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

Thanksgiving Update for Local Long Beach Area Market

Horn of Plenty Happy Thanksgiving

We're constantly reading about the shortage of housing units, in California and nationwide, and its effect in creating rising prices (still), yet the actual activity in many areas shows constantly decreasing prices and longer times on the market, because at the same time many buyers struggle with the higher interest rates.

And then there's this:

The number of homes on the market has grown amid the collapse in demand, but in emailed comments, Lawrence Yun, chief economist for the National Association of Realtors, said new listings are lower compared to the same period one year ago and that housing inventory overall remains near “historic lows.”  Forbes.com article.

In the midst of buyers who struggle with obtaining loan approval at higher interest rates, there are also those buyers who are exceptionally well qualified, and can buy well over the list price of the house they make an offer on, and also know that in the current market sellers may be feeling the pressure of selling, so they bid low, sometimes very low, well under market value. The property with very recent upgrades, i.e., new kitchen or new bath, is likely to fare pretty well, but still much depends on location, floor plan, and size factors. Out of 37 closings in the last 3 days in Bellflower, Long Beach, Lakewood, Cypress and Signal Hill, and Los Alamitos, 12 sold over last list price, but not necessarily with the huge overbids of 2021. 

Long Beach zip code median single family prices for October:

90806   $705,000  Please see my Wrigley listing

90803   $1,477,000

90808   $895,000

90815   $983,000

90805   $628,000

90807   $1,020,000

So while these prices may still look healthy, all these areas are down from the peaks in April and May of 2022, when the median SFR price in April for all of Long Beach was $1,040,000, compared to October when the median SFR price for the city fell to $850,000.  (Average prices produce a different number in some cases, but the median price is not dragged up or down by an outlier price they way an average price may be.)  Both buyers and sellers have  been caught off guard by the volatile, and literally overnight, changes in interest rates, up as high as 7.2%, and then recently returning to the high 6%'s.  There are various projections about future rates, discussed in California Association of Realtors annual market prediction.  The future is hard to predict, and buyers and sellers should act promptly -- buyers who want to wait 6 months out to buy are chancing what could be a very different environment, and this is true in any market.

For an evaluation of your property please contact me for more area market information.

And, oh yes, Happy Thanksgiving!

 

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

New California Laws Affecting Real Estate in 2023

• As long as an owner lives on the site, an HOA may not ban the rental or leasing of a portion of the home.  Assembly Bill 1410.
• Clarification of existing laws to make it easier to build ADUs (Accessory Dwelling Units). In addition to procedural changes, this law attempts to make it easier to build ADUs in two ways: by prohibiting "local governments from imposing front setback standards that make it impossible to build a new ADU; and by incorporating the proposed changes to ADU height limits that are proposed in SB 897 which would facilitate two-story ADUs in certain locations that are amenable to that height, such as near transit, when the ADUs are part of a multi-story multifamily project, or when the ADU is attached to the primary home."  Assembly Bill 2221.
• Under Assembly Bill 2170  prospective owner-occupants, nonprofits, or public entities of foreclosed properties have prioty. This law also prohibits institution from bundled sales of such residential one to four properties, and must sell them individually, in order for individual purchasers, rather than large investors, to have an opportunity to buy.
  
• Homeowners may add up to two bedrooms in an existing dwelling unit without requiring a public hearing. This law applies to all cities, and only to a permit application for up to two additional bedrooms.  Assembly Bill 916 
  

 For additional information on more housing laws, please contact me and I will gladly send you additional summary. 

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

More on California's 2022-2023 Housing Market Outlook

For Southern California as a region, inventory has come up to 3 months, but is still not considered a "normal" amount of housing on the market. Compared to Sept. 2021, price has increased by 3.8% while homes sales decreased over 32% in same period.  In Los Angeles County, September 2021 showed 3,630 home sales, but the September 2022 volume reduced to 2,481 homes sales, and list price to sales price ratio was 97.8%, meaning on average sales prices were over 2% lower than list.  Orange County homes sold even a little lower percentage at over 3% below list.

 

The market is not as competitive

Housing affordability in Los Angeles County in 2nd Quarter of 2022 was at 16%,  Orange County at 12%, meaning these counties are in the bottom third of housing affordability in California. Lassen County stands at highest affordability rate in the state -- at 54%.

Fed Funds rate predicted to come down

Buyer demand in the housing market is dipping below pre-pandemic markets, as shown by the dip in mortgage applications in most of 2022, compared to 2018-2021.

Housing supply constraints continue, as shown by the number of housing permits issued, plus the number of years owners stay in a home before selling, another great cause of limited inventory. The current average length of stay is 10 years, whereas in 2006 it was 5 years before selling. 

Don't expect a surge in foreclosures, California has the lowest rate of foreclosure at .6%, and most other states are under a 3% rate for foreclosures. In recent years buyers have had higher down payments, creating greater equity in their homes, and the percentage of California buyers with second mortgages has decreased from 43% in 2006 to 2.2% in 2022.

California's median home price for 2023 is predicted to reduce to $758,600 from 2022's $831,000.

• Housing demand will continue to pull back as economic uncertainty and affordability challenges remain
• Supply shortage will still be an issue despite improvement in housing inventory in the short term
• Prices will soften in the next few months but should begin to stabilize in H223
• Inflation will remain a threat to the economy and the market in 2023
• Rates will rise further and will peak in mid-2023
• Buyers and sellers need REALTORS® even more to navigate through the market uncertainty

 Demand will continue to slow in 2023, and home prices will slow, but the type of market seen in 2009 is not predicted to occur, inflation is not predicted to abate until 2024, interest rates may continue to rise as the Fed tries to fight inflation. 

 

Thanks to CAR's Oscar Wei, Deputy Chief Economist, the source of this information at our Fall Forum.

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

California Housing Market for September, and 2023 Annual Prediction

 According to California Association of Realtors report on current sales and pricing for September, the existing home price in September for Southern California was $783,380, a year to year increase of over 3%, but existing home sales slipped since last May and are down over 32% year to year.  Sales dipped as rates climbed - pending sales fell more than 40% as mortgage rates hit 20-year high.

So Calif Housing Prices/Sales

The California median price is up from last year, but dipped to a seven month low, $821,680 and the median price for a condo/townhome is $620,000.  The sales price to list ratio dipped to the lowest level since 2019, and the share of homes selling above asking price was 28.3% vs. 72% in the Spring of 2022.

In Los Angeles County in September, approximately 30% of homes sold over list price, the highest being San Francisco County at 64%.  

While inventory slipped a little, it's still comparable to pre-pandemic levels of being under 3 months (normal is 6 months, not seen since 2012).  Active listings have increased over last year but still lower than 2018 and 2019.  Southern California has seen the largest growth in active listings over all other California regions.   Time on market was a median of 22 days, double that of one year ago. Sales to list price ratio was 97.7%.  The median reduction amount for reduced price listings was 5.6% while 44.5% of listings had a reduced price.

2023 Calif Housing Forecast

The October annual CAR forecast at the Long Beach Convention Center predicts an overall softening of the housing market for 2023 by about 7%, where the median price is $758,000 vs. the current $821,680. This may be a relief for some buyers, however the 30-year Fixed Interest Rate is predicted at 6.6%, and in recent days has threatened to increase even more.  Buyers may be interested to know that mortgage lenders are bringing back programs that will help some buyers with grants, etc., to help their buying process.

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

House Representatives Introduce Bill to Increase Capital Gains Exclusion

The "More Homes on the Market Act" was introduced on September 29th by Jimmy Panetta (D-CA) and Mike Kelly (R-PA), proposing increases in the capital gain exclusion amounts.  Under this bill, the exclusion amount of the sale of a principal resident for single filers would increase to $500,000 (now $250,000) and to $1 million (now $500,000) for joint filers.

Homes May Benefit from New Capital Gains Bill

This bill would provide tax relief for California homeowners, who are experiencing one of the highest cost markets in the nation, who have been unable or not wanting to move because of the large tax burden that  could result if they sold in the current market.  Senior citizens are more likely to face a larger tax burden since they have on average lived in their homes longer than younger age groups. 

The current capital gains exclusion was passed 25 years ago, with no indexing for inflation, in a different market which was not experiencing such huge equity gains. According to Rep. Panetta, "The current exclusion amount was first set in 1997 and was not indexed to inflation. If it had been indexed for inflation, it would be $461,325 for single filers and $922,650 today," amounts similar to the current proposed exclusion.  The new proposed bill does include indexing for inflation.

The current capital gains rate is  concurrent with fewer homes are on the market, which has contributed to higher demand and higher prices.  The National Association of Realtors estimates that single (95%) and married homeowners (68%) who purchased before 2000 could face capital gains tax if they sold their homes this year.

 

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

Just Listed, South Wrigley Charmer in Long Beach

Front porch of Wrigley home

Living Room and fireplace

 

Update:  this property is listed as of 11/22/2022 for $720,000.  Best of this Wrigley neighborhood in Long Beach, this lovely home at 861 W 21st St is ideally located for those who need to commute to nearby Lakewood/Long Beach/

Backyard gazebo

Formal dining room and china cabinet

Los Angeles areas for work, or just want a very comfortable two-bedroom home.  Spacious back yard patio and gazebo with yard is ideal for entertainers or gardeners. Front xeroscaping is suitable for the environment, new driveway gate offers privacy and security. Art Deco styling is typical of the 1935 era, and newer plumbing is a maintenance asset. See it all at the MLS listing. Contact listing agent for more information, or visit my website below to see "featured properties" or open houses tab. List price at $740,000.  Find out more information for a $5000 grant for the buyer and qualifying for a special program.  Such programs may be helpful in buying down an interest rate, and saving money on the monthly mortgage!

 

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