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Echo Park home prices jump in September; hot pink Silver Lake Spanish sells for $1.9 million

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Home prices increased just 3.8% in the city of L.A. this September – the lowest price appreciation since June 2012, according to a recent report from real estate brokerage, Redfin. But the Eastside was an exception as it contained some of the most competitive markets in all of L.A. Many Eastside neighborhoods saw the typical home sell within 15 days and above asking price.

The median sale price last month in Highland Park, for example, topped $600,000 – a record for the once-affordable ‘hood. Prices skyrocketed in Echo Park, where the median price of homes sold last month was $735,900, which is more than $200,000 higher than just one year ago. Part of last month’s increase reflected a trio of sales at the pricey Blackbirds development in Elysian Heights, where sales ranged from the $800,000 to the $900,000 range. However, there was also $1.2 million sale on Lakeshore Avenue that bumped the median price higher.

Below are examples of some of the recent Eastside sales. Mount Washington, Echo Park, Eagle Rock and Atwater Village all had home sales in the million-dollar range over the past month. A giant, hot pink Spanish revival in Silver Lake sold for nearly $2 million. On the bright side, you can still get a cozy home with a pool in El Sereno for under $500,000.

Real Estate Report for October 2015

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The net worth of home owners’ is significantly higher than renters. A typical home owner’s net worth is $195,400 compared to a renter’s $5,400, according to the Federal Reserve’s last data from 2013. The Fed’s next survey of household finances, which is conducted every three years, is due out in 2016 and the renter to home owner gap is expected to widen further due to price increases. Lawrence Yun, chief economist for the National Association of Realtors®, predicts the figure to jump to a range of $225,000 to $230,000 in median net worth for home owners in 2016 and around $5,000 for renters. If that proves correct, the typical home owner will be ahead of a typical renter by a multiple of 45 on a lifetime financial achievement scale. “Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that home owners steadily build wealth,” Yun writes in his latest column for “The simplest math shouldn’t be overlooked. A vast majority of home buyers take out a 30-year fixed rate loan to make a home purchase. After 30 years, there is no loan payment (nor rent payment). So the home price growth over that time period would be the equity that the home buyer would have accumulated.” Source: Forbes

A new study has found potential homebuyers are placing a higher degree of priority on residential properties that are energy efficient. The National Association of Home Builders (NAHB), through the new report What Green Means to Home Buyers: Perceptions and Preferences published by its BuilderBooks division, has determined that potential homeowners are putting clean tech solutions and the savings associated with them at the top of their list when judging houses to buy. While having a home in a safe community is still the number one concern among buyers (90 percent), the other top-five considerations for a home purchase are energy efficiency (88 percent), low maintenance (85 percent), lower operating costs (85 percent) and durability and resilience (84 percent). “This new study is an incredibly useful tool to help builders and remodelers determine not only consumer attitudes towards green homes, but also which green features consumers care most about,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “We have seen incredible growth in green and sustainable building over the years, and the results of this survey only further solidify the continued consumer interest in green building, and which attributes matter most to these buyers.” Source: NAHB

The growing number of aging homes could provide a big boost to the remodeling market in the coming years. About two-thirds of owner-occupied homes in the U.S. were constructed prior to 1980. Forty percent were built before 1970, according to the latest American Housing Survey, published by the Department of Housing and Urban Development. On the other hand, newly built owner-occupied homes constructed after 2010 comprise only about 2 percent of the U.S. housing stock. The number of homes three decades old has grown considerably. Indeed, the median age of owner-occupied homes is 37 years old compared to only 27 years old in 1993. “The age of the housing stock is an important indicator for the housing market going forward,” according to the National Association of Home Builders’ Eye on Housing blog. “Aging homes require remodeling and renovations, as these structures are, for example, less energy efficient than new construction.” Source: The National Association of Home Builders

C.A.R. Releases its 2016 Housing Market Forecast

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California’s housing market will continue to improve into 2016, but a shortage of homes on the market and a crimp in housing affordability also will persist, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2016 California Housing Market Forecast.”

The C.A.R. forecast sees an increase in existing home sales of 6.3 percent next year to reach 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold. Sales in 2015 also will be up 6.3 percent from the 383,300 existing, single-family homes sold in 2014.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said C.A.R. President Chris Kutzkey. “However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability. On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas.”

C.A.R.’s forecast projects growth in the U.S. Gross Domestic Product of 2.7 percent in 2016, after a projected gain of 2.4 percent in 2015. With nonfarm job growth of 2.3 percent in California, the state’s unemployment rate should decrease to 5.5 percent in 2016 from 6.3 percent in 2015 and 7.5 percent in 2014.

The average for 30-year, fixed mortgage interest rates will rise only slightly to 4.5 percent but will still remain at historically low levels.

The California median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300. This is the slowest rate of price appreciation in five years.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year. Additionally, as we see more sales shift to inland regions of the state, the change in mix of sales will keep increases in the statewide median price tempered.”

Is Airbnb raising rent in L.A.?

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Airbnb mounted a defense this week against charges that its short-term rentals are exacerbating the housing crisis in Los Angeles. The San Francisco online lodging marketplace has come under fire from the Los Angeles Alliance for a New Economy for siphoning long-term rental properties from the market. But with three public hearings on its business model set to take place in and around L.A. this week, Airbnb is hitting back.

In a report issued last month, LAANE separated out the commercial operators on Airbnb from the on-site hosts who share their homes with guests and concluded that short-term listings have cost Los Angeles 11 units of housing per day over nine months through July 2015 and cost L.A. renters $464 million annually.
Airbnb has come under fire for siphoning long-term rental properties from the Los Angeles housing market.

Airbnb has come under fire for siphoning long-term rental properties from the Los Angeles… more

Photographer: Andrew Harrer/Bloomberg

The situation is worse in popular neighborhoods including West Hollywood, Silver Like and Echo Park, and Venice, where the number of short-term rentals outnumbers net new housing units at rates of two to seven times.

Airbnb took issue with LAANE’s findings, arguing in a blog post by regional head of public policy David Owen that most of its whole-home listings are rented “only occasionally.” The company’s data scientists worked with the UCLA Luskin School of Public Affairs to determine that 92 percent of its entire-home listings are rented on a short-term basis for less than six months of the year, and 80 percent are rented for less than 90 days.

“Entire home listings do not represent housing units taken off the market, but rather the homes of regular citizens that are rented during the resident’s vacation, work assignment, or other temporary absence,” Owen wrote.

Furthermore, Airbnb noted that from 2005 to 2013, the vacancy rate in L.A. has remained essentially unchanged, “underscoring that the Airbnb community has no material impact on housing availability in the City of Los Angeles.”

LAANE disagreed with Airbnb’s conclusions, noting in the L.A. Times that Airbnb’s own numbers belie the argument that home owners are renting out their houses only when they’re away. Ninety days is far more than the number of vacation days that typical workers get annually, the advocacy organization said.

“There’s no way you can live there full time and rent it out at the rates we’re seeing,” Roy Samaan, LAANE’s research and policy analyst, told the Times. “We stand by our conclusions.”

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Homes as ATMs: It’s starting again

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As home values rise, homeowners are gaining more equity on paper — and they’re taking it out in paper. Cash-out refinances jumped 68 percent in the second quarter from a year ago, according to Black Knight Financial Services. This is the highest volume of this type of refinance in five years.

“People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they’re capitalizing on the strength of home price appreciation,” said Ben Graboske, senior vice president at Black Knight Data & Analytics.
House and money
John Lund | Getty Images

Mortgage holders have gained about $1 trillion in home equity collectively over the past year. On an individual basis, borrowers doing cash-out refinances are taking an average $65,000, which is comparable to what borrowers did in 2006, the height of the last housing boom. While the jump is significant, the volume is still nowhere near where it was back then. In fact, volume is still 80 percent below where it was at the peak in 2005.

That is not the only difference. Today’s refinancer is in a far more solid equity position in his or her home, compared with borrowers then, who used their homes like ATMs, pulling out every available dollar. Even after tapping equity, the average resulting loan-to-value ratio for today’s borrowers is 68 percent, meaning the borrower has only leveraged 68 percent of the home’s current value. That is the lowest level in a decade.

“That reflects real strength of price appreciation and consumer sentiment,” said Graboske.

The jump in cash-out refinances could be behind the strength in auto sales and home remodeling. The lack of homes for sale has caused many potential buyers to stay where they are, even though they have the equity to move up. In turn, they are using that equity to not only enhance their home but to add to its value.

Anecdotally, remodeling contractors have been swamped this year, with many putting off new projects for months just to keep up. Remodeling by owners is expected to grow about 10 percent next year, according to a new study by John Burns Real Estate Consulting. It could grow even more if interest rates rise more than expected.

Manhattan developer Zeckendorf confident $130M penthouse will sell

“This is because more homeowners will choose to stay in place and remodel rather than abandon their current low rate mortgage by moving,” according to researchers in the study.

Cash-out refinances were most popular in California, accounting for 30 percent of all volume, according to Black Knight. The next closest was Texas, accounting for 7 percent. These states have seen the most home value appreciation. Should home value appreciation slow or even flatten, those hearty loan-to-value ratios will shrink, but it is unlikely today’s highly cautious, litigation-leery lenders will allow borrowers to take out more cash than is prudent.

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