Starting Out in 2023's Real Estate Market

As of mid December 2022, these are some of the conditions leading into 2023.

The labor market - There are two jobs for every job seeker, which puts pressure on wages, and ultimately creates higher prices for products.

Recession ahead - Most likely, maybe in the 2nd quarter of 2023. Mortgage rates fall typically with a recession, and an increase in demand follows. 

Supply and demand wavered in 2022 - Inventory for single family homes still lower than prior to the beginning of the pandemic, in mid-December 1,000,000 homes were on the market per the National Association of Realtors. 

U.S. Total Inventory of Home on Market

Southern California Counties inventory on market, 3-year average prior to COVID:

Los Angeles  - 9,349 (down 11%)

Orange: 2,939 (down 36%)

Riverside: 6,115  (down 27%)

San Bernardino: 3,471  (down 21%)

Ventura: 851 (down 35%)

The average days on market for Los Angeles, Riverside and San Bernardino Counties were over 100 days.

Median Price and Mortgage Rates in Southern California:

Median Price and Rates

By mid-December, interest rates went to below 6.5%, from a high of over 7 % a couple of months prior. The dark blue line shows the  corresponding increase in monthly payment, and obviously there's been extreme changes in the rates since the beginning of 2022. Buyers are seeing the return of assistance programs in the form of grants (with conditions of course), and more sellers have been willing to do buydowns in rates for the buyers. 

Buydown scenario:

$800,000 Price, 20% down, $640,000 loan amount, 750 FICO score, single family home. The mortgage only payment in Year One is $3,148; Year Two is $3,534, and $3,940 for Year Three and beyond. The seller contribution to buyer to make this happen is $14,400. 

A survey by Lending Tree showed that 41% of Americans think that there will be a housing crash in the next 12 months (from November 2022).  But in the words of Steven Thomas, Orange County Economist:

"The number one reason why a crash will not occur is a lack of available homes to purchase. When the inventory builds, it takes a lot longer to sell. When the unsold inventory rises above 300 days, negotiations lean heavily in favor of buyers and home values fall rapidly. The unsold inventory in Southern California, according to the California Association ofor 2022 in July at 99 days. In comparing today’s unsold inventory to the two years leading up to the Great Recession, 2006 and 2007, the difference is stunning. The unsold inventory peak in 2006 was 219 days, and it was 456 in 2007.   Home prices are not tumbling at the rate they were in 2007-2008 when values sank by 40%."

There is no panic selling and no forced selling in today's market, there are limited homes to sell because homeowners are choosing not to sell. Today's loan delinquency rate is at its lowest level in decades.

If you are thinking of making a change, please contact me for assistance in finding your home's value and how to prepare for a sale.

Julia Huntsman, REALTOR, Broker | 562-896-2609 | California Lic. #01188996

A Slowing of Rate Increases, Finally?

The sequence of four straight hikes of 75 basis points (.75%) in a row was capped last Wednesday Dec 14 by a rate hike of 50 basis points (.5%), all in an effort to cap inflation.  Federal Reserve Chair Jerome Powell recognize the stress of these rate hikes, and continues to promise to be vigilant in fighting inflation, but it perhaps has been having the opposite effect.

"Indeed, the statement released by the FOMC pointed to “ongoing increases in the target range” in order to bring inflation back to the Fed’s 2% target. New economic projections issued Wednesday by the central bank revealed that officials now anticipate inflation to close this year at 4.8%, gradually dwindling back to 3.5% in 2023 and falling to 2.5% in 2024."  The Fed's policy rate is now at 4.5%, the highest since 2007.  https://www.scotsmanguide.com/browse/content/fed-finally-backs-off-of-75basispoint-hikes-with-december-rate-increase

However, the federal funds rate and mortgage rates sometimes move in opposite directions, such as in early December when mortgage rates fell in response to declining inflation.  "Although there's merely an indirect link between mortgage rates and the federal funds rate, the Fed does have a direct influence on the rates charged on home equity lines of credit, which typically have adjustable rates." https://www.nerdwallet.com/article/mortgages/fed-mortgage-rates

California Association of Realtors, in its October prediction for 2023, was somewhat stark in its prediction of the market and the economic factors affecting housing for 2023:

Inflation will not return to pre-pandemic levels until 2024; interest rates will surge again; home sales will dip as costs of borrowing rise; housing affordability will be in the headwinds in 2023, but home prices will not fall as they did in 2009 era.
 

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Long Beach Housing Market Profile for November 2022

Amazingly, the median and average single family prices are up over the rolling calculation 12 month period by 7% and 11%, respectively. Comparing November to November, however, the median price is down almost 4%, but the average sales price is up over 3%!  Yes, the year has been somewhat fractured, what with interest rates down, then up, then softening again most recently.

Although it may vary in individual neighborhoods and price points, the original list to sale price on a rolling 12 month basis was over 100% -- still!  But then comparing November to November, that figure shows sales prices were down almost 4% for the City as a whole.  

November Housing Stats for Long Beach CA

The picture for condominiums is similar, the 12 month rolling calcuation is up over 9%, the November to November comparison is down for median prices, still up slightly for the average condo price.

Long Beach condo pricing - November

 

 

 

 

 

 

 

 

 

Best wishes for a beautiful end of 2022 holiday celebration!

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Electrification Costs to Consumers to Reduce GHG Emissions

Greenhouse effect around Earth

A law signed in 2018, AB3232, mandates a 40% reduction in greenhouse gas emission by 40% by 2045. Greenhouse gas emissions (GHG) from buildings account for about 25% of California's total emissions. 

Building emissions stem from direct and indirect sources:
Direct emissions come from
• Combustion of fuels for heating and cooking
(gas stoves, gas heaters).
• Gas leaks (gas lines in buildings, unlit pilot lights).
• Hydrofluorocarbon (HFC) leaks (from refrigerators and other compressor-based systems for space conditioning and water heating, during use and disposal).* Indirect emissions come from generation of the electricity used in buildings. 

According to the California Building Decarbonization Assessment, Californians can reduce emissions by:

    "Expanding use of efficient electric heat pumps.
        • Investing in weatherization and electrification of existing buildings.
        • Reducing refrigerant leakage.
        • Planning for and promoting substitutes for natural gas in existing buildings, primarily electricity; considering renewable gases where available at reasonable cost."

There are 7 ways to decarbonize a building as outlined under this program through the California Energy Commission:

1. Replace gas-fueled appliances with efficient electric alternatives.
2. Continue decarbonizing electricity by growing the low-carbon share of the generation portfolio.
3. Foster energy efficiency through incentive programs, appliance standards, building standards, research, and financing.
4. Transition to using better refrigerants and reduce associated leakage
5. Grow distributed energy resources such as rooftop solar photovoltaic (PV) and onsite battery storage.
6. Decarbonize the gas system by displacing natural gas with renewable gas produced from carbon-free electricity or existing waste streams.
7. Give building owners and occupants incentives to shift their electricity use in response to the timing of energy costs, GHG emissions intensity, or electricity grid emergencies.

So what can consumers do?  Californians should start looking now at what will be an additional investment in their homes. Millions of single family homes (which are almost 90% of owner-occupied housing) were not built to be electrified, and will need substantial changes including solar panels, amp volt changes, new appliances, and professional installation.   And this will come at a cost in order to retrofit single-family homes and units in multi-family structures.  

Cost per housing unit for a pre-1978 home retrofit is estimated as follows:

San Francisco        $34,790 

San Jose                 $36,500

Sacramento            $29,000

Los Angeles           $34,000

This Residential Building Electrification in California study outlines in explicit and lengthy detail the aspects of appliances, water heaters, refrigerators, utility gas and heating features of home which will need to be changed out in time.

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996