Archive for January, 2016

What do you get when you combine a strengthening economy with a chronic shortages of housing? Sky-high rents. California began restricting growth in the 1970s with regulations like CEQA. Local opposition groups sprang up ostensibly to protect their quality of life. What started as a reaction to poorly designed and executed suburban sprawl devolved into an attempt by Nimbys to cast their neighborhoods in amber to prevent any future changes or development, even reasonable development. As a result of various growth restrictions, we simply don't have enough housing stock to meet the needs of our growing population, either rental or owner-occupied. When any commodity is in short supply, prices tend to rise, and rentals are no exception. There are not…[READ MORE]

After nine consecutive years of extremely weak sales, low sales rates are starting to look like the new normal. A lie, if repeated often enough, becomes accepted as truth. The mainstream media is reporting that home sales are strong and demand is robust. Compared to the depths of the housing bubble crash, sales are up somewhat, mostly due to investor demand, but sales are still very low by historic standards, and we’re nowhere near a healthy real estate market. If not for the dearth of inventory, the anemic demand wouldn’t be pushing prices up at all. Just how anemic have sales been? The percentage of houses sold each year, the turnover ratio, plummeted during the bust, and over the last…[READ MORE]

A proposed real estate tax will be passed through to businesses across California, failing to tax the people it's aimed at. "Take from the rich and give to the poor." The legend of Robin Hood resonates with those who believe the unequal distribution of wealth is a social problem best solved by forcibly taking from those who have and giving to those who have not. It appeals to our notions of social justice, particularly when we perceive the rich obtained their wealth through nefarious or equally forceful means. During Medieval times when wealth was afforded only to those who took it from working peasants by force, the selfless Robin Hood was a hero who balanced the equation. In our modern…[READ MORE]

Higher interest rates create superior investment alternatives that will drain money out of high-end real estate investments. The rich always get richer, and they use their wealth to buy real estate at ever-increasing prices -- At least that's what most people believe (particularly homebuilders). But is that really true? Over the last decade the federal reserve lowered interest rates to zero to support inflated asset prices, especially home values. The rich did get richer, and they did buy real estate, which supported unjustifiably high house prices, leading to increasing wealth disparity and populist unrest. As interest rates rise, these trends could easily reverse. The value of any asset is the future cashflow risk-adjusted by a discount rate. When the federal…[READ MORE]

The OC Housing News published its monthly housing market report, covering resale home prices and rental rates across Southern California. IRVINE, Calif., January 2, 2016 – OC Housing News Orange County Housing Market Report: January 2016 Historically, properties in this market sell at a 0.6% premium. Today's discount is 3.5%. This market is 4.1% undervalued. Median home price is $594,700 with a rental parity value of $611,600. This market's discount is $16,900. Monthly payment affordability has been improving over the last 3 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $392/SF to $394/SF. Resale prices have been rising for 11 month(s). Over the last 12 months, resale prices rose 5.1% indicating a longer term upward…[READ MORE]

The median sales prices does not give any indication of what was obtained for the money spent. Median prices may be flat while people are either getting more for their money or settling for less. Also, the median sales price when charted over time occasionally gives false signals when prices appear to be moving on one direction when the prices of individual properties in the market are moving another. To deal with these problems with the median, alternate measures of pricing are used. Cost Per-Square-Foot Many data reporting services measure, record, and report the average sales cost on a per-square-foot basis to address the problem of evaluating what buyers are getting for their money. For instance, in a declining market…[READ MORE]

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