Update: Jan 14, 2025
The Recent Los Angeles Fires: Causes, Government Response, and Resources for Assistance
The recent wildfires that is ravaging Southern California, including the Palisades and Eaton fires, have left a trail of devastation, displacing thousands of residents, destroying homes and businesses, and disrupting lives. This tragic event underscores the urgency of addressing wildfire prevention and response strategies, as well as providing immediate support to those affected.
The Causes of the Los Angeles Fires
Preliminary investigations indicate that the fires were fueled by a combination of factors:
Drought Conditions: Southern California has experienced prolonged drought, leaving vegetation dry and highly flammable.
High Winds: Seasonal Santa Ana winds exacerbated the fires, spreading flames rapidly across vast areas.
Climate Change: Rising temperatures and unpredictable weather patterns have made wildfires more frequent and severe.
Human Activity: While investigations are ongoing, some fires may have been sparked by human negligence or accidents, highlighting the need for increased public awareness and safety measures.
Failures in Preparedness and Response
Critics have pointed to shortcomings in preparedness and response by both local and state leadership:
Inadequate Fire Prevention Measures: Despite recurring wildfires, there has been insufficient investment in proactive measures such as controlled burns and vegetation management.
Emergency Infrastructure Gaps: Los Angeles Mayor Karen Bass and California Governor Gavin Newsom have faced criticism & rightfully so, for not ensuring the city and state were fully equipped to handle such large-scale disasters. This includes shortcomings in evacuation planning, emergency communication, and resource allocation.
Policy Delays: It is valid to argue that bureaucracy and delayed implementation of wildfire prevention policies & lack of proper water resources have exacerbated the impact of these disasters.
Federal and State Support
In the wake of these fires, President Joe Biden announced that the federal government would cover 100% of costs for initial disaster recovery efforts in Los Angeles. This funding will support debris removal, temporary shelters, first responder salaries, and other critical recovery needs for up to 180 days.
Governor Gavin Newsom has also pledged state resources to aid recovery efforts, but many residents remain skeptical, citing previous delays in providing disaster relief.
Available Resources for Assistance
For individuals and businesses affected by the wildfires, several resources are available:
- Federal Emergency Management Agency (FEMA)
FEMA provides financial assistance for housing, personal property replacement, and other disaster-related expenses. Residents can apply for aid online or through the FEMA mobile app.
Website: www.fema.gov
Phone: 1-800-621-FEMA (3362)
- Small Business Administration (SBA)
The SBA offers low-interest disaster loans to help businesses, nonprofits, and homeowners recover.
Website: www.sba.gov
Phone: 1-800-659-2955
- California Department of Insurance
The Insurance Commissioner provides guidance on filing insurance claims and ensures that insurers meet their obligations.
Website: www.insurance.ca.gov
Phone: 1-800-927-4357
- Local Authorities and Nonprofits
Local governments and organizations offer additional support:
Los Angeles County Fire Department: Real-time updates and safety information.
Website: www.fire.lacounty.gov
Phone: 1-323-881-2411
American Red Cross: Shelters, food, and emotional support.
Website: www.redcross.org
Phone: 1-800-RED-CROSS
United Way of Greater Los Angeles: Financial aid and community support.
Website: www.unitedwayla.org
- California Association of REALTORS® (C.A.R.)
C.A.R. has compiled a dynamic resource list with information for evacuees, including shelter locations, pet care, and donation opportunities.
Website: www.car.org
What Comes Next?
Recovery from these devastating wildfires will require a united effort from federal, state, and local governments, as well as private organizations and individuals. Moving forward, it is imperative to:
Invest in Prevention: Increase funding for wildfire prevention measures, such as forest thinning, controlled burns, and infrastructure upgrades.
Improve Emergency Systems: Enhance communication and evacuation plans to better protect residents.
Address Climate Change: Commit to long-term solutions to mitigate the root causes of worsening wildfire conditions.
While the road to recovery may be long, Southern California has a resilient community and robust support network to aid in the rebuilding process. If you or someone you know has been affected, don’t hesitate to reach out to the resources listed above for assistance.
The devastation from the wildfires in Southern California is absolutely heartbreaking. Our hearts go out to everyone affected, and as your officers, we want you to know that C.A.R. is here for you.
These fires have already destroyed numerous homes and businesses, and disrupted countless lives.
During this difficult time, it’s important for us to come together to support those in need. C.A.R. is compiling a list of resources to help with immediate needs. This list will include information for evacuees, including animals, as well as ways we can help – whether through donations or simply by offering a helping hand. Look for it on car.org and C.A.R.’s social media platforms. It will be evolving and constantly updated, so please check back often.
In addition to the new resources list, C.A.R. also has many other resources available on car.org and on Smart Zone. Many of the resources listed there also can be shared with your clients.
Stay safe and please reach out to us if we can be of any assistance.
Smart Zone & C.A.R. provide wildfire disaster relief resources
Source: Smart Zone
The devastation from the wildfires in Southern California is absolutely heartbreaking. These fires have already destroyed numerous homes and businesses and disrupted countless lives. The CALIFORNIA ASSOCIATION OF REALTORS® stands ready to help. C.A.R. is compiling a list of resources to help with immediate needs, including information for evacuees about shelters, supplies, food, pet care and supplies, childcare and more. It will be evolving and constantly updated.
Anyone can use the list on Smart Zone to find assistance. Homeowners, renters, buyers, sellers and agents will find information to help during this tragedy.
Biden says federal government to cover 100% of costs for initial LA fire recovery
Source: ABC News
President Joe Biden on Thursday announced the federal government would cover 100 percent of costs for the initial disaster response to the Los Angeles wildfires. Meeting with federal officials at the White House, Biden said the funds would go toward debris removal, temporary shelters, salaries for first responders and more for 180 days.
Biden said he emphasized to California officials that they should “spare no expense to do what they need to do.” He also had a message for residents impacted by the ravaging fires: “We are with you. We are not going anywhere. To the firefighters and first responders, you are heroes.”
More than 9,000 homes, structures lost in Palisades and Eaton fires
Source: Los Angeles Times
Officials said Thursday that more than 9,000 homes, businesses and other buildings appeared to have been damaged or destroyed in the Palisades and Eaton fires. Around 5,300 of these structures were destroyed in the Palisades fire, while another 4,000 to 5,000 structures were estimated to be damaged or destroyed in the Eaton fire burning in the Altadena area.
Officials made the estimate using aerial infrared technology and stressed that it was a preliminary number. If accurate, it would place the firestorm among the worst in Los Angeles history in terms of property damage.
73% of U.S. mortgage borrowers have rates below 5.0%
Source: ResiClub
Before borrowing costs surged, a remarkable 85.5 percent of U.S. mortgage borrowers had interest rates below 5.0 percent in Q1 2022. However, as mortgage rates remain “higher for longer,” that share continues to shrink. Most new borrowers are now predominantly taking out loans with rates with a 6-handle or 7-handle.
Indeed, according to newly released third-quarter data from the FHFA, 73.3 percent of U.S. mortgage borrowers currently have interest rates below 5.0 percent. This marks a 12.2 percentage-point decline from the historic Q1 2022 level (85.5 percent).
Unemployed office workers having a hard time finding jobs
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Source: Morning Star
The U.S. economy has added more than two million jobs over the past year, but more people who are out of work are having a hard time getting back in. On average, it now takes people about six months to find a job, roughly a month longer than it did during the postpandemic hiring boom in early 2023, according to the Labor Department. The pain is largely in high-paying white-collar jobs, including tech, law and media, where businesses grew fast when the economy reopened from the pandemic but now have less need for new hires.
Meanwhile, Federal Reserve governor Adriana Kugler stressed that the inflation battle isn’t finished. Richmond Fed President Tom Barkin said he sees more upside than downside for the economy in the year ahead. Former Fed Chairman Ben Bernanke said the economic policies outlined by the incoming Trump administration won’t cause a radical shift in inflation.
Mortgage rates hit highest level since July, crushing demand
Source: CNBC
Mortgage rates last week moved higher for the fourth week in a row. That caused already very weak mortgage demand to drop even further. Total mortgage application volume fell 3.7 percent compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,650 or less increased to 6.99 percent from 6.97 percent, with points decreasing to 0.68 from 0.72 (including the origination fee) for loans with a 20 percent down payment. The refinance share of applications rose 2 percent for the week but were 6 percent higher than the same week one year ago. Applications for a mortgage to purchase a home fell 7 percent for the week and were 15 percent lower than the same week one year ago. There is considerably more supply of homes for sale now than there was last January, but higher rates and higher home process are keeping buyers on the sidelines.
Insurance Protection for Southern California Residents Affected by Wildfires
The Calif. Dept. of Insurance announced it is issuing a mandatory one-year moratorium on insurance non-renewals and cancellations for homeowners impacted by the Southern California wildfires.
Those within the perimeters or adjoining ZIP Codes of the Palisades and Eaton fires in Los Angeles County will be shielded for one year by the Governor’s January 7 emergency declaration regardless of whether they suffered a loss.
As firefighters continue to battle wildfires across the region, the Department may issue a supplemental bulletin if additional ZIP Codes are determined to be within or adjacent to a fire perimeter subject to this declared state of emergency for Los Angeles and Ventura counties.
Market Update
Southern California had a rough week to start the new year, with four major fires burning in L.A. County, forcing thousands to evacuate. The devastating blazes have incinerated more than 10,000 structures and will likely be one of the costliest in U.S. history. While the conditions have shown some slight improvements in the past couple days, the danger is far from over as more strong winds are expected this week. We hope the fires will be under control very soon and hope everyone stays safe.
Jan 2025
America’s median renters have $10,000 net worth, while homeowners have $400,000
Source: CNN
The story of the housing market over the past few years has been characterized by a growing divide between “haves” and “have-nots” – those who own a home and those who rent. Existing homeowners in American have seen their wealth on paper explode as home prices have surged across the country. At the same time, after a slight dip in rents after the start of the COVID pandemic, rents have also spiked, eating into many people’s savings.
A recent report from the Aspen Institute highlights the gaping wealth chasm that has formed between homeowners and renters in America. The median homeowner in America has a net worth of $400,000 as of 2022, the most recent data available, while the median renter’s net worth is just $10,000, according to the report. That means the typical homeowner has almost 40 times as much wealth as the typical renter.
November home sales surged, boosted by lower rates
Source: CNBC
Sales of previously owned homes rose 4.8 percent in November compared with October, according to the National Association of REALTORS. That put them at a seasonally adjusted, annualized rate of 4.15 million units. Sales were 6.1 percent higher than November 2023. This is the third-highest pace of the year and the largest annual gain in three years.
“Home sales momentum is building,” said Lawrence Yun, chief economist at the NAR. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6 percent and 7 percent.” The supply of homes for sale at the end of October was 1.33 million units, up 17.7 percent from November of last year. At the current sales pace, that represents a 3.8-month supply. A six-month supply is considered balanced between buyer and seller.
20 million homes could be available, but not where buyers want them
Source: CNBC
As the U.S. continues to face a shortage of available homes, some may be looking at those occupied by “empty nesters” as an incoming source of inventory. As older residents begin to downsize, the thinking goes, the millions of homes they currently own will fill the deficit, thus bringing housing costs down. However, those units are likely to be the solution, says Zillow Senior Economist Orphe Divounguy. The reason is simple: Empty nesters, which Zillow defines as “residents ages 55 or older who have lived in the same home for 10 or more years, have no children at home and have at least two extra bedrooms,” don’t live in the same places where younger generations want to be, according to recent research.
“These empty-nest households are concentrated in more affordable markets where housing is already more accessible – not in the expensive coastal job centers where young workers are moving and where homes are most desperately needed,” said Divounguy in the report. Around 20.9 million households fit the definition of empty nesters in 2022 and out of the 50 biggest, U.S. cities, they have the greatest concentrations in Pittsburgh, Buffalo and Cleveland. But the cities with the most people under 44 are San Jose, Austin and Denver.
Unglamorous feature now sought after in California
Source: MSN
Well-to-do homeowners in California are increasingly investing in personal fire hydrants to protect against the growing threat of wildfires. The trend has led to the unlikely object emerging as a new status symbol in ritzy areas such as Malibu, with claiming they can help homes sell faster because they “mitigate fear,” reported the Wall Street Journal.
Personal hydrants are connected to municipal water systems or private tanks and provide an immediate water source in the event of a fire. Some homeowners choose to install such a device as an extra safety measure, whereas others have no choice because their property is located in a remote area. The rise in demand for personal fire hydrants reflects growing awareness around the frequency and severity of wildfire outbreaks. In the 2000s, wildfires in the U.S. were four times larger, three times more frequent and significantly more widespread compared to the previous two decades, found researchers at the University of Colorado, Boulder.
Mortgage rates rise after Fed rate cut
Source: CNBC
After a 21-basis point jump following last week’s Fed meeting, the next day mortgage rates rose even higher, to 7.14 percent, according to Mortgage News Daily. That translates to $218 more per month today on a mortgage payment for a 30-year fixed rate mortgage with 20 percent down. The data is based on closings, so that contracts will have been signed in September or October.
The supply of homes was up nearly 18 percent compared to the year before. Homebuilder stocks are down due in part to the slowdown in mortgages.
Use just from fidelity for new email 122424
A new study has revealed a few connections through which homeownership can impact longevity. The study, led by Dr. Casey Breen, Senior Postdoctoral Research Fellow at Oxford University’s Leverhulme Center for Demographic Science and Department of Sociology, examined the benefits of homeownership in the male population in the United States. It looked at 1920 and 1940 U.S. census records and Social Security mortality records to document Black-White disparities in homeownership rates and estimated the effect of homeownership on longevity using a sibling-based approach.
It found that homeownership was linked to an increased in life expectancy of 0.36 years for Black male Americans born in the early 20th century, and 0.42 years for white male Americans in the same cohort. According to the study, the connection to longevity came partly through wealth accumulation. “A home is the single largest component of nonpension wealth in the United States,” the study explains. First, homeownership likely reduces housing costs, saving owners from high rental prices and providing tax benefits such as tax deductions on mortgage interest and no capital gains tax. Second, homes will generally gain value over time. And third, monthly mortgage payments encourage savings, the study says. Another reason for longevity is that homeownership has a connection to social networks. Homeowners are more likely to feel a sense of community than renters, largely because homeowners often live in one neighborhood much longer than renters do. This helps them foster stronger ties to their communities, as well as more integration and interaction at community events. Longevity was also impacted by improved housing conditions as well as the psychological benefits of feeling a stronger sense of control and self-determinism over their lives because their environments are predictable and dependable.
LA City Council votes to boost housing development and leave single-family-home zones
Source: MSN
The Los Angeles City Council on Tuesday voted to boost housing development in existing high density residential neighborhoods and along commercial corridors, while leaving single-family zones largely untouched. In a 15 to 0 vote, the council asked the city attorney to draft an ordinance to carry out that plan, which provides incentives to build both market rate and affordable units. Once the ordinance is drafted, it will come back to council for final approval.
The rezoning effort is in response to state housing mandates that seek to alleviate the housing crisis by requiring the city to find land where an additional 255,000 homes can be built and have the plan in place by mid-February. Last month, a city council committee approved a plan that allowed for more building in existing high density residential neighborhoods and along main streets in areas with jobs and good schools. Under the plan, developers would be able to build more than they currently can in those areas if they include a certain percentage of affordable units.
Mortgage rates dip today and refinance demand surges
Source: CNBC
Mortgage rates had been moving higher this week in anticipation of the release of the Consumer Price Index, which would reveal whether inflation were increasing. However, when the inflation numbers were released, rent inflation had its lowest gain since April 2021. According to the Mortgage Bankers Association’s seasonally adjusted index, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,650 or less decreased to 6.75 percent from 6.78 percent, with points remaining falling to 0.66 from 0.67 (including the origination fee) for loans with a 20 percent down payment.
Mortgage applications overall surged 5.4 percent last week compared with the prior week. Applications to refinance a home loan rose 27 percent week to week and were 42 percent higher than the same week one year ago. Applications for a mortgage to purchase a home fell 4 percent for the week and were 4 percent higher than the same week one year ago.
Here are five steps we encourage all investors to consider taking to help boost their financial fitness at any time of the year.
More Home Buyers Expect Rosier 2025 Housing Outlook
The housing market could open up more opportunities to home buyers in the new year and lead to a housing rebound after two years of sluggish sales, housing economists said last week during NAR’s Real Estate Forecast Summit. During the virtual summit, NAR released its 2025 housing forecast, predicting stronger home sales (rebounding after hitting a 15-year low this summer), moderating but still increasing home prices, a greater number of homes coming up For Sale—both newly built and existing—as well as stabilizing mortgage rates.
Zillow’s Housing Market Predictions for 2025
Zillow predicts a more active housing market and more buyers gaining the upper hand in 2025, but those hoping to buy — or even refinance — should buckle up for a bumpy ride and stay ready to move when conditions are right. Rent affordability is on track to improve next year, as long as wages continue to grow, after a construction boom has eased pressure on rent prices.
Market Update
Despite mortgage rates remaining elevated in the past couple of months, the latest housing report offers some hope that the market will continue to get better as we wrap up 2024 and move into 2025. While home sales remained well below the pre-pandemic norm in November, market conditions continued to improve year-over-year. Inflation appears to be sticky, but it is in line with expectations for now, and the Fed will likely follow through with a reduction this week as such. Consumers are also feeling more optimistic about the housing market, which is a good sign that many potential homebuyers could be moving off the sidelines in the coming year.
Housing Market Unlikely to Thaw in 2025 Due to Affordability Challenges and ‘Lock-in Effect’
Affordability and the so-called “lock-in effect” are expected to keep housing activity subdued in 2025, with existing home sales forecast to move only slightly upward from recent multi-decade lows, according to the December 2024 commentary from the Fannie Mae Economic and Strategic Research Group. The broader economy is expected to remain on solid footing and expand at an above-trend pace through 2026 as it navigates elevated core inflationary pressures and heightened policy uncertainty.
California housing market sees largest sales increase since 2021
Source: Times of San Diego
California’s housing market recorded its largest annual increase in existing home sales since June 2021 this November, reported the CALIFORNIA ASSOCIATION OF REALTORS® on Tuesday. However, the market continues to recover slowly, with overall sales still far below pre-COVID levels. The sales of existing single-family homes climbed 1.1 percent from October’s 264,870 homes to 267,770 homes in November. Compared to November 2022, sales surged 19.5 percent from a revised 224,140 homes. C.A.R. noted, though, that this significant year-over-year growth was due to the “low-base effect,” as November 2022 sales dropped to their lowest point since late 2007.
The statewide median home price declined 4 percent month-over-month, from $888,740 in October to $852,880 in November. Despite this drop, the median price rose 3.8 percent year-over-year from November 2022’s revised $821,710. November’s price drop marked the largest October-to-November decline since 2008, following a significant price increase in the prior month. C.A.R. attributed the drop primarily to a shift in the sales mix, with higher-priced home sales pulling back more sharply than lower-priced sales.
Federal Reserve lowers interest rates but hints at fewer cuts next year
Source: NPR
The Federal Reserve lowered interest rates on Wednesday, but policy makers signaled caution about additional rate cuts next year in the face of stubborn inflation. The central bank lowered its benchmark interest rate by a quarter percentage point to a range of 4.25 percent to 4.5 percent. Rates have fallen by a full percentage point since September, making it cheaper to get a car loan, finance a business or carry a balance on your credit card.
On average, members of the Fed’s rate-setting committee said they expect borrowing costs to fall by only another half percentage point in 2025. That’s less than the projections three months ago, which predicted a full percentage point in rate reductions next year. While inflation has fallen sharply since hitting a four-decade high in 2022, progress on prices has slowed in recent months. The annual inflation rate in November was 2.7 percent – slightly higher than the month before. Fed officials say they’re determined to bring inflation down further, while acknowledging it’s been a lengthy and exhausting battle. Members of the rate-setting committee now think it will be 2027 before inflation falls to the Fed’s 2 percent target.
SoCal housing market slows for homes and rentals
Source: Los Angeles Times
The Southern California housing market is downshifting. The average home price in the six-county region fell 0.3 percent from October to $869,288 in November, according to Zillow, marking the fourth consecutive month of declines. Price are now 1.3 percent off their all-time high in July, but some economists say prospective home buyers and sellers shouldn’t expect home values to plunge – one reason behind the shift is the market typically slows in the fall and prices are still above where they were a year ago.
Still, more homes are hitting the market and mortgage interest rates remain high, creating a situation of slightly more supply and slightly less demand. As a result, annual price growth has slowed. Last month, Southern California home prices were 4.3 percent higher than a year earlier, compared to a recent peak of 9.5 percent in April. Senior economist at Zillow Orphe Divounguy said he expects annual price growth in Southern California to slow further next year, but not to turn negative. Though more homeowners are choosing to sell their home, many others still don’t want to give up their ultra-low mortgage rates they took out during the pandemic.
New California insurance rule will increase coverage in fire-prone areas
Source: CBS News
Under a new insurance regulation that just got approved last week, California Insurance Commissioner Ricardo Lara said homeowners would have an easier time buying fire insurance. The insurance crisis has been unfolding in the state for the last couple of years, with companies leaving or dropping customers, especially those who live in wildfire-prone areas.
Commissioner Lara announced on Friday that his plan to allow companies to use catastrophe models and climate change to set higher rates got the approval from the Office of Administrative Law. In exchange, he said companies promised to sell policies in areas with the greatest fire risks, such as Wine Country, the Santa Cruz Mountains, and the Oakland Hills. “This is the first time in California that there’s a requirement for insurance companies to write policies and we’re going to be enforcing that,” said Michael Soller, a deputy insurance commissioner at the state’s insurance department. He said the new regulation will require companies to try to cover 85 percent of homes in designated fire-prone zip codes.
California’s fourth-largest home insurer to drop all condo, rental policies
Source: San Francisco Chronicle
Liberty Mutual, California’s fourth-largest home insurer, is planning to exit the condo and rental insurance markets in 2026. On the eve of a slate of reforms meant to incentivize insurance companies to write policies in California, Liberty Mutual has told state regulators it will stop offering new condo and renter policies in 2025. Existing customers will begin losing coverage in 2026, according to filings with the California State Department of Insurance.
In 2023, Liberty Mutual insured 6.75 percent of the California home insurance market, which includes homeowners, condo owners and renters insurance. Filings show Liberty Mutual currently insures just under 67,500 condos and about 102,000 rental properties under its Liberty Mutual and Safeco brands. The company hasn’t written new condo and rental policies under the Liberty Mutual brand since December 2023, according to the spokesperson. All existing customers will remain covered until at least January 2026. The company will continue offering insurance for homeowners.
November home sales surged more than expected
Source: CNBC
Sales of previously owned homes rose 4.8 percent in November compared with October, according to the National Association of REALTORS. That put them at a seasonally adjusted, annualized rate of 4.15 million units. Sales were 6.1 percent higher than November 2023. This is the third-highest pace of the year and the largest annual gain in three years. This count is based on closings, so contracts were likely signed in September and October.
According to the Mortgage Bankers Association’s seasonally adjusted index, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,650 or less increased to 6.75 percent from 6.67 percent, with points remaining unchanged at 0.66 (including the origination fee) for loans with a 20 percent down payment. Applications for a mortgage to purchase a home increased 1 percent for the week and were 6 percent higher than the same week one year ago. Refinance demand fell 3 percent for the week but was 41 percent higher than the same week one year ago.
California Experiences Largest Annual Increase in Home Sales Since June 2021
California had its largest yearly increase in existing home sales since June 2021 in November, but overall, the housing market remained a work-in-progress. Despite a double-digit growth rate from their year-ago level, sales of existing single-family homes remained well below the pre-Covid norm of 400,000 units, C.A.R. reported last week.
Existing, single-family home sales totaled 267,800 in November on a seasonally adjusted annualized rate, up 1.1 percent from 264,870 in October and up 19.5 percent from 224,140 in November 2023.
November’s statewide median home price was $852,880, down 4 percent from October but up 3.8 percent from $821,710 in November 2023.
Year-to-date statewide home sales edged up 3.1 percent
Fed Lowers Rates But Sees Fewer Cuts Next Year
The U.S. central bank cut interest rates last Wednesday, as expected, but Federal Reserve Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, remarks that showed policymakers are starting to reckon with the prospects for sweeping economic changes under a Trump administration.
12/31/24
Housing Supply Hits 4-Year High
Active listings—the total number of homes for sale—climbed to the highest level since 2020 in November on a seasonally adjusted basis, rising 0.5% month over month and 12.1% year over year, according to a report by Redfin.
A major reason for the jump in supply is a pileup of unsold homes, many of which buyers have deemed undesirable because they seem overpriced.
Over half (54.5%) of home listings in November sat on the market for at least 60 days without going under contract. That’s the highest share for any November since 2019 and is up from 49.9% a year earlier. The typical home that did go under contract in November did so in 43 days, the slowest November pace since 2019.
Update: Corporate Transparency Act Beneficial Owner Information On Hold Again
The Corporate Transparency Act (CTA) requires most U.S. business entities, including most corporate brokerages, to report stakeholder information to the Treasury Department. In early December, a lower federal court in Texas ruled the CTA unconstitutional and issued a preliminary injunction blocking enforcement of the Beneficial Owner Information (BOI) reporting requirements.
On December 23, 2024, the 5th Circuit Court of Appeals lifted the preliminary injunction. Following the ruling, the Financial Crimes Enforcement Network (FinCEN) reinstated the BOI reporting requirements with an extension. On December 26, 2024, the 5th Circuit Court of Appeals issued a new order reinstating the preliminary injunction while it considers the substantive arguments on appeal. The reporting requirements would have applied to most corporate brokerages, including agent owned corporations used primarily for tax purposes.
America’s Renters Are Moving Less Than Ever
A third (33.6%) of U.S. renters have lived in the same home for at least five years, up from 28.4% a decade ago, according to a new report from Redfin.
While the majority of renters move within five years—including 25.6% moving within 12 months and 40.8% moving between 1-4 years—the soaring cost of buying a home has pushed many to stay put for longer.
Nearly one in six (17%) renters had lived in the same property between 5-9 years in 2023, compared to 14.4% in 2013. Nearly the same number (16.6%) stayed in the same home for 10+ years, compared to 13.9% a decade earlier.
010325
Housing supply hits 4-year high
Source: Yahoo! Finance
Active listings — the total number of homes for sale — climbed to the highest level since 2020 in November on a seasonally adjusted basis, rising 0.5 percent month over month and 12.1 percent year over year, according to a report by Redfin.
A major reason for the jump in supply is a pileup of unsold homes, many of which buyers have deemed undesirable because they seem overpriced. Over half (54.5 percent) of home listings in November sat on the market for at least 60 days without going under contract. That’s the highest share for any November since 2019 and is up from 49.9 percent a year earlier. The typical home that did go under contract in November did so in 43 days, the slowest November pace since 2019.
California insurers required to increase home coverage in wildfire areas
Source: Milford Mirror
Insurance companies that stopped providing home coverage to hundreds of thousands of Californians in recent years as wildfires became more destructive will have to again provide policies in fire-prone areas if they want to keep doing business in California under a state regulation announced Monday.
The rule will require home insurers to offer coverage in high-risk areas, something the state has never done, Insurance Commissioner Ricardo Lara’s office said in a statement. Insurers will have to start increasing their coverage by 5 percent every two years until they hit the equivalent of 85 percent of their market share. That means if an insurer writes 20 out of every 100 state policies, they’d need to write 17 in a high-risk area, said Lara’s office.
New California laws take effect in 2025
Source: CBS News
Governor Gavin Newsom signed hundreds of new laws that will take effect this year, some of which affect homeowners and potential home buyers and sellers. Senate Bill 1037 aims to crack down on local governmnets that block or delay approved housing. The bill allows penalties of up to $50,000 per month, funds that will go toward supporting affordable housing in areas where the local government blocked or delayed the approved housing.
Assembly Bill 3057 aims to make developing Accessory Dwelling Units a little easier. Commonly known as “in-law” units, the law comes amid efforts by several communities across the state to increased housing production.
California homeowners pay a median $5,114 in property taxes
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Source: San Francisco Examiner
America’s homebuyers have had a difficult few years. A combination of surging demand and scarce inventory has led to fierce competition among buyers, driving home prices to record levels. On top of this, high interest rates have increased borrowing costs. While existing homeowners have largely benefitted from high prices in the form of equity gains, they also face rising property taxes based on a percentage of their home’s increasing, assessed value. As of 2024, 19 states including California have assessment limits that cap how much a property’s assessed value can increase annually. Median property taxes for owner-occupied homes in California in 2023 was $5,114, and the median owner-occupied home value was $725,800. Median owner-occupied household income was $122,776.
Property taxes are a cornerstone of state and local government finances, providing the largest share of tax revenue to fund essential services such as education, public safety, and infrastructure. Unlike other tax types, property taxes offer a relatively stable revenue stream, as they are less directly affected by economic fluctuations.
Mortgage demand dives nearly 22% to end 2024
Source: CNBC
A sharp rise in mortgage interest rates toward the end of December took its toll on mortgage demand, hitting just as the housing market entered its typically slowest stretch of the year. Total mortgage application volume for the two weeks ended Dec. 27, 2024 dropped 21.9 percent compared with the week before that period, according to the Mortgage Bankers Association’s seasonally adjusted index. An annual adjustment was made to account for the holidays.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less increased to 6.97 percent from 6.89 percent, with points rising to 0.72 from 0.67, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan, which are the most sensitive to interest rate gyrations, fell 36 percent from two weeks before. Still, they remained 10 percent higher than the same period one year ago. The refinance share of mortgage activity decreased to 39.4 percent of total applications from 44.3 percent the previous week. Applications for a mortgage to purchase a home fell 13 percent during the two weeks and were 17 percent lower than the same period one year ago.
010625
Market Minute
Despite mortgage rates remaining elevated in the past couple of months, the latest housing report offers some hope that the market will continue to get better as we wrap up 2024 and move into 2025. While home sales remained well below the pre-pandemic norm in November, market conditions continued to improve year-over-year. Inflation appears to be sticky, but it is in line with expectations for now, and the Fed will likely follow through with a reduction this week as such. Consumers are also feeling more optimistic about the housing market, which is a good sign that many potential homebuyers could be moving off the sidelines in the coming year.
The housing market continued to improve in November, as sales of existing single-family homes in California recorded its largest increase since June 2021 and pending sales exceeded last year’s level for the fifth consecutive month – suggesting another modest growth in December to close out the year.
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010725
Mortgage Rates Reach Highest Point Since July
Freddie Mac released the results of its Primary Mortgage Market Survey®, showing the 30-year fixed-rate mortgage averaged 6.91 percent, as of January 2, 2025.
The 15-year fixed-rate mortgage averaged 6.13 percent, up from the prior week when it averaged 6.0 percent. A year ago at this time, the 15-year FRM averaged 5.89 percent.
HUD: Housing Programs Crucial as Homelessness Reaches New Highs
A new report on homelessness from the U.S. Department of Housing and Urban Development paints a picture of an increasingly bleak housing crisis, but perhaps offers some glimmers of hope.
On one night in January, HUD said it counted approximately 771,480 people who were in shelters or temporary housing, or who had no housing at all. This translates to roughly 23 out of every 10,000 people in the United States — the highest number of people experiencing homelessness on record. The figure also represents an 18% year-over-year increase in the total number of homeless people based on HUD’s annual point-in-time count.
For families with children, the rise in homelessness between 2023 and 2024 was even sharper, increasing 39%. Of the total homeless count, 150,000 individuals were children.
Market Update
Mortgage rates kicked off the new year with their highest level since early July. With consumers remaining resilient and the economy expected to grow moderately in 2025, the Fed is proceeding more cautiously with further cuts in the next 12 months. The bond market reacted accordingly to the Fed’s latest outlook and prompted rates to climb higher in the last two weeks of 2024. With the latest spike in rates, the housing market is seeing some softening at the end of last year as mortgage application activity began to slow. While a soft start in home sales in California looks likely for the beginning of 2025, the housing market is still expected to grow modestly this year with rates projected to decline steadily in the next 12 months.
Silver Tsunami Likely to Bring Wave of Wealth to Children of Baby Boomer Homeowners
Government sponsored lender Freddie Mac reports that three quarters—75%—of Baby Boomer homeowners plan to leave their current home or the proceeds from the sale of their home to their children or family members when they pass on.
Freddie Mac’s latest analysis of the housing perceptions, preferences and plans of Baby Boomers found that nearly as many—68% Boomers—are planning to “age in place,” meaning they will not be moving to a different home to live out their retirement years. Back in April, a study conducted by Redfin found 78% all Boomers plan to stay in their current home for retirement.
October 2024
California housing to see stronger sales, rising prices in 2025, REALTORS® forecast
Source: OC Register
California’s beleaguered real estate industry will get some relief next year, with house sales projected to increase 10 percent to 304,400 transactions in 2025, the CALIFORNIA ASSOCIATION OF REALTORS® predicted on Wednesday, Sept. 25.
In the last two years, sales plunged to fewer than 276,000, well below the state’s average of more than 400,000 transactions per year. House prices, meanwhile, are expected to continue rising next year, but at a slightly slower pace than in 2024. C.A.R. economists predicted the median price, or price at the mid-point of all sales, will rise almost 5 percent to a record high of $909,400. If accurate, house prices will have nearly doubled in the past 10 years. C.A.R. also predicted that 30-year mortgage rates will drop to an average of 5.9 percent next year, down from 6.6 percent this year. Lower mortgage rates will encourage many “locked-in” homeowners – reluctant to give up low payments they acquired during the pandemic – to put their properties up for sale.
GDP: U.S. economy grows at 3% annualized pace in second quarter
Source: Yahoo! Finance
The U.S. economy grew at a 3 percent annualized pace in the second quarter, a faster rate than Wall Street had expected. The Bureau of Economic Analysis’s third estimate of second quarter U.S. gross domestic product (GDP) was unchanged from the second estimate which had shown 3 percent annualized growth. Economists had estimated the reading to show annualized growth of 2.9 percent. The third estimate for second quarter GDP confirms that economic growth was higher than the 1.4 percent annualized growth seen in the first quarter.
Separately, data from the U.S. Labor Department released Thursday showed 218,000 unemployment claims were filed in the week ending Sept. 21, below Wall Street’s expectations of 223,000. This marked the lowest level of weekly claims since the middle of May. “The revisions only strengthen our conviction that the U.S. economy will continue to expand at a decent pace over the coming year, which suggests labor market conditions are unlikely to deteriorate markedly from here,” Oxford Economics Deputy Chief Economist Michael Pearce wrote on Thursday.
The Fed sees its inflation fight as a success. Will the public eventually agree?
Source: Associated Press
With its larger-than-usual half-point cut to its interest rate last week, the U.S. Federal Reserve underscored its belief that it’s all but conquered inflation after three long years. The public at large does not seem to agree. Consumer surveys, including one released Friday by the Associated Press-NORC Center for Public Affairs Research, show that most Americans remain unhappy with the economy, still bruised by an inflation rate that hi a four-decade high two years ago as the economy rebounded from the pandemic recession.
Yet in the view of some economists, the shift toward steadily lower borrowing rates could eventually boost consumer sentiment. Inflation has sunk for more than two years and is nearly back down to the Fed’s 2 percent target. That that means overall prices are still rising, they’re doing so much more slowly. The costs of some high-profile consumer goods, from used cars to grocery prices, have actually been falling. Economic history suggests that a low, stable inflation rate, with prices rising only gradually, eventually leads Americans to adapt to higher price levels. One favorable factor is that average incomes are now rising faster than prices, allowing more households to afford necessities.
Newsom signs bill limiting homebuyer sales contracts to 3 months
Source: Marin Independent Journal
California Governor Gavin Newsom signed a bill Tuesday limiting real estate contracts between homebuyers and their agents to three months, imposing a time limit on agreements that became mandatory last month under the National Association of REALTORS® commission lawsuit settlement.
The new law will take effect on Jan. 1, making California one of at least 28 states with laws requiring home shoppers to have a buyer-representation agreement with their agents. The new law requires written consent by both the buyer and the agent for renewing buyer’s representation agreements every three months.
Home builder confidence rises in September amid rate cuts
Source: Yahoo! Finance
The Home Builder Confidence Index rose to 41 in September, up from August’s reading of 39. The latest print from the National Association of Home Builders (NAHB) came in line with expectations as mortgage rates continue to cool to 19-month lows. In this video, anchor Seana Smith breaks down the data and what interest rate cuts from the Federal Reserve could mean for the homebuilder category.
Mortgage refinance boom takes hold, as weekly demand surges 20%
Source: CNBC
A steady decline in mortgage rates to two-year lows has current homeowners rushing to take advantage of potential savings. Applications to refinance a home loan surged 20 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was a stunning 175 percent higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,650 or less decreased to 6.13 percent form 6.15 percent, with points increasing to 0.57 from 0.56 (including the origination fee) for loans with a 20 percent down payment. The rate was 128 basis points, or 7.41 percent, higher the same week one year ago. “The 30-year fixed rate decreased for the eight straight week to 6.13 percent while the FHA rate decreased to 5.99 percent, breaking the psychologically important 6 percent level,” said Joel Kan, vice president and deputy chief economist at the MBA, in a release. The refinance share of applications rose to 55.7 percent. Applications for a mortgage to purchase a home rose just 1 percent for the week and were 2 percent higher than the same week one year ago, partially because buyers are still facing high home prices and a limited supply of houses for sale.
C.A.R. Releases its 2025 California Housing Market Forecast
A more favorable interest rate environment that will loosen up the “lock-in” effect and improve housing inventory will encourage buyers and sellers to return to the market to boost both home sales and prices next year, according to a housing and economic forecast released last week by C.A.R. during its annual REimagine! Conference & Expo in Long Beach.
The baseline scenario of C.A.R.’s “2025 California Housing Market Forecast” sees an increase in existing single-family home sales of 10.5 percent next year to reach 304,400 units, up from the projected 2024 sales figure of 275,400. The projected 2024 figure is 6.8 percent higher compared with the pace of 257,900 homes sold in 2023.
The California median home price is forecast to rise 4.6 percent to $909,400 in 2025, following a projected 6.8 percent increase to $869,500 in 2024 from $814,000 in 2023. A persistent housing shortage and a competitive housing market will continue to put upward pressure on home prices next year.
Market Update
The housing market continues to adjust to the first rate cut by the Federal Reserve in years, sliding mortgage rates, and an economy that keeps surprising to the upside. Putting all of these factors together, C.A.R. released its forecast for 2025 and expects both home sales and home prices to continue their upward trend. Consumer confidence has slid, reflecting the normalizing labor market and more muted economic growth, but income and spending continue to rise. New home sales have yet to rebound despite the recent rate cut, but demand is already picking up and preliminary indications suggest an unseasonably strong winter in California.
Market Minute
The housing market continues to adjust to the first rate cut by the Federal Reserve in years, sliding mortgage rates, and an economy that keeps surprising to the upside. Putting all of these factors together, C.A.R. released its forecast for 2025 and expects both home sales and home prices to continue their upward trend. Consumer confidence has slid, reflecting the normalizing labor market and more muted economic growth, but income and spending continue to rise. New home sales have yet to rebound despite the recent rate cut, but demand is already picking up and preliminary indications suggest an unseasonably strong winter in California.
August 2024 Sales & Price
A surge in mortgage interest rates and a shortage of homes for sale suppressed California home sales in April, while the statewide median home price climbed above the $800,000 level for the first time in six monthsA surge in mortgage interest rates and a shortage of homes for sale suppressed California home sales in April, while the statewide median home price climbed above the $800,000 level for the first time in six months
The statewide median price continued to grow from last year, but the rate of growth has been moderating. Meanwhile, mortgage payment growth registered its first year-over-year decline since July 2020 and will hopefully continue to moderate from this point. Closed sales in California hit a seven-month low in August as buyers held out despite declining rates, but pending sales suggest a likely bounce back in September.
April 2024
Market Update and Affordability:
We remain in a paradoxical environment where the ongoing strength of the U.S. economy raises concerns for the housing market. Strong jobs numbers last week were followed by equally strong inflation numbers this week, and then retail spending numbers exacerbated concerns that any rate cuts from the Fed would not come until the second half of the year, if at all. As a result, the bond market has sent interest rates climbing as investor demand for treasuries declines. The 10-year note has now surpassed 4.5% for the first time in nearly 6 months and mortgage rates have followed them north of 7% again. The outlook has not changed dramatically, but we expect more speedbumps in the coming months as the markets digest the latest data.
California sees surge in homeowners trying to sell their houses
Source: MSN
The number of homes listed for sale in California is on the rise and last month saw the largest jump in more than a year amid rising home prices in the state, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Active listings shot up based on monthly comparisons to last year for the second consecutive month, while new active listings also increased by double digits as the spring season for home sales gets underway.
“It’s a great time to sell a home in California,” Jordan Levine, C.A.R.’s chief economist told Newsweek. “About half the homes are now selling above list price once again and prices themselves are rising.” Sellers are also seeing their homes spend less time on the market, the data showed. It took about 19 days to sell a single-family home last month, compared to 24 days one year ago. Sales were down on a monthly basis by about 8 percent and by 4 percent compared to a year ago, largely due to elevated mortgage rates that are keeping sellers locked into their low home loans. This constricted supply is why prices for homes in the state are high, as competition for available homes has escalated.
Source: San Francisco Chronicle
Starting this summer, 30,000 California policyholders will be told they are being dropped by California’s largest home insurer, State Farm. The decision affects homeowners policies, rental insurance and other property insurance. The company will not send official notices until July, but some customers have been notified by their State Farm agents that they will be among the 30,000. State Farm accounts for 8.7 percent of all home insurance policies in California. The company wrote that it would not renew polices “that present the most substantial wildfire or fire following earthquake hazards, or that are in areas of significant concentration.”
Recent filings with the California Department of Insurance show where these nonrenewals will be concentrated, which is mostly in Sonoma County, Contra Costa County, Los Angeles County and the Santa Cruz Mountains. The link below takes you to an article with a map showing the ZIP codes included. You can enter your address to see if you are likely to be affected. Customers affected by the decision will retain coverage until their current contract is up.
Mortgage rates hit highest level of the year and could still rise
Source: CNBC
The average rate on the popular 30-year fixed mortgage crossed over 7 percent on April 1 and just kept going, according to the Mortgage Bankers Association’s seasonally adjusted index. It now sits at around 7.5 percent, the highest level since mid-November of last year. When rates got that high at the end of last year, home sales ground to a halt until rates fell through mid-January to the mid-6 percent range and held there into February, causing a surge in home sales. A pick-up in inflation reset expectations, putting mortgage rates back on an upward trend.
Even with rates higher, however, mortgage applications to purchase a home rose 5 percent last week compared with the previous week. Demand was still 10 percent lower than the same week one year ago. Some borrowers may have decided to act in case rates continued to rise, said Joel Kan, MBA’s chief economist.
Source: Los Angeles Times
Southern California home prices hit a record in March amid sky-high mortgage interest rates. The average for the six-county region reached $869,082 in March, according to Zillow. That’s up 9 percent from a year earlier and 1 percent higher than the previous all-time high in June 2022.
With rates hovering in the upper 6 percent range, the mortgage payment on the average home now tops $5,500 – and that’s with 20 percent down. The lack of existing homes for sale has fueled higher prices. Buyers who can pay all in cash don’t have to worry about interest rates, and others who are selling their old home are benefiting from their considerable equity in order to put down hefty down payments well over 20 percent. Professionals such as architects and Hollywood types who have saved, liquidated stock portfolios, built up equity or received help from family are placing down payments of at least 30 percent with the intention of living in the home. In all, 23 percent of L.A. County homes sold in February were bought with all cash, up from 16 percent in 2021, according to Redfin.
Source: Associated Press
Consumer inflation remained persistently high last month, boosted by gas, rents, auto insurance and other items, the government said Wednesday in a report that will likely give pause to the U.S. Federal Reserve as it considers when to cut interest rates this year. Prices outside the volatile food and energy categories rose 0.4 percent from February to March, the same accelerated pace as in the prior month. Compared to one year ago, prices are up 3.8 percent, the same rise as February 2023.
The March figures, the third straight month of inflation readings well above the Fed’s 2 percent target, threaten the prospect of multiple rate cuts this year. Fed officials have made clear that with the economy showing a healthy job market, a near-record-high stock market and inflation’s decline from its peak, they are in no rush to cut their benchmark rate despite earlier projections that they would do so three times this year.
It could still make sense to borrow now and refinance later
Housing affordability for white/non-Hispanic households fell from 25 percent in 2022 to 21 percent in 2023. Nine percent of Black and Hispanic/Latino households could afford the same median-priced home in 2023, down from 11 percent for both ethnic groups. Housing affordability was better for Asian residents, at 28 percent, but also declined from the prior year’s 32 percent. The affordability gap between Black residents and the overall population in California improved from 9.7 percentage points in 2022 to 8.5 percentage points in 2023, and the gap for Hispanics/Latinos improved from 9.6 percentage points in 2022 to 8.9 percentage points in 2023.
U.S. inflation up, likely delaying Fed rate cuts
Source: InvestorsObserver
Housing affordability continued to deteriorate for all ethnic home-buying groups last year as interest rates rose higher and the typical mortgage payment for a median-priced home climbed from a year ago, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ Housing Affordability Index. Eighteen percent of all Californians earned the minimum income needed to purchase a home in 2023, down from 21 percent in 2022.
Source: NBC
After two years of scarce listings, the market is finally loosening up. Sales of existing homes rose 9.5 percent nationwide in February – the largest monthly increase in a year – and 16.4 percent in the western U.S., even though mortgage rates remain between 6 and 7 percent and prices remain fairly high.
This video explains that homeowners who may have held onto super-low mortgage interest rates for the last couple of years are likely responding to recently softened rates as well as life changes that require moving, such as changes in jobs or family status. Housing demand has been on a steady rise due to population and job growth, though the timing of home purchases is largely determined by prevailing mortgage rates and wider inventory choices.
New home sales fell in February; median new home prices lowest in 2.5 years
Source: Yahoo Finance
Sales of newly built single-family homes in the U.S. unexpectedly fell in February after mortgage rates increased during the month, but the underlying buying trend remained strong despite a chronic shortage of previously owned homes on the market.
The report from the U.S. Commerce Department also showed that the median new house price last month was the lowest in 2.5 years, while supply was the highest since November 2022. Builders are ramping up construction, while offering price cuts and other incentives as well as reducing floor size to make housing more affordable.
65.2% of California homes are single-family, 6th lowest in U.S.
NAR SETTLEMENT-How does this impact you?
NAR Reaches Agreement in Claims Brought by Home Sellers
The National Association of REALTORS® (NAR) recently announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.
The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule) that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately four years.
So, what happened regarding the settlement?
Well, to understand that, let us briefly explain how the home sales process works: in majority of the cases, a seller will list their home with a real estate agent for an agreed-upon commission percentage. This commission gets split between the listing agent and the buyer’s agent. To submit a listing into the MLS, a listing agent would have to indicate the buyer’s agent commission, so the terms were immediately clear to all parties.
According to the lawsuit, this long-standing practice is unfair to sellers who aren’t given the choice and opportunity to whether to pay for the buyer’s agent commission or not. In this new real estate reality could potentially dictate, a buyer’s agent commission in the MLS will be prohibited. Also, a seller will no longer have to pay a buyer’s commission unless they choose to do so.
On the buying side of the transaction, the commission a buyer’s agent receives will be set when the buyer enters into a Buyer Broker Agreement, by basically hiring that agent to help them find their home of any type of property. This Buyer Broker Agreement specifies a specific commission percentage the buyer agrees and is willing to pay the agent once they purchase the home or property. The seller could potentially pay some or all of this commission, but that will become a negotiated term between the buyer and seller.
Let’s say the seller says, “Sure, I would like and agree to pay the buyer’s agent commission.”
Then the home sale transactions continues on as previous normal and it did previously, with this commission taken from the seller’s net proceeds from the transaction.
Let’s say the seller says, “No, I do not agree to pay the entire commissions for both agents.”
Then the buyer must pay the agreed commission for their agent.
What does this mean for you when you are buying, selling … your property?
We think the dust on that question will take time to settle, and we have a long process to understand, digest and determine the best course of action for any real estate transaction which commissions negotiations will become a major part of the initial process. Some sellers are going to think, “that is awesome, I don’t have to pay the buyer’s agent any more.”
Many buyers will either not have funds (especially true for first-time buyers) or more likely, choose not to pay their agent separately regardless of the Buyer Broker Agreement, as it’s simply no longer the normal operating procedure. It most probably limit some buyers to only look at houses where the seller will pay the buyer agent’s commission, regardless of how much they like the property.
This will take some time, but choosing the right Realtor is the key to any real estate transaction and of course compromise. Just like negotiating any successful deal, this is just another negotiation point that will take place during the course of a transaction.
For a long time in real estate, sellers have built commissions into their pricing by asking for “Seller’s Closing Statements” in advance. The sellers will now need to be educated that there’s a new way to sell, and this education will be critical to the success of the transaction for everyone.
What it comes down to, really, is strengthening the relationship between the agent and their seller, and the agent and their buyer. Sellers must work with an agent who fully understands the implications of the new business model, a professional who can provide clarity and collaboration throughout every step of the transaction. Buyers must trust their agent completely, as an advisor and confidant who will guide them to the best home possible.
For Realtors, it is critical to change, and become more versatile. We’ve all weathered every kind of market change in the past few years, every interest rate fluctuation, every economic cycle, inventory challenges, Covid and ………..Adapting to this new normal can be good. This could be challenging as this is not the first time nor will it be the last time in an ever-changing industry predicated on the idea that if we don’t change, we will become obsolete.
Jan 22, 2024
Ozempic Could Be The Next Big Curveball For Commercial Real Estate
What does the widespread consumption of a juggernaut drug have to do with commercial real estate?
More than meets the eye, and the industry should start preparing for a potential upheaval in the not-too-distant future, a growing number of real estate professionals say.
Diabetes drugs being prescribed for weight loss, like Ozempic and Mounjaro, are already altering consumer purchasing habits. In the short term, the retail sector is in line to adjust first. But widespread adoption of the drugs, known as GLP-1s, could have far-reaching and surprising implications for asset classes from housing to healthcare and beyond.
Nearly 24 million people, or roughly 7% of the population, are slated to be taking appetite suppressants by 2035. That has prompted longtime industry insiders like Roy Oppenheim to brace for what they believe could be the biggest disruption to real estate since the pandemic, on par with emerging and revolutionary technologies like artificial intelligence.
“After Covid, this will be the next big impact,” said Oppenheim, a real estate lawyer, partner and co-founder of Oppenheim Law in South Florida who has taken a keen interest in the relationship between the adoption of GLP-1s and commercial real estate.
A heightened focus on health and wellness brought on by the widespread use of semaglutide and tirzepatide, the active ingredients in the Type 2 diabetes drugs often prescribed for weight management, could alter both the tenant mix and configuration of retail developments, according to Anton Pil, global head of alternatives for J.P. Morgan & Co.
And developers, landlords and brokers should pay close attention to who their target audience is and how their preferences might shift as a result, he said at a Jan. 11 state of retail event held by Texas-based firm Weitzman.
“Over the next five to 10 years, the spending patterns of that cohort will change dramatically … alcohol sales will probably be struggling, fast food sales are going to have to morph,” Pil said.
“If 10% of this country goes on these drugs, sales of a lot of major companies are going to decline and they’re going to decline pretty dramatically.”
Walmart executives have already noticed a link between Ozempic and a decline in food sales. Other major food manufacturers are devising plans to respond to dietary changes caused by the drugs, with food giant Conagra, manufacturer of brands such as Duncan Hines and Marie Callender’s, creating an internal crack team to respond to changing behavior.
In the CRE sphere, grocery stores may become smaller as sugary items are pulled from the shelves, Oppenheim said. Athleisure stores like Lululemon and Nike could become even more prevalent, and fast food chains like McDonald’s might be replaced with healthier, fast-casual options.
Ultra-processed foods are on the way out,” Oppenheim said. “You’ll see more Whole Foods, more salad places … and [developers will] have to consider giving people more walking opportunities.”
Along those lines, malls could get a much-needed boost in foot traffic, said Emilie Paulson, vice president at Weitzman.
“When people lose weight, they want to show off their success,” she said. “If enough people lose weight, I think you will absolutely see an uptick.”
Weight-loss drugs can reduce daily calorie intake by as much as 30%, according to a Morgan Stanley survey of more than 300 patients. As more Americans take obesity drugs, overall consumption of carbonated soft drinks, baked goods and salty snacks could fall by as much as 3% by 2035, the survey found.
“You lose 15% to 20% of your weight, and it changes your buying patterns and your consumer patterns,” Pil said, noting that his own analysis of anonymized spending data from 95 million Chase customers had already revealed a shift away from fast food, snacks, soda and alcohol.
Further down the road, behavioral changes may also impact the housing market, Oppenheim said. A renewed commitment to health could lead people to prioritize access to the outdoors or exercise facilities when choosing where to live.
Those same individuals may feel more comfortable socializing and prefer more communal types of living, which could provide a boost to the apartment industry if owners are savvy, he added.
“You’ll see that people are going to want to live in different types of areas,” he said. “Not as close to a couch but closer to a park or an outdoor activity.”
By the same token, the drugs could lead to a reduction in demand for medical facilities, he said.
Ozempic and other weight-loss drugs are still inaccessible to the majority of Americans. The drugs require a prescription and are administered by needle, which is a deterrent for many, Oppenheim said.
But perhaps the biggest obstacle is out-of-pocket cost, with Wegovy, Ozempic and Mounjaro priced between $215 to $700 per month, according to an analysis by The New York Times. More recently, The Wall Street Journal noted costs for the drug had shot up 3.5% to nearly $970 for a month’s supply.
Barriers to access should keep weight-loss drugs from making a noticeable impact on retail real estate in the very near future, Paulson said. And offerings by existing tenants will likely change before the tenant mix itself, she added.
“If insurance companies start covering this and it becomes something that’s over the counter, then we will see a shift,” Paulson said. “But because of the accessibility issues with the expense, there’s just no way for it to affect spending on a grand scale.”
Oppenheim and Pil disagree. They believe the drug will soon become widely accessible, and that insurance companies will realize it is more cost-effective to pay for weight-loss drugs than it is to treat diabetes and other obesity-related illnesses.
“Insurance companies will very quickly do the math,” Oppenheim said.
Jan 15, 2024
Tishman Speyer and Mitsui Fudosan America acquired a 31.9-acre, fully entitled industrial development site in Irvine for $149.5M. The partners announced plans to build four industrial buildings totaling 600K SF at the property.
The site is just off the 5 Freeway near Bake Parkway in the southern part of Irvine’s Great Park Neighborhoods master plan area. The master plan calls for a mix of uses in the areas it covers, including industrial.
“Great Park Neighborhoods is a perfect example of the type of ground-up development that we envisioned when we created our industrial platform with Mitsui Fudosan America,” Tishman Speyer Managing Director and Head of Industrial Andy Burke said in a release announcing the acquisition. “Utilizing our long-established local team, we were able to source a rare opportunity to create a well-located industrial facility that offers modern specifications within a severely supply-constrained and high-barrier urban center.”
The release says that in this part of Orange County especially, the industrial stock is often 30 or 40 years old and no new developments have come online in quite some time. The JV will build structures ranging from 73K to 203K SF.
Orange County’s total vacancy was just 2.8% in the fourth quarter, giving it the distinction of having Southern California’s lowest vacancy in the period, according to a JLL report.
This project is the second acquisition for the Tishman-MFA venture, which is focused on logistics properties. The JV began with a $500M funding commitment from MFA, plus “co-investment capital” of an undisclosed amount from Tishman Speyer. The partnership was created in 2022 to pursue ground-up development projects as well as repositioning and redevelopment of value-add industrial sites, a release from Tishman says.
Trophy Office Space Is Hot. What Will It Take To Build More?
The shiny office towers that developers have built in U.S. downtowns in recent years have increasingly drawn tenants away from older buildings, but the demand shift toward top-tier space hasn’t been followed by new supply.
New year-end data has shown high demand for top-quality space and shrinking vacancy in the trophy and Class-A segments across major U.S. markets like Miami, D.C., New York and Chicago. But experts in those cities tell Bisnow they anticipate the headwinds facing the overall office sector will continue to restrict new supply and make the market for trophy tenants even tighter.
Lenders seeking to reduce their overall exposure to office are either unwilling to finance new projects or are requiring a higher level of pre-leasing commitments, developers and brokers said. In some markets, potential tenants aren’t able to plan ahead enough to sign the deals necessary to move projects forward.
Nationally, the office construction pipeline at the end of the fourth quarter was less than half of its 2020 peak and is predicted to continue to slow, according to Cushman & Wakefield’s year-end U.S. market report. This has made it hard in some markets where tenants are looking for large blocks of space in trophy and Class-A buildings.
The subleasing market is also seeing a bump in activity from tenants looking for trophy space. In Q4, trophy subleases represented 27.6% of all sublease activity nationally, a 26% increase from 2020, according to Avison Young’s year-end U.S. market report. Combined with Class-A space, the two segments made up 71.8% of total sublease activity in the quarter.
Restaurant Brands International has struck a deal to buy Carrols Restaurant Group, the largest Burger King franchisee in the U.S. with about 1,000 locations, for about $1B. The all-cash sale is set to close in the second quarter.
The acquisition of Carrols would vastly increase the number of Burger King-branded restaurants RBI owns directly. RBI counts about 75 locations among its holdings. But the company doesn’t plan to keep the enlarged portfolio indefinitely.
“We are going to rapidly remodel these restaurants … and put them back into the hands of motivated, local franchisees,” Tom Curtis, president of Burger King U.S. and Canada, said in a statement.
The refranchising is expected to take five to seven years, according to Curtis, although the company also says it will retain “a couple of hundred restaurants” for training and operator development purposes.
RBI plans to spend about $500M, funded by Carrols’ operating cash flow, to remodel about 600 of the acquired restaurants that “are not currently considered modern image.”
The deal comes as Burger King continues its efforts to boost sales, which it kicked off in September 2022 and has taken the form of remodels, enhanced marketing and upgraded tech.
The company reported in November that same-store sales were up 6.6% in Q3, but it also said it had closed about 200 locations during last year, Restaurant Business reported.
There are about 19,000 Burger King locations in more then 100 countries. The chain is the seventh largest in U.S. sales, according to the most recent Technomic report, just ahead of Subway but behind its two main burger rivals, Mcdonald’s and Wendy’s.
Under the terms of the transaction, RBI will acquire Carrols for $9.55 per share, which the buyer says represents a premium of 23% over Carrols stock’s average price over the month ending Jan. 12. Carrols stock closed at $8.42 that day.
In New York, there has been a shrinking availability of newer space, with buildings developed in 2010 and later seeing just over 9% vacancy compared to the citywide rate of 15.6%. The Big Apple has 15M SF of new construction expected to deliver in the next five years, a 66% drop from the five years ending in 2023, according to JLL.
“The new construction is definitely two different buckets. The bigger buildings, that are 1M SF buildings, it’s hard to kick those off without an anchor tenant,” JLL Vice Chairman Cynthia Wasserberger, based in New York, told Bisnow. “The boutique market, we are seeing some speculative building coming online … I think the reins are loosening on that for sure.”
In Miami-Dade County, 3.2M SF of office was under construction at the end of Q4, according to Colliers’ Q4 2023 report. Positive net absorption totaled 147K SF in Q4, and the county saw rental rates rise 1.8%.
Gale said rents have even doubled in some submarkets like Brickell because of the lack of supply and the demand from outside companies that are migrating south. But it has still been difficult to obtain financing for new office construction.
Special servicer Rialto Capital Advisors has moved to foreclose on 681 Fifth Ave., the building that long held Tommy Hilfiger’s flagship store before the designer shuttered in 2019. Rialto, on behalf of a CMBS trust, filed a pre-foreclosure complaint in New York County Supreme Court on Wednesday.
Metropole Realty Advisors has owned the 12-story, 1913-built property since 2005, when the Robert Siegel-led firm paid $86M for it, then spent several years renovating before drawing in high-profile fashion tenants like Tommy Hilfiger and Vera Bradley.
Metropole took out a $215M CMBS mortgage on the property in 2016, refinancing a $125M loan from Ladder Capital. The new debt, which was split into six notes, valued the building at $440M, according to the Morningstar Credit database. The building was 91% occupied at the time.
But 681 Fifth started to have difficulties in 2019 when Tommy Hilfiger vacated its lease. The fashion house occupied 27% of the property, Crain’s New York Business previously reported, but accounted for 78% of the building’s base rent.
The fashion house kept paying rent until May 2023, when its lease expired. Another tenant, Apex Bulk Carriers, left the property in March. Metropole has since spent approximately $350K on renovations to attract new tenants.
The building’s occupancy was less than 52% as of September, according to Morningstar Credit.
The drop in occupancy, which was 91% when the loan was issued, has led to Metropole not being able to make payments on the loan, according to Rialto’s complaint, filed Wednesday.
The borrower missed its monthly payment, roughly $773K, for the first time in July. The property’s debt was placed on a watchlist and downgraded in August, and Rialto was appointed special servicer in September. Rialto sent Metropole and Siegel, who is a personal guarantor on the loan, a letter of default Oct. 2, according to court filings.
Rialto and Metropole have executed a pre-negotiation letter and were in discussions as of Dec. 11, according to special servicer commentary.
But Rialto accelerated the loan and demanded full payment of the $215M outstanding principal, plus the unpaid interest and late fees, in a Dec. 15 letter that was filed alongside the foreclosure complaint. Metropole hasn’t made an interest payment since July, Rialto said, adding up to more than $4.6M in unpaid interest.
In the letter, Rialto said Metropole’s license to collect rents has been terminated and demanded that the landlord turn over rent collection to the special servicer.
NEW YORK, DECEMBER 26, 2023: S&P Dow Jones Indices (S&P DJI) today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for October 2023 show that 11of the 20 major metro markets reported month-over-month price increases.
YEAR-OVER-YEAR
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.8% annual change in October, up from a 4% change in the previous month. The 10-City Composite showed an increase of 5.7%, up from a 4.8% increase in the previous month. The 20-City Composite posted a year-over-year increase of 4.9%, up from a 3.9% increase in the previous month. Detroit reported the highest year-over-year gain among the 20 cities with an 8.1% increase in October, followed again by San Diego with a 7.2% increase. Portland fell 0.6% and remained the only city reporting lower prices in October versus a year ago.
The chart on the following page compares year-over-year returns of different housing price ranges (tiers) for San Diego.
MONTH-OVER-MONTH
Before seasonal adjustment, the U.S. National Index and10-City Composite, posted 0.2% month-over-month increases in October, while the 20-City composite posted 0.1% increase.
After seasonal adjustment, the U.S. National Index, the 10-City and 20-City Composites each posted month-over-month increases of 0.6%.
ANALYSIS
“U.S. home prices accelerated at their fastest annual rate of the year in October”, says Brian D. Luke, Head of Commodities, Real & Digital assets at S&P DJI. Our National Composite rose by 0.2% in October, marking nine consecutive monthly gains and the strongest national growth rate since 2022.”
“Detroit kept pace as the fastest growing market for the second month in a row, registering an 8.1% annual gain. San Diego maintained the second spot with 7.2% annual gains, following by New York with a 7.1% gain. We are experiencing broad based home price appreciation across the country, with steady gains seen in nineteen of twenty cities. This month’s report reflects trendline growth compared to historical returns and little disparity among cities and regions.”
“Each of our 10-city, 20-city and National Index, remain at all-time highs, with 8 of 20 cities registering all-time highs (Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland). While Portland remains slightly down compared to last year’s gains, Phoenix and Las Vegas have flipped to year over year gains. The Midwest and the Northeast region are fastest growing markets, while the Southwest and West regions have lagged other regions for over a year. A solid, if unspectacular report, this month’s index reflects a rising tide across nearly all markets.”
“Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher. With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation.”
Fed Tightening Looks Done
What happened last week?
The S&P 500 rose 5.85%
The Dow Jones gained 5.07%
The Nasdaq advanced 6.61%%
The 10-year Treasury yield dropped a whopping 30 basis points to 4.52%. Markets celebrated that it looks as though the Fed’s tightening campaign has run its course.
This week investors will digest 3Q earnings reports from 55 of the S&P 500’s constituents. The results from the 408 companies that have already reported show that a three-quarters long profits recession has ended.
Markets recoveries don’t begin from a perfect economy. Our view has been that we’re operating in an environment where some economic sectors, such as manufacturing, have rolled into recession, are now stabilizing, and are likely to roll out before other sectors enter their own downturns.
While there is no way to be certain that this is THE turning point for financial markets, we believe fixed income offers compelling opportunities at this time and that equity conditions are looking increasingly sound for 2024–25.
3 Things to Know:
Evolving Macro Environment Suggests Equity Broadening
The rolling recessions suffered in 2023 across many industries will not be repeated in 2024.
In fact, they will likely “roll out” in the year to come. That is just one reason we believe investors should consider adding to equity allocations.
Excluding the “Magnificent 7” US tech shares, the MSCI World Equity Market Total Return index is down 12% since end 2021.
At its recent low, the S&P 500 price lost 14% over the same period. Compared to the roughly 50% losses of the 2008/2009 Global Financial Crisis period and the unwinding of the great tech bubble from 2000–2002, the drop in equities since 2021 has not been catastrophic — but it has slowly eroded investor confidence.
More recently, from July 31 to October 27, US equities dropped 10%. But there has also been a far broader correction in world equities than the S&P 500 and Nasdaq 100 might suggest. Just 15% of stock markets globally are trading above their 200-day moving average.
For nearly three years, the GIC has maintained an overweight in cyber-security software firms given their critical role in protecting governments and firms from the dangers of cyber-crime and the misuse of AI. Equity performance has been strong, but earnings have delivered more than share prices, making valuations more attractive these days.
US Fixed Income Offers Compelling Returns
The gains for the bond market accelerated after Fed Chairman Powell appeared to set a fairly high bar for further interest rate hikes. He said that if there was a reversal of the easing in labor market conditions or if it appeared that the slowdown in inflation were stalling, it would call for additional policy tightening.
We believe fixed income offers compelling returns at this time with four-year duration US Investment grade corporate bonds yield near 6.25%.
We have a high level of confidence that core inflation measures will slow in the coming year. Lagging components of the CPI are only beginning to moderate.
If labor demand does slow markedly as we expect, the Fed will not want restrictive monetary policy to drive the economy into a full stall. This is why Fed forecasts and market estimates both embed rate cuts before 2024 ends.
Therefore, Citi believes current yields on high quality bonds provide a compelling potential opportunity to lock-in durable portfolio income for many years.
The Citi View: Don’t Time the Market
Historical data analysis has gotten much faster, but this does not explain why there are many striking values available to investors.
While we see undeniable valuation discrepancies and potential growth opportunities, others claim to be able to predict the “perfect moments” to enter and exit investments.
The history of equity market timing continues to show a bleak record.
Growth is normal. Since World War II, the US economy has expanded in 87% of all months. While volatile month to month, US equity returns have been positive in 78% of all years over the same period.
With fear of recession and fear or loss driving investors to the sidelines as we end 2023, we remind investors that betting against equity market progress has historically been unprofitable.
As mentioned, there is no way to be certain this is THE turning point for markets.
However, we are seeing data that suggests our view for the direction of markets in 2024–25 is sound.
Almost a Third of Homes for Sale Are New Construction—the Highest Share of Any Third Quarter on Record
October 31, 2023 by Lily Katz
New builds are taking up a growing share of the pie as builders attract buyers with concessions, and surging mortgage rates prevent existing homeowners from selling.
Nationwide, 30.6% of U.S. single-family homes for sale in the third quarter were new construction—the highest share of any third quarter on record. That’s up from 28.9% one year earlier and 25% two years earlier.
Newly built homes have taken up a growing share of for-sale housing inventory partly because homebuilding has increased and partly because the number of existing homeowners putting their houses up for sale has decreased as mortgage rates have surged to a 23-year high of roughly 8%.
High mortgage rates have pushed a lot of buyers to the sidelines, but many of the buyers who are in the market are opting for new construction homes because builders are handing out concessions like mortgage rate buydowns in order to attract bidders and offload inventory. Purchases of new single-family homes jumped 12.3% last month—the fastest pace since early 2022. It’s worth noting that the latest run up in mortgage rates could slow new-home construction.
“Sellers are facing tough competition from homebuilders, who are sometimes offering buyers up to $30,000 worth of concessions,” said Kim Lotz, a Redfin Premier real estate agent in Phoenix. “With that kind of money, a buyer can cover closing costs, home upgrades, and buy down their mortgage rate. In some cases, people who purchased a house from a builder a year ago are selling and competing against that same builder for buyers.”
Retail strip centers have declined by -7.4% while office buildings are down by -8.9%. Industrial has been the best-performing sector with prices only down -2.3%. These value declines are likely the first in a series of drops that will occur over the next several years as the recession worsens and the debt crisis intensifies. We’re already seeing landlords begin to walk away from this maturing debt. Brookfield Corporation, one of the world’s largest investment management companies (think of them as the Canadian version of Blackrock), just defaulted on a $161 million mortgage collateralized by office buildings in Washington DC.
The default was prompted by a double whammy of 1) tenants moving out of the building in a post-pandemic world and 2) the interest cost on the mortgage more than doubling over the last year due to Fed Rate hikes. Among the dozen buildings in the Brookfield portfolio with the $161.4 million debt, occupancy rates averaged 52% in 2022, down from 79% in 2018 when the debt was underwritten, according to the report. Monthly payments on the mortgage’s floating-rate debt jumped to about $880,000 in April from just over $300,000 a year earlier as the Federal Reserve raised interest rates.
Meanwhile, Westfield Group, the shopping center company, just stopped making interest payments on a downtown San Francisco mall collateralized by a $550 million mortgage. They are handing it back to their lender.
The issue for these lenders on the Washington DC office buildings and San Francisco mall is that they will have to significantly write down the asset value of the properties on their books. And potentially by a lot (e.g., lenders on a St. Louis office building lost 95% of their investment when it sold at foreclosure in 2022).
Writing down the asset value will force lenders, particularly banks, to recognize losses on their income statement and balance sheet, which will constrain their ability to issue new loans. It might also trigger concern among their depositors that the bank is not financially sound and it could trigger bank runs.
This is especially true for small banks, who hold $1.9 trillion in commercial real estate loans in 2023, which is more than two times the number of large banks. Even more concerning, small banks have been increasing their exposure to commercial real estate loans over the last five years. Small and regional banks have so much exposure to these commercial real estate loans that they comprise 37% of their customer deposits. By comparison, commercial loans only account for 8% of the deposits at large banks. Small banks have $5.2 trillion in deposits on their books right now, down about 4% from since the Silicon Valley Bank Crisis hit in March 2023. Meanwhile, they have $1.9 trillion in commercial real estate loans, accounting for 37% of their deposits. Such high deposit exposure to commercial loans means that there could be big issues for these small banks as landlords continue to default on mortgages (don’t be surprised if there’s more bank runs in the second half of 2023 and 2024 as a result). Commercial Real Estate is more exposed to this debt crisis than Residential because of how commercial real estate loans are issued, particularly the length of their terms.
Residential mortgages in America are typically 30-years and have low “refinance risk” as a result. Comparatively, commercial loans are usually issued for 5 or 10-year terms. Meaning that they come due more quickly.
So now all these commercial real estate loans issued during the ultra-low interest rate period of the 2010s and the pandemic are needing to be refinanced in an environment where interest rates have surged, with the 1-year US Treasury up to its highest level in two decades at 5.4%.