• Effective January 1, 2018, water submeters must be installed on all new multifamily units and mixed residential/commercial multifamily units, so a tenant may know how their water usage amount. This law does not apply to existing multifamily units.
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• Effective January 1, 2017, participation in a PACE (Property Assessed Clean Energy) lien program requires disclosures showing, among other things, that the property owner may not be able to sell or refinance without first paying off the PACE obligation.  There is also a 3-day right of rescission.  So know before you enroll in a PACE or HERO program which places a lien on your property.
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• However, FHA permits properties with a Property Assessed Clean Energy (PACE) obligation to be eligible for FHA-insured mortgage financing, whether for new purchases or refinancing, under certain circumstances. If the PACE lien is to remain, then property sales contract must include all terms and conditions of the PACE obligation by closing. Effective September 17, 2016.

For more information on other laws not mentioned here, or for additional information, please contact me and I will be happy to give to you.

California State and Regional Home Sales in August 2016

The August median home price for a California single family home was up to $526,000 in August, an increase from $498,000 in August 2015.

For the Southern California Region, the median home price was $496,000, an increase of over 6 percent from the same time last year.

The median single family home sales price in Long Beach was $546,750 (per CRMLS data), an increase from $537,000 last year.  The Long Beach months supply of inventory increased about 7% from last year to about 3 months of inventory.

As discussed at yesterday's Economics Panel the the California Association of Realtors Expo being held in Long Beach, 3 months of inventory appears to be the "new normal" (compared to 6 months in past years).  This ongoing level of inventory involves numerous factors, one of which is that owners are staying in their homes about 13 years (compared to 5-7 years in the past).