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NEWS

A Twisted Real Estate Market

9.28.18

In a report released this week by CoreLogic, home appreciation slowed to an 11-month low in 20 major U.S. cities, according to July year-over-year numbers. The combined national rate fell to 5.9% year-over-year, from 6.4% in July 2017, according to the data collected. 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. Of the 5 cities posting gains, Los Angeles showed a 6.4% increase in appreciation.

While the national housing market twists and turns, the Federal Reserve announced this week that it would raise short-term interest rates by another .25%, and central-bank officials signaled they expected to lift them again later this year and through 2019 to keep a strong economy on an even keel.

The increase, which drew rebukes from Republican leaders, is the 3rd this year and the 8th since the Fed began to lift rates in late 2015 after keeping them pinned close to zero after the 2008 financial crisis. The Fed’s action marks the first time it has lifted its benchmark rate above 2% since 2008.

 

 

To flip, or not to flip?

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At least once a day someone asks me about flipping. “Does it still pay? Are there still deals? Where would you buy?” I answer with micro-market specificity, but an article out this week addressed flipping on a national level. The national take-away: Some flipping still pays from coast to coast, but not as much as it did.

A U.S. home flipped in this year’s 2nd quarter sold for an average of $65,520 above what a flipper paid for it, according to the latest quarterly report by real estate data provider ATTOM Data Solutions. As a percentage, flippers turned a 44.3% return on investment (ROI) in 2018’s Q2, down from 47.8% in the 1st quarter. The most recent figure represents the lowest ROI since the 3rd quarter of 2014, according to the report.

In Los Angeles, the ROI was 29.5% in Q2, down from Q1’s 32.5%. Because L.A. had the highest home prices surveyed, it also offered the highest average gross profit of any market. On average, local flippers made an average of $140,000, but had to pay an average $475,000 for a property in Greater L.A. I recently sold a WeHo fixer (pictured) to a flipper for $1,171,000 who plans to net north of $500,000 after an overhaul and a bump-out. The local take-away: Knowing how, what, and where to buy is more important than ever before.

 

Zillow: It’s a buyer’s market…in 2020.

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According to the real estate website Zillow, the number of homes on the market nationally has dropped year-over-year for the last 42 consecutive months. As a result, prices have gone up; affordability down. Zillow partnered with data firm, Pulsenomics, to conduct a survey of housing market economists who said 2020 would be the soonest that may offer buyers a break from current conditions.

“For the past several years, home sellers have held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition in a fast-moving market,” said Zillow’s senior economist earlier this week. “Conditions are starting to show signs of easing up, but the effects of years of limited new construction and existing home inventory constriction will linger.”

Nationally, home value appreciation has been faster and higher thus far in 2018 than in 2017. Zillow’s survey noted that in some markets these trends have eased, but mostly prices have increased. The survey predicts 2018’s sales prices will top 2017’s record-breaking growth by 5.9%. 

A new median price record is set for DTLA to the ocean.

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While the median sales price for SoCal hovers around $540,000, figures released this week by the Multiple Listing Service (MLS) showed a “local” (DTLA to the ocean) median price cresting $1,300,000.

When comparing 2018’s 2nd quarter with that of the 2 previous years, the median price for single family homes rose from $1,046,350 in 2016, to $1,200,000 in 2017, to $1,301,000 this year (an all-time record). The total volume sold in the same area in 2018 was $4,290,829,959, up from 2017’s $4,244,675,603 and 2016′s $3,607,109,378.

According to the MLS, the median price for condos from DTLA to the ocean was $827,250 in 2018’s 2nd quarter, up from $730,000 in 2017 and $707,500 in 2016. The volume of condos sold in 2018 dropped from 2017’s numbers: Q2 of 2018 was $1,135,142,090, while 2017 peaked at $1,299,799,971. 2016 totaled $1,121,733,487.

 

National Sales Numbers Send Mixed Messages

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The good news for the economy is that housing prices throughout the U.S. remained strong in May, maintaining their steady growth. The CoreLogic national home price index released earlier this week showed a 6.4% gain from the same period last year. That is similar to the growth recorded in April year over year.

The bad news: Higher home prices are affecting the pace of sales, which is slowing around the country. New home sales reached an 8 month low in June, dropping by 5.3% from May, while existing home sales fell for the 3rd straight month.

In Los Angeles, where our need for affordable housing is at a critical stage, home prices were 7.6% higher than in May 2017. The number of sales in the same period dropped by just over 2% when compared with 2017. In Manhattan, the number of home sales dropped by 34.2% year over year in May. While home prices were higher than they were a year ago (4.2%), they’ve barely moved since March. In Miami, home sales dropped 2.3% from 2017’s numbers, but sales prices were up 5%.