Saturday, April 4, 2020

Real-Time Market Update + Property Taxes Due by April 10th!

 Last week’s notes on the market were well received and we are going to keep this going whenever we have good information to pass along during this unprecedented time.  Most importantly, we hope you and those close to you are healthy and safe and are able to implement positive ways to stay connected with each other while practicing social distancing.

Property Taxes- Property taxes are still due by April 10th! Get your payment in if you haven’t done so! Due to state law, it cannot be extended and is a hugely important source of local government revenue. However, beginning on April 11, the day after property taxes are due, people unable to pay on time for direct reasons related to COVID-19 may submit a request for penalty cancellation online. The department has set up a special team to process these requests for those who demonstrate they were affected by the outbreak. Please note, this is just to delay the penalty cost but not the actual taxes due. Here is a link to the LA County Property Tax web-site.

Market Update- Overall, March sales volume for Compass in So Cal ended up on par with last year’s numbers. The first 2.5 weeks of March were on pace to be quite a bit stronger than March 2019 but the slowdown in the last 1.5 weeks of the month balanced it out.

However, April closings will be down at least 30% compared to last year and probably closer to 40% as we won’t see very many quick closings in this environment. Unless a deal is all cash, lenders are not guaranteeing anything quicker than a 35 day escrow with 21 day loan contingency and prefer a 45 day escrow.

New listings in our offices are down about 30% compared to last year which is actually better than anticipated with city of Los Angeles barring agents from showing property, despite the state calling real estate agents an “essential” service. We are expecting new inventory to stay very light until we have a definitive light at the end of the tunnel.   Thus, May closings will be lighter than April.

Once we see a light at the end of the tunnel, new listing inventory will pick up quite a bit with many people waiting out the pandemic combined with those who have withdrawn their home from the market.

Lending- Most banks are offering 90-day mortgage deferment programs. Apparently the process is fairly easy and efficient with most of the larger banks. You will still be on the hook for the mortgage payment at a later date but just gives you a three month reprieve to focus on other pressing issues in your life and it is not supposed to negatively impact your credit, but definitely confirm with your bank what program is available and the implications as they vary among banks.

The average U.S. rate for a 30-year fixed mortgage fell to 3.33% this week, according to Freddie Mac, as the Federal Reserve’s bond-buying program created demand for securities backed by home loans. It is a 17-basis point drop from last week. Mortgage applications dropped 24% last week, compared to year earlier. Rates are expected to fall further… More competitive Jumbo rates are being offered by the big banks when it comes to purchases. They are really the only players right now when it comes to jumbo loans.

As I described last week, the re-fi business is still pretty strong and they have enough of a backlog that the rates being offered are not as enticing as one would think…though this could easily change in the next month and something to keep an eye on.

Title- Sampling a few different title companies, new openings this week were off about 40-50% compared to normal levels.

Title companies can close escrows electronically but the grant deed and loan docs are still required to be notarized in person. Escrow companies and the California Association of Realtors are lobbying local country recorder offices to allow notaries to be done electronically by video, but thus far, it has not been considered.

Rental Market After checking in with multiple landlords and property management companies in terms of rent being paid at the first of the month, the average came to about 90% paying on time. They unanimously have concerns about what it will look like next month if things stay status quo.

Here are a few links to information/articles you may find useful-

Los Angeles sees rental prices fall for the first time in a decade

Los Angeles webpage explaining their eviction moratorium 

Mortgage lenders are tightening standards as coronavirus crisis worsens

Thursday, March 26, 2020

Real Estate Market and Industry update as we navigate Covid-19

After speaking with colleagues, management, lenders, title/escrow officers along with our own experiences during this turbulent time, I thought it would be prudent to put together a summary of pertinent information on the Los Angeles residential real estate market as of 3/26/20–

 Market Update-

 *Despite a shut-down of open houses this past weekend and most brokers highly discouraging any in-person showings, 25+ deals went into escrow this week between four Westside Compass offices…quite a few with multiple offers and new to the market. This was surprising to management but also another sign of the lack of inventory we have faced over the past couple of years coupled with low interest rates.

*The vast majority of deals that went into escrow were “entry level” purchases for a neighborhood. For example, homes around $2M in the Palisades or $1.4M in Mar Vista. The “high-end” level of homes are not getting near the attention.

*Across the board in Los Angeles, Compass has had a surprisingly low rate of escrow cancellations. Deals are sticking together but a handful (5%) are seeing some buyers try to re-negotiate the sales price before closing escrow. In some cases the tactic has worked while in others the seller has initiated cancellation escrow instructions with the intent of keeping the deposit. Overall, the deals are making it through escrow with the normal back and forth re request for repairs, though buyers are definitely being sticklers when it comes getting their requests taken care of.

*New listings started decreasing a few weeks ago and are probably off about 70% this week (educated guess), compared to the normally busy spring season. This will undoubtedly be the case until some sense of normalcy is restored. Once that happens, we may very well see quite a few listings between those held off to sell and those forced to sell.

*Preliminarily, our real estate executives are predicting a 10-15% initial price correction. However, this number is shifting on a weekly basis at this point and doesn’t take into account the recent surge in the stock market.

Lending-

*The big banks which do the majority of loans on Westside/South Bay, are operating as business as usual when it comes to standard purchases. The rates for a 30-year jumbo mortgage are typically around 3.25% and the 7/10 year ARM’s are in the 2.5/2.75% range. However, the secondary loan market has dried up, especially when it comes to jumbo products or loans that are more difficult to qualify.

*The surge in re-finance applications a few weeks back has created enough of a backlog that many lenders have increased their rates to slow down demand. It was described multiple times as a “bit of a roller coaster”. That said, if a homeowner is willing to contact a variety of banks, they will be able to find someone who is beating the market…it literally shifts from day to day.

*Most big banks have agreed to defer mortgage payments for those directly impacted by Covid-19. Article

*Appraisals are still happening. With many homeowners not wanting the appraiser to enter their home, appraisers are walking the outside of the property, asking to see through windows and then having the homeowner take interior photos and e-mail them.

Title-

*Title companies can close escrows electronically but the county recorder office is otherwise closed and is not having any in-person meetings.

*The grant deed and loan docs are still required to be notarized in person. Some states have figured out ways to complete this process electronically by video, but not California. Some traveling notaries are working but people are advised to schedule signings as soon as possible.

Construction – Jobs considered “essential” 

*As I write this, Construction/remodeling of homes is considered essential. Most city permit officers are working but at a slower pace so be prepared for delays. Landscaping/gardening/pool service/moving companies are all considered essential.

Rental Properties

Here is a link to the city of Los Angeles web-site explaining their eviction moratorium.

We hope you and yours are doing well and are safe during these difficult times. Please feel free to reach out if you would like to further discuss or just catch up...we can chat in-between my attempts at kindergarten and pre-school teaching sessions…:).