Foreigners buy record number of U.S. homes

Source: Los Angeles Times

Foreign home buyers scooped up a record number of residential properties in the United States in the last year, despite a rising dollar and political uncertainty, according to a survey released Tuesday.

The National Assn. of Realtors said foreigners bought 284,455 properties in the 12 months that ended March 31, about a third more than a year earlier. Dollar volume surged nearly 50% to $153 billion, also a record for the survey first taken in 2009.

Chinese nationals were the biggest buyers, purchasing $31.7 billion worth of property, up from $27.3 billion a year earlier and more than ever before, the Realtors said.

But the largest increase came from a surge in buyers from Canada, where prices have skyrocketed in recent years, partially due to Chinese investment there.Canadians purchased $19 billion worth of residential property, compared with $8.9 billion in the 12 months ended March 2016, the Realtors said in their annual report on international investment.

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Is California’s housing crisis spinning out of control?

Source: The New York Times

California has a severe lack of affordable homes and apartments for middle-class families. The median cost of a home in the state has surged to $500,000—double the national cost.

A booming economy, home construction, and apartments that haven’t kept up with demand have all fueled a housing crisis throughout the state. Home prices in Los Angeles, San Francisco, San Jose, and San Diego have surged as much as 75 percent over the past five years alone.

Homelessness in California is also on the rise. In Silicon Valley, lines of parked recreational vehicles can be found with people living inside them. In Los Angeles, some local residents are reportedly installing makeshift kitchens and living in vans within quiet neighborhoods.

The state has introduced 130 housing measures this year. Among one of the most recent actions, the Senate approved a bill to crack down on communities that have delayed or derailed housing construction proposals. The bill would restrict the ability to use zoning, environmental, and procedural laws to kill projects that may be considered “out of character” with the neighborhood. The bill is expected to be voted on again later this summer.

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Consumers would pay off personal loans before mortgage  

New TransUnion study finds struggling consumers who possess multiple credit products tend to pay their unsecured personal loans first.

When faced with the choice of which debts to pay and which to miss, consumers in financial distress tend to prioritize unsecured personal loans ahead of other credit products such as auto loans, mortgages and credit cards.

These findings were released today during TransUnion’s annual Financial Services Summit, attended by more than 300 senior-level financial services executives from around the globe.

The most recent study incorporates unsecured personal loans for the first time since TransUnion began analyzing the payment hierarchy dynamic in 2010.

Beyond personal loans, this most recent analysis is consistent with prior TransUnion studies in finding that consumers have historically prioritized auto loans over their mortgages and credit cards, and have done so consistently since at least the beginning of 2004.


New home sizes continue to shrink

After increasing and leveling off in recent years, new single-family home size continued along a general trend of decreasing size during the start of 2017.

This change marks a reversal of the trend that had been in place as builders focused on the higher end of the market during the recovery. As the entry-level market expands, including growth for townhouses, typical new home size is expected to decline.

According to first quarter 2017 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was slightly lower at 2,389 square feet. Average (mean) square footage for new single-family homes declined to 2,628 square feet.

Since cycle lows, the average size of new single-family homes is 10 percent bigger at 2,624 square feet, while the median size is 14 percent bigger at 2,402 square feet.


C.A.R. Opposes Bill that Eliminates Mortgage Interest Deduction on 2nd Homes

C.A.R. is OPPOSING UNLESS AMENDED AB 71 (Chiu) a bill that would eliminate the mortgage interest deduction for second homes to fund an increase in low-income housing tax credits. 

While C.A.R. supports increasing the amount of tax credits available for low-income housing, the association is opposed to doing so at the expense of the mortgage interest deduction.

AB 71 may be voted on by the entire Assembly next week. Please look for a Red Alert on Tuesday, May 30. 

Consumer Confidence in Housing Hits All-Time High

The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 5.6 percentage points in February to 88.3, a new all-time high. Five of the six components that comprise the HPSI were up, and three hit record highs. 

Highlights from the HPSI include:

  • The net share of Americans who say it is a good time to buy a house rose 11 percentage points to 40 percent, rebounding strongly from last month’s survey low.
  • The net percentage of those who say it is a good time to sell increased 7 percentage points to 22 percent, reaching a new survey high.
  • The net share of Americans who say that home prices will go up increased 3 percentage points in February to 45 percent.
  • The net share of those who say mortgage rates will go down over the next 12 months remained constant for the third consecutive month at -55 percent.

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Millennials Think Housing No Longer Part of American Dream

Source: HousingWire

In 2015, 80 percent of millennials said buying a home was part of the American dream, but the same survey taken at the end of 2016 showed that number dropped to 72 percent.

“Given millennials make up the largest pool of potential homebuyers in the U.S., this should be at least somewhat disconcerting,” Trulia Chief Economist Ralph McLaughlin said. “If the for-sale housing market is to continue building steam in the years ahead, this demographic will need to transition into homeownership in order to support the resale of homes by their older counterparts.”

“Though home buying among millennials is likely to be volatile in the short-run, the long-run potential for this generation to support housing consumption in the U.S. is large,” McLaughlin said.

However, there is still hope for the future of homeownership. McLaughlin points out that the report shows growth in household formation. Household formation increased 0.5 percent to 805,000 new households, however, the increase was due to the formation of renter households."

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San Diego Home Price Increases Outpace Nation and California

Source: San Diego Union Tribune

Prices in San Diego County’s housing market in November outpaced the rest of the nation and California, said the S&P CoreLogic Case-Shiller Indices released Tuesday. 

Adjusted for seasonal variation, the San Diego regional index of home prices was up 5.8 percent in November compared to a year ago. The nationwide increase was 5.6 percent, setting an all-time high in three consecutive months.

 The Los Angeles index rose by 5.5 percent and by 5.3 percent in San Francisco. David Blitzer, managing chairman of the Index Committee at S&P Dow Jones Indices, wrote in the report Tuesday that recent gains show it could end the boom-bust cycle that began about 12 years ago.

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Talking Points

  • Rates for home loans were unchanged after notching their first weekly increase in 2017, mortgage provider Freddie Mac said Thursday.
  • The 30-year, fixed-rate mortgage averaged 4.19 percent during the February 2 week. The 15-year, fixed-rate mortgage averaged 3.41 percent, up one basis point during the week.
  • The 5-year, Treasury-indexed, hybrid adjustable-rate mortgage averaged 3.23 percent, up from 3.20 percent the prior week.
  • The 10-year Treasury yield fell 5 basis points during the week as familiar signs of slow growth re-emerged, Freddie noted in a release.

One of Trump's First Orders Means Home Loan Fees Won't Go Down


Friday was the day that many homebuyers across the country were to start saving on average $500 a year on their loans. A fee reduction was set to go into effect at the Federal Housing Administration, lowering the cost of nearly 1 million FHA loans per year.

But that's not going to happen, at least for now, because in his very first hours in office, President Trump issued an order suspending that fee cut.

The Obama administration had authorized the fee reduction for FHA loans earlier this month. Trump's order says it is now "suspended indefinitely." The Trump administration could ultimately allow it to go through, but the order states "more analysis and research are deemed necessary."

Geoff McIntosh, president of the CALIFORNIA ASSOCIATION OF REALTORS©, said his group was disappointed by the Trump administration's move. "It would have made a difference to California homebuyers of about $860 a year," McIntosh told NPR.  

Making sense of the story

  • The higher the price of the home, the greater the savings since the fee in question was to be cut by 0.25 percentage points of the total amount borrowed; on a $400,000 home loan, the savings would be $1,000.
  • Why would the new administration want to keep that money out of Americans' pockets? The order doesn't say precisely. But some conservatives had warned that cutting the fees for FHA borrowers might leave taxpayers on the hook in another housing crash.
  • "FHA insures over $1 trillion in outstanding mortgage loans," says Ed Pinto, co-director of the American Enterprise Institute's Center on Housing Risk. He sees that as a potentially ominous liability given the FHA's cash reserves.
  • Other analysts disagree and say the FHA is once again on strong financial footing and they say the fee cut was justified.


Looking for a Flip-Worthy House? Must-Haves for Every Room

Source: Trulia

While location is key in almost any real estate transaction, that’s not all you should consider when purchasing a property you intend to “flip.” You need to examine the home room by room, looking for potential ways to make it marketable. 

“Flipping real estate is all about minimizing risk,” says Robin Mathis, a settlement attorney in Fairfax, Va., who flips homes with her husband, Mike Irvin. “It’s not something to go into lightly.” 

With that in mind, here are some details to mull over before you buy.

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Third-Party Sales at Foreclosure Auctions Now Higher Than Ever

Source: HousingWire

Investors are undaunted by rising home prices and increasing interest rates, and perhaps even encouraged by it, as the share of third-party sales at foreclosure auctions reached a new high.

In fact, third party buyers, those who are not associated with the lender or former owner, made up 28.5 percent of all completed foreclosure auctions in 2016, according to the Year-End 2016 U.S. Home Sales Report from ATTOM Data Solutions.

The remaining 71.5 percent went back to the foreclosing lender. This is up from 23.5 percent in 2015 and the highest point going back to the earliest data available in 2000.

A total of 96,438 single-family homes sold to third-party buyers at foreclosure auctions in 2016. This was led by buyers in San Jose, Calif., where 59.1 percent of all foreclosure auction homes sold to third-party buyers. This was followed by Los Angeles with 52.2 percent, Reno, Nevada with 52.1 percent, Oxnard-Thousand-Oaks-Ventura, Calif, with 50.3 percent, and Stockton, Calif., with 50.2 percent.

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What is the definition of gentrification?

As top investment Realtors in Echo Park and Silver Lake for over 10 years, BRE Investment is constantly around and involved in discussions of gentrification. These are usually very emotionally charged conversations, and while most people are quick to give their opinion, most are very slow to properly define it. So here's what we found online. After reading it, we'd love for you to weigh in on this controversial topic. Right now, more than ever before, gentrification is so intertwined with real estate activity in the area. 

Gentrification is a process of renovation and revival of deteriorated urban neighborhoods by means of influx of more affluent residents, which results in increased property values and the displacing of lower-income families and small businesses. This is a common and controversial topic in urban planning. Gentrification may be viewed as a "correction" of blockbusting and urban flight, as many gentrified neighborhoods of the present were once affluent neighborhoods of the past.
Gentrification is typically the result of increased interest in a certain environment. Early "gentrifiers" may belong to low-income artists or boheme communities, which increase the attractiveness and flair of a certain quarter. Further steps are increased investments in a community and the related infrastructure by real estate development businesses, local government, or community activists and resulting economic development, increased attraction of business and lower crime rates. In addition to these potential benefits, gentrification can lead to population migration.
In a community undergoing gentrification, the average income increases. Poorer pre-gentrification residents who are unable to pay increased rents or property taxes may find it necessary to relocate.

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Talking Points

  • Southern California home prices jumped in December, reaching the highest level in more than nine years.
  • An improving economy and a shortage of homes for sale propelled prices up 6.8 percent from a year earlier, real estate data firm CoreLogic said Tuesday. December’s median price of $470,000 was up 1.1 percent from a month earlier.

  • In Los Angeles County, the median price last month climbed 4 percent from a year earlier to $520,000; in Orange County, 5.3 percent to $665,000; in Ventura County, 5.9 percent to $519,000; in San Bernardino County, 8.7 percent to $299,000; in Riverside County, 8 percent to $345,750; and in San Diego County, 4.2 percent to $495,000.

  • The rise in last month’s six-county median price comes after prices stayed largely flat since June, when the regional median hit $465,000 — which at the time was a nine-year high.

Led by Southern California, State’s Pending Home Sales Trends in December


Led by the Southern California region, California pending home sales registered gains on a month-to-month and year-to-year basis, portending a moderate increase in sales in the near term, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said. 

The modest sales growth is unlikely to be sustained, however, given the severe shortage of homes for sale and affordability concerns, as indicated in C.A.R.’s December Market Pulse Survey**, which saw fewer listing appointments and less open house traffic. 

Based on signed contracts, statewide pending home sales increased in December on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* rising 1.9 percent from 115.8 from December 2015 to 118.1 in December 2016 – even with new mortgage rules that pushed sales higher December a year ago. 

On a monthly basis, California pending home sales were up 3.3 percent from the November index of 114.4.  

  • Southern California saw the largest increase in pending sales last month, rising 7.8 percent on an annual basis and decreasing 16.1 percent on a monthly basis.
  • On the flip side, in the San Francisco Bay Area as a whole, tight housing supplies and low affordability contributed to a fall in pending sales of 14.2 percent compared to December 2015 and 32.5 percent from November.
  • Overall pending sales in the Central Valley improved 0.9 percent from December 2015 and were down 18.4 percent from November.
  • The share of homes selling below asking price fell from 57 percent a year ago to 43 percent in December. Conversely, the share of properties selling above asking price increased to 23 percent from 18 percent in December 2015. The remaining 34 percent sold at asking price, up from 25 percent in December 2015.
  • For homes that sold above asking price, the premium paid over asking price rose to 11 percent, up from 8.4 percent in November and 9.2 percent a year ago.
  • The 43 percent of homes that sold below asking price sold for an average of 22 percent below asking price in December, double the November figure of 11 percent, and was up from 13 percent from a year ago. 

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Existing-Home Sales Slide in December; 2016 Sales Best Since 2006

Source: National Association of Realtors®

Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. 

Lawrence Yun, NAR chief economist, said the housing market's best year since the Great Recession ended on a healthy but somewhat softer note. "Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market," he said. "However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December."

Added Yun, "While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end."

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Creating Housing That Older Americans Will Need

Source: Forbes

There’s a huge disparity between the types of homes older Americans will need over the next 20 years and their availability and affordability, according to a Harvard Joint Center for Housing Studies report.

During that time period, the 65+ population is expected to grow from 48 million to 79 million. But for many, their homes will be physically unsuitable and financially precarious. Only 3.5 percent of today’s housing has three key features of “universal design” (zero-step entrances, single-floor living and wide halls and doorways). What’s more, nearly 6.4 million low-income renters will pay more than 30 percent of their income for housing by 2035. 

“The Harvard study was a scary forecast. The senior sector will be one of the hardest hit for affordability. The most important thing we can do is find affordable housing for older Americans and contemplate layout and design to accommodate the older population,” said Lukas Krause, the Salt Lake City-based CEO of Real Property Management, the largest property management franchise in the nation."

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Industry Reacts: Is Trump's Suspension of FHA Mortgage Insurance Premium Cut Good or Bad?

Source: HousingWire

The Department of Housing and Urban Development’s decision to suspend the reduction of Federal Housing Administration mortgage insurance premiums didn’t come as a shocker.
FHA mortgage insurance premiums have been under heightened scrutiny ever since the FHA’s flagship fund, the Mutual Mortgage Insurance Fund, reached its Congressionally mandated threshold of 2 percent ahead of schedule in November 2015.

The cut will have an impact on future borrowers, said National Association of Realtors President William Brown. 

“According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut,” Brown said. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”

“We hope HUD and the Trump administration will make it a priority to quickly review the reduction in the FHA mortgage insurance premium,” said CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) President Geoff McIntosh. “Homebuyers in California, who would have saved an average of $860 a year, will be negatively impacted more than any other state by the decision to not reduce the FHA premium.”

The Decorating Trends to Look for in 2017

Source: Vogue

When it comes to home décor, 2016 was the year of everything from woven wall hangings to Scandinavian-inspired interiors. And as the year winds down, soon enough your thoughts will most likely wander to a home refresh. So it’s worth exploring the top decorating trends that will likely be on repeat in homes across the country—and possibly in your own abode.

Lawrence-Bullard, Young Huh, and Beth Diana Smith give their 2017 decorating forecast and some easy pointers on how to make them your own. These trends are chic, inspiring, and (fortunately) don’t require a complete room overhaul.

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Talking Points

  • Default notices, scheduled auctions, and bank repossessions fell 14 percent year-over-year to 933,045 U.S. properties in 2016 to the lowest level since 2006, when there were 717,522 U.S. properties with foreclosure filings, according to ATTOM Data Solutions.
  • In December, there were 85,919 U.S. properties with foreclosure filings, down 1 percent from the previous month and down 17 percent from the year-ago period.

  • “The national foreclosure rate stayed within an historically normal range for the third consecutive year in 2016, even as banks continued to clear out legacy foreclosures from the last housing bubble, particularly in the final quarter of the year,” said Daren Blomquist, senior vice president at ATTOM.

  • Foreclosures completed in the fourth quarter had been in the foreclosure process 803 days on average, a substantial jump from the third quarter and indicating that banks pushed through significant numbers of legacy foreclosures during the quarter.

  • Nationwide, 55 percent of all loans actively in foreclosure as of the end of 2016 were originated between 2004 and 2008.