Real Estate Information

There’s a scramble to refinance and buy new homes

Mortgage Bankers Association’s index tracking volume of mortgage applications to buy homes rose 2 percent in most recent survey. (iStock)

As the summer heats up, so too is the demand for home loans. 

An index tracking the volume of mortgage applications to buy homes increased 2 percent, seasonally adjusted, from the second week of July when it fell by 6 percent.

The so-called purchase index is a metric based on the Mortgage Bankers Association weekly survey, which encompasses 75 percent of the U.S. residential mortgage market. Joel Kan, who leads industry forecasting for MBA, said the purchase index was up 19 percent year-over-year. 

He said the “strong homebuyer demand” the index shows came “despite mixed results from the various rates.” 

The 30-year fixed mortgage rate increased 1 basis point to 3.20 percent, while jumbo rates dropped 2 basis points to 3.51 percent, according to the MBA’s survey. 

Kan noted, however, that “some creditworthy borrowers are being offered rates even below 3 percent.” Last Thursday, Freddie Mac saidthe average rate for a 30-year fixed-rate mortgage hit 2.98 percent, a new low in its 50 years of tracking.

MBA also tracks weekly refinance applications, which jumped by 5 percent, seasonally adjusted, last week, marking a 122 percent year-over-year increase. 

MBA’s overall index, which measures all home-loan applications, increased by 4.1 percent, and refinancing applications accounted for 65 percent of the total applications. 

written by Erin Hudson | The Real Deal

MARCH UPDATE: Corona Virus Snippets…

We talked to 21 multiple listing services about their coronavirus preparations. Here’s what they said…

Canceling open houses, making showings voluntary and offering online training are some of the steps MLSs are taking. More drastic steps may be on the horizon

Christmas lights shine for hope amidst coronavirus fears

Amidst fear and uncertainty, homeowners have begun hanging Christmas lights back up to signal their health and well-being while spreading hope to passersby

Trump may allow homeowners to delay mortgage payments

The administration didn’t make clear how borrowers might catch up on payments later on.

Self-Employed, Small Business Included in Emergency Aid Measures
The Senate passed emergency legislation Wednesday afternoon to provide support to workers and families during the coronavirus pandemic.

THANK YOU! MILLE GRAZIE!

I am honored and thankful to have received, and earned thanks to your continued support, the 2019 MVP Award for a second year in a row.

My gratitude to you all!

Rita

WALL STREET AND REAL ESTATE???

WHAT EXACTLY IS GOING ON?

A little over a decade ago, disaster struck.

The year was 2007 and after riding a rising economy and easy credit for years, home prices began to fall. Suddenly, multitudes of homeowners found themselves underwater and began defaulting on their mortgages. And in turn, Wall Street — where investors had turned to bundled home loans known as mortgage-back securities — fell to its knees. 

The ensuing chaos wrought devastation across the economy and today historians are still parsing the subprime mortgage crisis, the Great Recession, the foreclosure crisis and other chapters of this dark financial period.

Now, it might seem like after a once-in-a-lifetime financial crisis Wall Street would forever be wary of dipping back into the world of real estate. But in fact, the opposite has proven true: Today big investors with big money are roaring back into the sector. All of this has happened before, all of this will happen again. 

Of course circumstances are not exactly as they once were. For one thing, there are numerous regulations in place that didn’t exist prior to the financial crisis. Credit is also tighter for would-be homebuyers, and much of today’s cash is flowing into tech startups instead of exotic financial vehicles. 

Still, investors have warmed considerably to the real estate sector in recent years, and today it has become a consistent target for people looking for big payouts. This is a huge topic that could fill volumes and volumes, but below you’ll find some of the more notable trends.

WHO’S INVESTING, AND WHERE?

There are too many investors pouring money into the real estate sector to list here, but some of the big names are definitely worth knowing. Perhaps most significantly is Softbank, a Japanese multinational behemoth that in 2016 announced it was going to raise $100 billion for a “Vision Fund” to invest in tech companies.  

Softbank has sunk fortunes into companies across numerous sectors, but its real estate investments have been particularly transformative. In 2017, Softbank put $450 million into Compass, which was the largest real estate tech investment in U.S. history. Less than a year later, Softbank led another round of funding that netted Compass another $400 million. These investments helped drive Compass’ valuation to $4.4 billion last year, and have been the key behind both the company’s expansion and frequent attention. In other words, even if you’re not familiar with Softbank, if you’ve heard of Compass then you’re aware of the Vision Fund’s impact. 

Softbank has also fueled the growth of iBuying by investing $400 million in Opendoor. Other real estate investments include leading funding rounds of $865 million and $120 million for construction startup Katerra and insurance company Lemonade, respectively. 

Softbank also plunked down a staggering $6 billion on office co-working company WeWork

The list of Softbank’s investments could go on, but suffice it to say that it is behind many of the most prominent real estate companies on earth. Its investments also haven’t come without controversy; nearly half of the Vision Fund’s value comes from Saudi money, which became a point of criticism last year thanks to the Middle Eastern kingdom’s connection to the killing of journalist Jamal Khashoggi.

This graphic shows how diverse Softbank’s investments in real estate have become. Credit: GCA

Softbank is obviously not the only big investor in the real estate space and a list of other players looks like a who’s who of flashy funds. Sequoia Capital, for example, is one of the largest venture funds in the world and has invested in Trulia, Airbnb, Houzz and home maintenance startup Setter

Andreessen Horowitz — another famous venture capital fund — has invested in rent-to-own startup Divvy, online brokerage FlyHomes, investing platform PeerStreet, and Airbnb.

Vanguard Group, a massive financial company that among other things provides mutual and exchange traded funds (ETFs), has invested in real estate as well. Perhaps most notably, the company has spent big on disruptors like Redfin and Zillow —  though among other things it also operates a real estate ETF

Here are just a few other investors who are pushing into real estate: Axel SpringerRiverwood CapitalFidelity InvestmentsSignia Venture PartnersZeev VenturesWorld Innovation LabDFJTribeca Venture PartnersColchis CapitalNyca PartnersCaffeinated CapitalTLV PartnersThomvestMenlo VenturesFelicis VenturesSolon MackRevolutionSciFi VCSunstone CapitalNavitas CapitalCorigin VenturesHoltzbrinck VenturesBessemer Venture PartnersHony CapitalCommerce VenturesCamber CreekValar VenturesTwo Sigma VenturesChicago VenturesMadrona Venture GroupMatrix PartnersE15 VC, and many, many others.

This list is not comprehensive, but the point here is merely to emphasize just how massive the amount of investment in real estate companies is. It’s a big deal. 

All this money is being thrown at different parts of the real estate equation from buyer and seller leads to property management to insurance to closings

But one thing many of the recipient companies have in common is that they rely heavily on cutting edge technology — things like automation, algorithms or artificial intelligence — and are sometimes classified as “proptech.” The idea is that new technology can significantly boost efficiency by giving home sellers near-instant offers, or by reducing paperwork, or by analyzing data at a vast scale to identify previously unknown trends. Or whatever. 

“I would say that we’re definitely seeing the proptech market on the cusp of a super cycle of innovation,” said Vik Chawla, a principal at Fifth Wall Ventures, which has invested in companies such as Opendoor and insurance startup Hippo. “The real estate market itself is the largest asset class on earth.”

Speaking to Inman, Chawla pointed to the example of customer relationship management systems, or CRMs, which “until really three to four years ago was a foreign concept to the typical real estate agent.” Today, however, CRMs are a competitive field.

HOW MUCH CASH ARE WE TALKING ABOUT?

In a word, tons. 

According to GCA Advisors, an investment bank that tracks various types of funding, 2018 saw a total of 289 deals that altogether added up to $5.4 billion in equity invested. Incredibly, just three companies accounted for 37 percent of that funding: Opendoor, Compass and Katerra (all three of which are backed by Softbank).

The GCA report also notes that 2018 was “the most active year of financing to date,” with an increase of 84 percent year over year. By comparison, investors put about $2.9 billion into the real estate technology sector in 2017, $1.7 billion in 2016, $1.1 billion in 2015 and $763 million in 2014. 

[graphic from page 4 of the report]

Investment in real estate has increased significantly in recent years. Credit: GCA

Chris Gough, a managing director at GCA, told Inman that there is currently “broad participation in the real estate market from all capital sources,” including venture, growth and buyout-oriented funds. 

“To put it in perspective, there were 463 unique investment firms that participated in at least one real estate tech investment in 2018,” he added.

Gough also explained that the size of transactions has gone up in recent years, and that there have been significant investments from “large, well-known funds such as SilverLake, Providence Equity, Thoma Bravo, Vista Equity, TA Associates and TH Lee, amongst others.”

Significantly, GCA also expects this trend to continue, writing in the report that the real estate technology “market will remain highly active in 2019.”

Everyone who spoke to Inman for this story described personally witnessing this influx of capital, noting how even by their own anecdotal experience investment seems to be accelerating.

“I concur there’s been a lot of activity,” Chawla said. “That shouldn’t be surprising. The market is the largest one on earth and amongst the most backwards.”

WHAT ABOUT OTHER INVESTMENTS? IT’S NOT ALL PROPTECH, RIGHT?

Tech companies capture a lot of the headlines, but big money is flowing into other parts of the real estate industry as well. 

Big institutional landlords

One of the most significant trends is the rise of Wall Street-backed landlords. Major Wall Street players began snapping up single family homes to use as rentals during and in the wake of the foreclosure crisis as Fannie Mae and Freddie Mac started selling off non-performing mortgages, according to Daren Blomquist, an economist and vice president at Auction.com. Investors were able to buy those mortgages at deep discounts with the goal of making them “re-performing,” or in other words getting the homeowners to start paying again. 

Blomquist said the investors did in fact get many mortgages back on track, but “there is still a percentage of those that never got back to performing.” And in some of those cases, the investors ended foreclosing on and later buying the homes behind those mortgages. 

“Some of these companies,” Blomquist said of the Wall Street landlords, “it’s getting into the tens of thousands of homes that they have acquired.”

report commissioned by a group of consumer advocacy organizations in 2018 bears that out. The report (which is critical of this trend) states that by October 2016, Fannie, Freddie and the United States Department of Housing and Urban Development (HUD) had collectively sold off 

“104,258 delinquent mortgages at hugely discounted prices.” 

“Over 95% of them were sold to Wall Street private equity firms and hedge funds, and many were turned into rental properties,” the report adds.

Home for rent image via Shutterstock.

Today, Invitation Homes is the largest single family rental owner in the U.S. and claims to have more than 80,000 properties in 17 markets. The company — which in 2017 both went publicand merged with other big institutional landlords — is owned by the Blackstone Group, a massive private equity firm based in New York City. 

After Invitation Homes, American Homes 4 Rent is the second largest institutional landlord-investor. The company says it owned approximately 52,783 single family properties as of the end of 2018, and it went public in 2013. 

Other institutional landlords include Pretium Partners, which backs the consumer-facing Progress Residential and claims to own 27,400 homes; Tricon American Homes, which claims17,000 residences across nine states; and Cerberus Capital management, which owns more than 18,000 single family homes and is upfront about how it moved to “acquire distressed residential mortgage-backed securities following the Global Financial Crisis.”

A handful of other big, institutional landlords own thousands of other single family rentals as well.

Blomquist said the growth of these companies stands in contrast to the pre-Recession market, which, while it had investors, was still dominated by mom-and-pop landlords who ran as much as 80 percent of U.S. rentals. Now, however, Wall Street has “taken a bigger share of that investment market,” Blomquist added.

“People had done it before,” he continued. “But much more on a small scale, and much more on a regional scale. I think what’s different now is that slice of the market that’s institutional and national in scale.”

Institutional landlords are controversial

The rise of big landlords has been one of the most controversial parts of Wall Street’s recent involvement in real estate. The report from 2018 describes the big institutional landlords as turning the American dream into a “nightmare” for, among other things, maintaining higher eviction rates and aggressively pushing up rents. These trends have been covered extensively in the media in recent years, fueling a debate about whether or not Wall Street investors are really best equipped to oversee places where people actually live. 

Julia Gordon is among those who sees the rise of institutional investors as troubling. She was critical of what she described as Wall Street driving “the housing market into a ditch,” then coming in and profiting on the crisis while the “typical American families had no cash due to having been wiped out.”

“Wall Street was still there with cash,” she said. “So with the cash they went and bought up all these houses that were at insanely affordable prices after the bubble burst.”

Gordon went on to argue that shelter is a “critically important” social need “that should be managed by people who understand housing policy.” Institutional landlords, however, are less likely to be invested in things like local schools, parks, and the long-term health of a community. 

“No big institutional player is persuading me that they have the interest of the public at the heart of what they’re doing,” she said. “They’re just returning value to their investors, shareholders, whatever.”

But not everyone sees the rise of institutional landlords as a problem. Responding to criticism last year, Invitation Homes COO Charlie Young told Reuters that his company tries to respond promptly to maintenance requests. He also argued that the company’s business model gives people “a housing option that didn’t exist before,” enabling them to live in good communities where they might not be able to afford to buy.

An Invitation Homes spokesperson also disputed criticisms, saying in an email to Inman that the company sets rents “in line with broader market rates, including data from third-party sources.”

“Our homes present an affordable way for individuals and families to live in high-quality homes in great neighborhoods that are close to good schools and jobs,” the spokesperson said. “On a per-square-foot basis, our lease prices are on average 38 percent lower than multifamily rental housing across the same markets.”

The spokesperson said other advantages of Invitation Homes include the company’s 24/7 service capabilities and the flexibility it affords renters to live closer to work or amenities.

Blomquist took up a middle ground, saying he was familiar with the “horror stories” and believes that “early on there were a lot of mistakes made by the institution investors.” But he also added that larger corporations may also have some advantages, such as scale that allows them to do “maintenance on your home in a more streamlined manner.”

In any case, institutional landlords don’t show any signs of going away and remain one of the most important parts of Wall Street’s play in the real estate space.

Wall Street’s other plays

The types of investment happening now are as varied as the types of real estate available to purchase, but a few other trends are worth specifically noting here. For example, multiple companies offer short-term “fix-and-flip” mortgages that allow people to get financing for homes they plan to renovate and then resell. More provocatively still, a handful of these entrepreneurs, led by lender LendingHome, have figured out how to package those short-term loans into securities, which can then be sold to other investors — much as is done with conventional mortgage backed securities.

Wall Street has jumped into the construction business as well. In recent years, for example, surging home prices have reduced the ability of institutional investors to buy up single family homes on the cheap. And as a result, some of those investors have resorted to building their own homes that they then plan to rent out. 

Retail giant Amazon has also invested in a prefab home-building startup, and of course Katerra (see above) is spending its mountain of Softbank cash on both technology and on-the-groundinnovations.

Julie Clopper / Shutterstock.com

The boundaries between investment categories can also get blurry. For example, Blomquist said that data shows properties sold by iBuyers are increasingly “going to institutional rental investors.” He estimated the total share at about 10 percent. 

Cerberus Capital Management, in particular has been a top purchaser from iBuyers. 

Blomquist also pointed to Roofstock, a company that has attracted millions of dollars in funding and offers both institutional and retail investors a means to put money into single family rentals. The company is an example of how auxiliary services have sprung up to “feed the single family rental beast.”

ALRIGHT SO THERE’S A TON OF MONEY FLOWING INTO REAL ESTATE. WHY?

The simplest answer is because there’s an opportunity. 

“If you’re going to raise big funds and make big bets then you have to go to the places where the most opportunity is,” Aaron Block, co-founder and managing director of venture capital firm MetaProp, told Inman.

Block went on to say that the real estate industry is entrepreneurial, but historically also slow to change. And that means that over time, demand kept building and building.

“That bottled up demand was set to explode,” he said. “By most people’s estimate this has been long overdue.”

Russ Cofano, a real estate podcaster and former president of eXp World Holdings, said that investors see an opportunity in real estate and are pouring money into numerous ventures in an attempt to “hedge bets.” Though he stressed that conventional Wall Street investors and venture capitalists generally have different strategies — the former wants predictability while the latter wants to strike gold with a startup — they’re both trying to cash in at the moment. 

“Generally speaking money chases opportunity,” Cofano added. 

Most of the people who spoke with Inman for this story made similar points, noting that home sales involve such large quantities of money that they are irresistible for investors. The temptation to get into the real estate sector becomes even stronger when there’s the prospect of scaling up and dealing with hundreds or thousands of transactions. In those scenarios, even if margins are low (as they are with, say, iBuying) the potential for profit is enormous. 

“I think the reason is people realized that we’re just at the tip of the iceberg for all of the different ways that real estate can be disrupted,” Jake Fingert, a principal at venture capital firm Camber Creek, told Inman.

But that doesn’t really explain why this is happening now, at this moment in time, and not years ago or years in the future. 

Block, however, offered a few possible explanations. For one thing, there have been accelerator programs in recent years — including one created by his own firm and another run by the National Association of Realtors — that have prepared and boosted innovators to a point that they’re ready to take on large investments. 

“You’re starting to see thought leadership, of research, of innovation all coming together at the same time,” he added. “There’s just a critical mass of momentum.”

Block also pointed specifically to WeWork, saying the company’s success helped legitimize investment in other businesses that synthesize real estate and technology. It was a game-changer.

“That has really opened a lot of non-believers eyes,” Block added.

Another factor driving money into real estate at this particular moment is data, according to Cofano. 

“In residential real estate, fundamentally nothing could happen until the data was set free,” Cofano said. “As long as the data resided within the collective control of the brokerage companies, within the MLSs, there could be no broad based innovation.”

Cofano sees Zillow, which was founded in 2006, as a pivotal force in “freeing” data, making it more accessible and paving the path for other innovators who would go on to be a part of today’s real estate technology spree.

“It was a significant force in the democratization of data,” Cofano added of Zillow.

Gough, of GCA Advisors, said this democratizing of information by portals forced people in the real estate industry to respond in innovative ways.

“As technology has allowed consumers to become more independent in their home search,” Gough told Inman, “agents, brokers, lenders and other market participants (insurance, mortgage, etc.) have had to develop technology tools to engage with consumers digitally in order to make the transaction process more efficient.”

Chawla sees a similar trend, with existing players realizing that the startups were coming to eat their lunch.

“It’s actually the incumbents who quickly realized that they were being caught flat footed,” he added.

Finally, Gough noted that the availability of more data has spawned “new market opportunities” for other companies that can come in and analyze information at scale. In other words, it’s a kind of snowball effect. Gough specifically pointed to the example of Cape Analytics, which works with the insurance industry and applies artificial intelligence to property data. 

And like many other AI-focused real estate companies, Cape Analytics has been the recipientof millions of dollars in venture capital.

WHAT DOES THIS MEAN FOR AGENTS AND CONSUMERS?

Because the types of investment are so diverse, it’s tough to say if all of this is really a good or bad thing. The jury, for example, is still out on what institutional investors are doing for rentals (at least depending on who you ask). 

Most of the people interviewed for this essential guide, however, felt that in the technology space increased investment at least has the potential to be a boon. Fingert, of Camber Creek, argued that real estate is still too reliant on paper-based processes and Microsoft Excel spreadsheets. It’s an expensive ordeal, he said, and if technology can smooth it out that should ultimately be beneficial. 

“Companies can come in and purely through automation make real estate better, faster, cheaper,” he added. “I think a lot of the evolution that will happen will be instead of machines taking humans’ jobs, humans will have more time and energy to put into value added services.”

Fingert floated the example of developers who work on sustainability. Right now, he said, that job requires pouring over databases. But as automation slowly takes over that job, the humans are able to think more creatively about sustainability. 

“What we’re finding is that the heads of sustainability, instead of doing the number crunching, they’re having conversations about increasing sustainability,” he said. “They’re able to take a much more proactive, value-added approach.”

But Fingert’s comments about the relationship between humans and machines are also a nod to some uneasiness over what all this investment is going to do for real estate professionals. The iBuying industry is a perfect example: fueled by hundreds of millions in venture capital, the iBuyers have built a model that can easily cut real estate agents out of the equation, even if they claim that’s not what they want to do.

Either way, big investors do see more disruption on the horizon, which could portend hard times for some agents. Last fall, Andreessen Horowitz general partner Alex Rampell argued at a summit in Los Angeles that buying a house is a “terrible experience” that stands to be improved by the convergence of big money and high technology. Significantly, Rampell observed that it would be “hard for individual real estate agents” to compete with some technologies, such as Zillow’s Zestimate, that have emerged in recent years. 

And Rampell’s presentation was titled (somewhat ominously) “when software eats the real (estate) world.”

(Rampell and Andreessen Horowitz declined to speak with Inman for this story, citing scheduling conflicts.)

Still, the overarching theme that everyone stressed was that this is the beginning of the story of Wall Street’s latest foray in real estate, and that story still has many more chapters to come.

“We’re very much in the early innings here for disruption for the industry,” Chawla said. “And I think we’ll continue to see it as long as some of the underlying fundamentals continue to remain.”

written by Jim Dalrymple ll – Inman News

REAL ESTATE TODAY, TOMORROW AND BEYOND…

WHAT DO THE EXPERTS PREDICT?

  • 2020: SMALLER CITIES WILL BOOM – All that price growth, as well as low interest rates, are creating a wave of demand that coastal superstar cities in some cases just can’t meet. As a result, secondary cities — some in so-called “fly over states” — should see continued increasing demand.
  • 2020: HOMEOWNER DEMOGRAPHICS WILL EVOLVE – Millennials or, generally people born in the early 1980s through mid 1990s — hit their prime home buying age they will continue to drive housing trends in the coming year. That should lead to increased interest in smaller houses that are more affordable.
  • 2020: CLIMATE CHANGE WILL BE A BIGGER DEAL – Recent years have seen an array of climate and housing related disasters. From flooding in the Midwest to wildfires in California, a warming planet is already impacting housing for many people.
  • 2025: DATA WILL BE EVERYWHERE – Everyone is going to have access to data. We’re going to see a proliferation of applications that are made possible by common data standards.
  • 2030: CLIMATE CHANGE WILL MAKE HOMEOWNERSHIP PRICIER – While climate change will likely land on the radars of more buyers and sellers in the near term, in the medium term it will almost certainly make homeownership more expensive by driving up insurance rates in flood zones. Flooding is only one part of the climate change equation, of course, but homeowners affected by other disasters such as wildfires have also already begun to see their insurance costs skyrocket. Over the next decade, that trend is likely to continue — potentially pricing people out of areas they might otherwise have lived in.
  • 2030: AUGMENTED REALITY WILL ARRIVE – there have always been good potential uses for augmented reality, but that as phones become more powerful — both in terms of their cameras and computing power — innovators will rise to the occasion and develop new ways to deploy the concept.

U.S. Real Estate Market Shows Symptoms of Coronavirus Effect: What You Need to Know

The deadly outbreak of the coronavirus from China, which has sickened thousands around the world and terrified millions more, is taking a toll on global financial markets as well—and the effects are likely to extend to the U.S. luxury real estate market.

While there are only 11 confirmed cases of the virus on American soil, the U.S. housing market is already feeling the effects of what could soon be declared a pandemic. Mortgage interest rates have dipped, and the already sluggish luxury real estate market has depended in recent years on an injection of Chinese buyers.

“China has been the most important source of foreign demand for real estate,” says Lawrence Yun, chief economist at the National Association of Realtors®. Wealthy Chinese buyers often purchase luxury properties, such as high-rise condos, in California and New York. “The upper-end market can expect to be softer as a result.”

Buyers from China spent about $13.4 billion on U.S. homes from April 2018 through May 2019, according to the NAR’s most recent data on foreign buyers. While that may sound impressive, it actually represents a 56% drop from the previous 12-month period. Chinese buyers have been spending less on U.S. real estate as their government has tightened rules on how much money can leave the country, U.S. immigration rules have tightened, and trade talks between the two nations have heated up.

But with the temporary ban on any foreigners who have been in China in the past two weeks, and cancellations of many flights from China to the U.S., a lot of would-be Chinese buyers can’t get into America, putting any home-purchase plans they may have on ice.

“You have less incentive to buy real estate if it’s unclear if and when you’ll get to visit the property,” says Chief Economist Danielle Hale of realtor.com®. “In the short term, the virus could dampen [luxury] sales further.”

Why is the coronavirus pushing down mortgage interest rates?

It may seem perplexing that a virus that originated in China (and where most of its nearly 500 fatalities occurred) could result in lower mortgage interest rates an ocean away. Thank globalization. China is the world’s second-largest economy, with a worldwide supply chain. So what happens there affects businesses around the world, which then affects global financial markets. Amid market turmoil, investors tend to pull money out of the stock market and park it in safer, more stable U.S. Treasury bonds. And when bonds are strong, mortgage rates fall.

Rates dipped 9 basis points to 3.51% for 30-year fixed-rate loans as of Jan. 30, according to Freddie Mac. The panic surrounding the disease could keep them low, or even push them lower. The only thing in recent memory to compare it with is the outbreak of severe acute respiratory syndrome, or SARS, in late 2002 and early 2003. During the resulting panic, mortgage interest rates also dipped.

“SARS was barely a blip in the U.S. real estate market,” says Yun. But there weren’t nearly as many Chinese buyers shopping for homes in the U.S. back then. “We don’t know what’s going to happen.”

There could also be a downside to lower rates—while they will likely spur more buyers to get into the market at a time when buyer activity is already ramping up, sellers may respond by boosting their list prices.

Short-term effects: The luxury market could slow on the coasts

Recently, the luxury market hasn’t been in the best of health—and some folks fear the coronavirus scare could cause a relapse. The market was just beginning to pick back up, as buyers enticed by low mortgage rates were beginning to pick up pricey properties again. Then the virus hit.

(Realtor.com defines luxury as $1 million-plus homes in most of the country, although that threshold can be higher in the most expensive cities like New York and San Francisco.)

Real estate broker Amy Kong is seeing fewer folks attending open houses marketed toward Asian buyers. Kong is a real estate broker at Realty World Advance Group in San Bruno, CA, and the president-elect of the Asian Real Estate Association of America.

“People would rather not go out and mingle,” says Kong, who has heard some closings had to be postponed. “The buyers can’t be here physically to sign. They have to make other arrangements.”

That won’t be too catastrophic, though, as many of these affluent foreign buyers have representatives in the U.S. who can act on their behalf and usher through the paperwork.

Some wealthy non-Asian buyers, on the other hand, are worried about their prospective neighbors.

“Clients looking at new condos are asking us what is the percentage of Chinese living in those buildings,” says luxury real estate broker Dolly Lenz, who is based in New York but sells properties around the country. Three unrelated clients asked her this question, which she was legally unable to answer due to fair housing laws. “That was shocking to me.”

But Patrick Carlisle, chief market analyst for the San Francisco Bay Area at Compass, believes concern about the coronavirus affecting real estate sales is overblown.

“I don’t think it will have any impact unless it turns into a worldwide disaster,” he says. “People locally, I can’t see them changing their plans one way or another unless it gets much worse.”

Long-term effects: The U.S. luxury market could see a boost

While the outbreak may make it more difficult for Chinese buyers to pick up U.S. properties for now, it could be a boon for the luxury market in the long term.

“[Chinese] people who are wealthy may feel tired of the perception of China as being a third-world country,” says NAR’s Yun. “They want to park their money in a first-class world economy, which is Australia, Canada, and the U.S. Hence, we may see greater demand from Chinese, wealthy households.”

For example, more buyers from Hong Kong came to the U.S. looking for real estate after anti-government protests began last year in the territory. Since the coronavirus outbreak, luxury broker Lenz is seeing them become even more motivated to acquire a U.S. property. These affluent buyers are worried about medical care, strikes, and more unrest back home, and are looking to the U.S. as a safer option.

Chinese buyers may flock to the U.S. again for the same reasons. But once the virus is under control, the real estate market will likely go back to normal, more or less.

“I look at this as something that will last as long as the virus does,” says New York City–based real estate appraiser Jonathan Miller. “We’re uncertain about everything, and this is just another item to fret about.”

Story written by: By Clare Trapasso | Feb 6, 2020 REALTOR.com

2020 California Housing Forecast

September 26, 2019

C.A.R. releases its 2020 California Housing Market Forecast



Economic uncertainty and affordability issues to subdue California home sales

LOS ANGELES (Sept. 26) – Low mortgage interest rates will support California’s housing market in 2020 but economic uncertainty and affordability issues will mute sales growth, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

“With interest rates expected to remain near three-year lows, buyers have more purchasing power than in years past, but they may be reluctant to get off the sidelines because of economic and market uncertainties,” said C.A.R. President Jared Martin.

“Additionally, an affordability crunch will cut into demand in some regions such as the Bay Area, where affordability is significantly below state and national levels. These factors together will subdue sales growth next year.”

C.A.R.’s forecast projects growth in the U.S. gross domestic product of 1.6 percent in 2020, after a projected gain of 2.2 percent in 2019. With California’s 2020 nonfarm job growth rate at 1.0 percent, down from a projected 1.5 percent in 2019, the state’s unemployment rate will tick up to 4.5 percent in 2020 from 2019’s 4.3 projected figure.

The average for 30-year, fixed mortgage interest rates will dip to 3.7 percent in 2020, down from 3.9 percent in 2019 and 4.5 percent in 2018 and will remain low by historical standards.

“California’s housing market will be challenged by changing migration patterns as buyers search for more affordable housing markets, particularly by first-time buyers, who are the hardest hit, moving out of state,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “With California’s job and population growth rates tapering, the state’s affordability crisis is having a negative impact on the state economically as we lose the workers we need most such as service and construction workers, and teachers.”

In fact, according to C.A.R.’s 2019 State of the Housing Market Study, nearly a third (30 percent) of those sellers who planned on repurchasing said that they will buy their next home in another state outside of California — the highest level since 2005.

Older generations were more likely to buy outside of California as 37 percent of baby boomers and silent generation planned on repurchasing in another state, but only 30 percent of Millennial sellers planned to do the same

California housing seen cooling further going into 2020: UCLA forecast

Published March 13, 2019 by Jeff Daniels

KEY POINTS

While job growth and the California economy remain strong, weakness is apparent in the state’s housing market and it is likely to cool further going into 2020, says the latest UCLA Anderson Forecast.

The housing slowdown could put a damper on Democratic Gov. Gavin Newsom’s plans to step up the pace of new homes built to help ease the state’s housing shortage.

The director of the forecast says home prices are falling in many major markets of the Golden State, calling the decline “widespread and substantial.”

LOS ANGELES — While job growth and the California economy remain strong, weakness is apparent in the state’s housing market and it is likely to cool further going into 2020, according to the latest UCLA Anderson Forecast, released Wednesday.

“The housing markets are softening in California, and it’s not just the tony neighborhoods of San Francisco, Silicon Valley and West LA,” said Jerry Nickelsburg, an adjunct professor at UCLA and director of the Anderson School of Management’s forecast. “This is a statewide phenomenon.”

The economist said anticipated demand for housing throughout the state has been lacking despite the strength of the state’s overall economy and positive trends in the job market.

Nickelsburg said the slowdown in the state’s housing market also has implications for the California economy going forward. In addition, the housing slowdown could put a damper on Democratic Gov. Gavin Newsom’s plans to step up the pace of new homes built to help ease the state’s housing shortage.

“With our national forecast for slowing economic growth, continued discussion on when the next recession will be, and the Fed indicating that the peak of the interest rate cycle could be near, we now expect weaker housing markets into 2020,” Nickelsburg wrote in the forecast report. “As a consequence, our forecast for housing starts in 2019 and 2020 has been revised downward, with a recovery in building beginning in 2021.”

While the housing market is slowing, the state’s job growth remains strong, according to the forecast. It said California’s average unemployment rate is expected to rise to an average of 4.5 percent in 2019 with slower national economic growth, and then at a pace of 4.3 percent in 2020 and 2021.

California added the highest number of construction jobs nationally between January 2018 and 2019, according to the Associated General Contractors of America. The state added 28,500 jobs, or an increase of 3.4 percent during the period.

Meantime, Nickelsburg said home prices are falling in many major markets of the Golden State, calling the decline “widespread and substantial.”

The economist said the impact of the cooling is even being felt in the Central Valley of California, where home sales have fallen by more than 10 percent.

In Southern California and the San Francisco Bay Area, home sales fell to an 11-year low in January, according to CoreLogic. The analytics provider reported sales have fallen on a year-over-year basis in the Bay Area the past eight consecutive months, while in Southern California sales have fallen on a year-over-year basis in the last six consecutive months.

At the same time, the nation’s most populous state continues to suffer from a chronic housing shortage.

“Home prices are falling in California as is the level of building,” Nickelsburg wrote. He said one possible explanation is “higher mortgage interest rates are depressing prices but not the underlying demand.”

Another possibility behind the housing slowdown is prices are “so expensive that everyone (well a lot of everyone) is leaving,” the economist added.

Newsom, who assumed the governorship in January, this week announced an updated plan to ease the state’s “housing cost crisis.” The Democrat proposed a $1.75 billion housing package, including $1 billion in loans and tax incentives to spur low-, mixed- and middle-income housing production.

The governor wants to build 3.5 million new housing units in the state by 2025, or an average of about 500,000 a year. But there were only about 120,000 new homes built in 2018.

Newsom is pressing cities and counties to meet those ambitious housing expansion targets. Some of the steps are controversial, such as threatening to take away transportation funds from cities that fail to meet targets.

CALIFORNIA ASSOCIATION OF REALTORS | June Home Sales and Price Report

California home sales retreat in June, but 2019 housing market outlook revised upward, C.A.R. reports

– Existing, single-family home sales totaled 389,690 in June on a seasonally adjusted annualized rate, down 4.2 percent from May and down 5.1 percent from June 2018.

– June’s statewide median home price was $611,420, virtually unchanged from May and up 1.4 percent from June 2018.

– Year-to-date statewide home sales were down 5.9 percent in June.

– C.A.R.’s 2019 California housing market forecast was revised upward to 385,460 single-family home sales and a median price of $593,000.


LOS ANGELES (July 17) – After rebounding in May, California home sales fell below the benchmark 400,000 level in June as sales declined from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. 

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 389,690 units in June, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2019 if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

June’s sales figure was down 4.2 percent from the 406,960 level in May and down 5.1 percent from home sales in June 2018 of 410,800. Sales fell below the 400,000 benchmark again after rebounding in May. Sales have been under the benchmark for 10 of the past 11 months.

“With softer price growth and interest rates at the lowest levels in nearly three years, monthly mortgage payments on a median-priced home have fallen for four straight months. This allows homebuyers to save hundreds of dollars a month on the same home or to potentially consider a slightly more expensive home for the same monthly cost,” said C.A.R. President Jared Martin. “Combined with the long-term benefits of homeownership on personal wealth and quality of life, 2019 is a good time to purchase a home for the long haul.” 

While the median price set another record in June, the increase was tempered. June’s median price was $611,420, essentially unchanged from $611,190 in May and up 1.4 percent from $602,770 in June 2018.

“With low rates supporting sales and elevating home prices in the last few months, the market outlook has shown some improvement since the first quarter,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “As such, we have revised our 2019 forecast upward for home sales to reach 385,460 and for the median price to hit $593,000, from the previous forecast of 375,100 and $568,800, respectively.”       

Other key points from C.A.R.’s June 2019 resale housing report include:

  • At the regional level, sales fell from a year ago in all major regions on a non-seasonally adjusted annual basis, with the Central Valley recording the largest drop at 9.4 percent. Sales fell 8.8 percent in the San Francisco Bay Area and 8.4 percent in the Los Angeles Metro region. The Central Coast region experienced a 6.4 percent decline, while the Inland Empire recorded a 5.2 percent decrease.
  • In the San Francisco Bay Area, only Napa County recorded a non-seasonally adjusted annual sales increase at 19.2 percent, while sales were essentially flat in Sonoma County. The seven remaining counties experienced declines ranging from the low single-digits in Marin to a 21 percent dip in San Francisco.
  • Home sales in Southern California were down 9.1 percent, with every county outside of Ventura (0.6 percent) posting declines. Los Angeles (-12.6 percent), San Diego (-12.5 percent), Orange (-7.6 percent) and San Bernardino (-7.2 percent), and Riverside (-4.0 percent) counties all recorded sales declines. 
  • At the regional level, median home prices were up from a year ago in all major regions except for the San Francisco Bay Area, which saw an 8.1 percent decline. Only San Francisco County recorded a solid 8.8 percent year-over-year price increase, while elsewhere in the nine-county region, prices followed the statewide trend of cooling price growth.
  • In Southern California, only Ventura County experienced a year-over-year price decline. Other counties in the region recorded annual price growth ranging from 0.8 percent in Orange County to 5.7 percent in San Bernardino.
  • Median prices improved from the prior year in all Central Valley region counties, even as the region posted the weakest sales.
  • Active listings, which have been decelerating since December 2018, grew 2.4 percent from a year ago — the smallest increase since April 2018.
  • The number of homes available for sale has moderated significantly, suggesting that market is getting back toward being more balanced between supply and demand — but inventory remains relatively tight from a historical perspective. The Unsold Inventory Index (UII), which is a ratio of inventory over sales, was 3.4 months in June, up from 3.2 months in May and up from 3.0 months in June 2018. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate.
  • The median number of days it took to sell a California single-family home increased in June. Time on market inched up from 18 days in May to 19 days in June. It took a median number of 15 days to sell a home in June 2018.
  • C.A.R.’s statewide sales-price-to-list-price ratio* was 99.2 percent in June 2019 compared to 100 percent in June 2018.
  • The average statewide price per square foot** for an existing, single-family home statewide reached $292 in June 2019 and was $290 in June 2018.
  • The 30-year, fixed-mortgage interest rate averaged 3.8 percent in June, down from 4.57 percent in June 2018, according to Freddie Mac. The five-year, adjustable mortgage interest rate was an average of 3.48 percent, compared to 3.82 percent in June 2018.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.