I have clients looking for the following homes. If you know of anyone who may sell in the next six months, please let me know:

• Home in Century City/Westwood Area: 3250+ SQ FT, 3+ Bedroom, (max budget $3.5M)
• Condo/Townhouse in a desirable area of LA: min. 2 bed/2 bath (max budget $850K)

IMPORTANT HOMEOWNER REMINDERS 

• February 1st: Property Taxes are due and payable but only considered delinquent if not paid by 5pm on April 10th
• February 19th: Earthquake Brace + Bolt Program Opens (more on this further below)

STATE OF THE MARKET
The Market Is Strong and Growing Stronger Halfway Through February of 2020 
An extreme lack of homes for sale continues to choke the housing market across the board except at the very top end of the market.  When there are not enough homes to go around, the average homebuyer is not helped much by historically low mortgage rates and a strong jobs market—more on that later—since it simply increases competition.

This increase in competition drives sales prices up, leaving many prospective homebuyers upset when they lose bidding war after bidding war because their agents may lack the skillset needed to get them an edge in this competitive environment.

Sellers Market, Part 2
Sellers stand to gain the most as intense bidding wars allow them to cash out their equity at values they never thought possible with less pressure to give credits/repairs during escrow. A perfect storm has been created for sellers within this unique environment that formed out of high demand (jobs & low-interest rates) and low supply (home inventory levels in some areas at record lows) amid a resilient economy and soaring stock market. This storm is likely here to stay, barring some earthquake or localized catastrophic event.

What About The R-Word?
A report by the Chief Economist at the title insurance company, First American Financial Services, predicts that “even when the next recession comes—and the predictions are that this will not happen anytime soon—the U.S. housing market is unlikely to take much of a hit.”

The analysis even speculated that “the housing market may actually aid the economy in recovering from the next recession—a role it has traditionally played in previous economic recoveries” except for the Great Recession of 2008, which was caused by a rapid expansion of credit among unqualified borrowers.

After that sinks in, consider this…

A New Threat To The Average Homebuyer
Some buyers can access Adjustable Rate Mortgages (ARMs) that are interest-only with rates in the 2s—some even in the low 2s.

Imagine a buyer is approved for an interest-only ARM with a rate of 2.5%. If that buyer is involved in a bidding war for a $1M home and that person increases their offer $50,000 in the counter round, then that would only increase their mortgage payment by ~$104.17/month. Typically agents must be prepared with an effective strategy that can give their clients an edge when competing against the usual all-cash buyers, but that strategy needs to be updated to contend with this growing set of buyers who have access to inexpensive mortgage capital.

My experience in law and business has played a huge role in my early success in real estate. For example, structuring a strong offer and presenting it persuasively to appear attractive to both the listing agent and the seller is a skill that many agents lack. While there are no guarantees that a seller will accept my client’s offer, I pursue the little things that can significantly boost the odds that a seller will be inspired to accept my client’s best and final offer even though other offers are for more money–the highest offer does not always win!

To Be Continued Next Week…

Where Are We Headed
So here we are now, in mid-February, and we are seeing multiple offer activity that is normally seen at the peak of a hot market. It really started in certain pockets but it is now happening everywhere!  This could continue throughout the year and/or the Coronavirus could push mortgage interest rates lower, both of which could continue sending prices higher if everything else stays status quo—I know that is a lot of ifs and coulds!

Careful evaluation of a sound strategic plan in advance of taking action is so critical to benefiting in this real estate market. I continue to recommend making a move sooner than later because it doesn’t appear a correction is likely and the mortgage interest rates are not likely to move down much further.  I am advising clients that they can benefit by:

• making a move to a home more suited to their needs;
• moving to a more desirable neighborhood that better fits the lifestyle they would like to have;
• locking in gains (if they are an existing homeowner) and restarting the clock on the capital gains tax exemption to legally avoid paying tax on the sale of a personal home (up to $500,000 for a married couple and up to $250,000 for individuals)—contact me about the requirements that must be met*
• or deferring the tax liability on a gain from the sale of income or investment property through the use of a 1031exchange—contact me about the requirements that must be met*

If you would like to learn more or ask me any real estate related questions, feel free to call or text me for an honest, objective perspective: 310.383.3623!

CALIFORNIA HOUSING AFFORDABILITY 
*affordability increases in the fourth quarter of 2019 according to The California Association of Realtors*
Single Family Home Affordability in California 

• 31% of California households could afford to purchase a $607,040 median-priced home in the fourth quarter of 2019. That was up from 28% in the fourth quarter of 2018, as substantially lower interest rates offset price gains.
• A minimum annual income of $119,600 was needed to purchase a $607,400 median-priced single-family home with a monthly payment of $2,990. That payment included principal, interest, property tax and insurance with a 20% down payment, and a 30-year fixed loan.

Single Family Home Affordability In Different Counties

• Los Angeles county: affordability was 27% in the fourth quarter of 2019, up from 24% in the fourth quarter of 2018. The median price in Los Angeles County in the fourth quarter of 2019 was $617,310, and the monthly payment was $3040.
• Orange County: affordability was 26% in the fourth quarter of 2019, up from 20% in the fourth quarter of 2018. The median price in Orange County in the fourth quarter of 2019 was $828,000, and the monthly payment was $4,070.
• Ventura County: affordability was 31% in the fourth quarter of 2019, up from 29% in the fourth quarter of 2018. The median price in Ventura County in the fourth quarter of 2019 was $660,000, and the monthly payment was $3,250.

Condos/Townhomes Affordability in California 

• Affordability also increased for condominiums and townhomes from one year ago. The report revealed that 41% of California households could afford a $480,000 median-priced condominium or townhouse, up from 37% one year ago.
• An income of $94,400 was needed to qualify for a monthly payment of $2,360 on a median-priced condominium or townhome.

US JOBS REPORT
*number of new jobs in January exceeded expectations*
The Department of Labor Statistics reported that:

• U.S. employers added 225,000 new Jobs in January.  That number eclipsed analysts’ expectations of 158,000 new jobs.
• The unemployment rate ticked up from 3.5% (a 50-year low) to 3.6%, as more employees entered the labor force.
• Wage growth rose with hourly wages 3.1% higher than last January.

CALIFORNIA EARTHQUAKE PROGRAM
*Opens Feb 19th…Get up to $3,000 toward retrofit for qualifying homes*

• California’s Earthquake Brace + Bolt (EBB) Program was developed to help homeowners lessen the potential for damage to their houses during an earthquake. This program provides up to $3,000 toward a seismic retrofit of qualifying homes, making the homes more resistant to earthquake activity such as ground shaking and soil failure.
• The seismic retrofit involves bolting the house to its foundation and adding bracing around the perimeter of the crawl space.
• Online registration for EBB opens Wednesday, February 19 and will be open through March 19, 2020.  Check if your home is in an eligible ZIP Code: https://www.earthquakebracebolt.com/content/ProgramZipCodes

STOCK MARKETS 
*Hit Record Highs Again This Week* 
Stocks closed higher again this week with all major indexes recording substantial year to date gains.

• The Dow Jones Industrial Average closed the week at 29,398.08, up 1.0% from 29,108.51 last week. It’s up 3.0% year to date.
• The S&P 500 closed the week at 3,3380.16, up 1.6% from 3,327.71 last week. It’s up 4.6% year to date.
• The NASDAQ closed the week at 9,731.18, up 2.2% from 9,520.51 last week. It’s up 8.5% year to date.

TREASURY YIELDS 
*We watch treasury bond yields because mortgage rates often follow bond yields.*

• The 10-year treasury bond closed the week yielding 1.59%, unchanged from 1.59% last week.
• The 30-year treasury bond yield ended the week at 2.04%, unchanged from 2.05% last week.

MORTGAGE RATES 
*remain at lowest levels in 3 years* 
The Freddie Mac Primary Mortgage Survey released on February 13, 2020 reported mortgage rates for the most popular loan products as follows:

• The 30-year fixed mortgage rate average was 3.47%, almost unchanged from 3.45% last week.
• The 15-year fixed was 2.97%, unchanged from 2.97% last week.
• The 5-year ARM was 3.28%, down from 3.32% last week.

Thank you for reading and have a great weekend!

Copyright © 2020 Kevin Tidwell Real Estate, All rights reserved.