by Stephen Filchondnieff | [email protected]
The local housing market may not be as crazy as it was 18 months ago, but this news may surprise anyone already looking for a place to live in the city of trees.
According to Paul Stephen of Wheeler Steffen Sotheby’s International Realty, last year his office may have seen 30 offers for a good-priced home — now it’s more like six to eight, but of those, they’re all solid.
Make no mistake, it’s still a seller’s market with historically low inventory and plentiful qualified buyers, selling homes in a matter of days, bolstering already inflated prices for both the buy and rent markets.
A year ago, mortgage interest rates were all low, which only added to the feeding frenzy. At the time, the conventional logic was that when interest rates go up, the market should calm down, but that simply didn’t materialize yet.
The idea that interest rates as high as 5% would slow the market did not happen. Stephen said the demand is still there and quite frankly, people are still coming in all-cash deals, so the interest rate isn’t slowing them down.” “There is still pent-up demand for housing, and there is a housing shortage, particularly in Claremont.”
Results? The median home price in Claremont is $900,000 – a 15% increase year-over-year for the first quarter of 2022.
If one looks casually at the current inventory of homes for sale, a million dollars appears to be what it would realistically cost you to buy in Claremont, especially for single-family homes.
According to a popular online platform that provides public access to a multiple listing service, on April 23, there were 25 homes for sale in Claremont, 12 of which exceeded $1 million. Of the 13 people under $1 million, two were condominiums, and two were single-family homes with additional homeowner union expenses. Only three single-family homes were listed under $900,000, all in the $750,000 price range, one of which was a short sale.
Nationally, prices are up 20% from a year ago, but rapid price gains in the past few years are expected to slow to just 5% over the next 12 months, according to CoreLogic’s real estate clearinghouse.
The median home price in the Southern California area has hit record highs in 12 of the past 14 months, rising nearly 17% since March of 2021 to $735,000, according to CoreLogic data released last week. The Los Angeles County median price increased 12.0% to $840,000, but the county reported lower sales, only 7,531, which is a 5.5% decrease.
“New listings have not kept pace with the large number of families looking to buy, resulting in homes selling quickly and often well above list price,” said Frank Nothaft, chief economist at CoreLogic. “This imbalance between the insufficient number of landlords looking to sell relative to homebuyers looking for a home has led to a record high in the past 12 months. Rising prices and mortgage rates are eroding buyer affordability and should dampen demand in The coming months, leading to moderation in price growth in our forecasts.”
Those forecasts sound like a pipe dream here in Claremont, where homes have only been on the market for an average of 18 days and typically sell for $50,000 to $150,000 below asking price.
At the start of the pandemic, many people left crowded urban areas in favor of suburbs where they could have a yard and space to stretch out. This trend continues and with astronomical real estate prices in many Southern California zip codes, many potential buyers are bringing in a bundle of cash. Moving to Claremont from LA’s West Side still makes our city look like a bargain.
“I still sit in my sales meetings thinking I know the prices, but I just left my mouth open while we sell things,” Stephen said of the increasing home prices.
The super competitive market pays some potential homebuyers who qualify for a traditional loan with a 20% down payment, but they have to compete with others who give all the cash or can make big down payments of 50% or more.
“You still see them [borrowers with 20% down] But it’s not as prevalent as it used to be, and it’s kind of a hindrance to first-time homebuyers because that’s all they can qualify for,” Stephen said.
Combined with home prices, rents in Southern California have recently risen with CoreLogic reporting median February rents for a single-family home at $3,342 a month in Los Angeles, Long Beach and Glendale, up 10% from last year.
Tenants may flee urban areas as well. According to data compiled by the Washington Post, rent has increased only 6.7% since 2019 in Los Angeles County, but over the same time period, rents have jumped 23.4% in San Bernardino County and 21.9% in Riverside County.
“Single-family rents are up more than three times the rate the previous year and more than four times the pre-pandemic rate,” said Molly Bussell, chief economist at CoreLogic. “Strong employment and a low supply have pushed single-family rental vacancy rates to lower levels and contributed to higher rental rates.”
In Claremont, there are very few places to rent due to the lack of apartment building over the past few decades and the dearth of mother-and-pop landlords, which is already putting pressure on the rental market.
Steffen said years ago that many Claremont residents own rentals in addition to their primary residence. But with the deaths of these people, their children chose not to be property owners, and they sold homes to people who mostly chose to live in them.
So what is the solution? Stephen hopes to see more high-density housing, including multi-storey buildings with many single-story apartments that residents can access by elevator. He noted that many younger homebuyers do not focus on mansion-like single-family homes, and many prefer the flexibility of smaller units that can be accessed on foot in restaurants, transportation and colleges. These units will also be popular with older residents seeking to downsize.
Which is rolling out in the South Village, which is currently in the commission process, but initial designs include as many units as the Steffen he described. His only complaint so far is the lack of units for sale.
“A lot of [South Village] It will be in the rental market, which I think is unfortunate. I actually think there is a demand for people to have some equity in their homes and this is an opportunity to build that equity. And at least to be in the housing market where they can enjoy appreciation and benefit from there.”
The one thing he doesn’t like is all the laws coming from Sacramento that regulate what gets built and where.
“I think they’re trying to legislate to solve the housing shortage and they’ve almost done so, so nobody wants to build the kind of housing they’re trying to legislate,” Stephen said, citing AB 1482 limiting rent increases, among other regulations.
Do you want to own an apartment building where your repair costs can exceed the ceiling and you still have to maintain it [the building]But you can not modify the rent? People may say that [Consumer Price Index] It protects you, but the truth is, construction costs aren’t correlated with CPI very well.” “It’s a much more difficult world for landlords and it’s not an attractive investment for a lot of people anymore.”