Is L.A.’s housing market really as unaffordable as it seems?

The average asking price for a home in some of Los Angeles’ most recognizable communities ranges from $269 per square foot in Boyle Heights to $1,118 per square foot in Malibu.

Based on these averages, one might reasonably expect that a 1,000-square-foot residence in Boyle Heights would cost about $269,000, while a similarly sized one in Malibu would go for $1,118,000. If you’re a prospective home buyer looking for affordable housing, it would seem reasonable, staring at these numbers, to steer as far clear of Malibu as possible in your search.

But is that the right approach?

We often hear about how unaffordable the L.A. housing market is. When we look at the average cost of a home in an area like Venice, the Southland’s reputation for being hopelessly unaffordable certainly appears justified. Stories of bidding wars pushing up prices in once-affordable neighborhoods like Highland Park often discourage prospective buyers from even trying to purchase a home.

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The reality, however, is that while many neighborhoods may seem out of reach based on price averages, those numbers don’t tell the whole story. The range of prices behind these averages can vary significantly — meaning affordable properties are available in areas where many might never think to look.

Los Angeles housing price ranges by neighborhood as compiled by real estate data provider NeighborhoodX.
Los Angeles housing price ranges by neighborhood as compiled by real estate data provider NeighborhoodX. (NeighborhoodX)

For example, while Boyle Heights has the lowest average asking price of the areas we analyzed, the prices within the neighborhood range significantly from $188 per square foot to $524 per square foot. On a per-square-foot basis, the most expensive listing in Boyle Heights is pricier than the most affordable properties in Beverly Hills ($474), Bel Air ($403) and Santa Monica ($423).

Conversely, there are neighborhoods where the average listing price is more expensive than that of Boyle Heights, but with a greater price range. In other words, these neighborhoods have properties than are more affordable than the lowest priced properties in Boyle Heights. Deals can be found in Mount Washington (as low as $155 per square foot), El Sereno ($163), East Los Angeles ($173) and Hollywood ($186) that are all cheaper than the lowest priced property in Boyle Heights ($188).

This holds true for the upper end of the Los Angeles neighborhoods, too.

For example, while the average listing price in Beverly Hills is $1,089 per square foot, it ranges from $474 to $3,206. To put this in context, the most affordable listing in Beverly Hills ($474) is less expensive than the average listing in Eagle Rock ($499). Similarly, the most expensive listing in Los Feliz ($1,030) is still more affordable than the average listing in Bel Air ($1,080).

In short, while data can help in the search for a residence or investment property, the right kind of data is even more useful. At any time, neighborhood averages can be skewed higher by new development or lower by foreclosures — and this can steer buyers away from certain neighborhoods.

Instead of simply flooding a neighborhood like Boyle Heights because it appears to be the most reasonably priced — and in doing so helping to create bidding wars — Angelenos might be better served by expanding their searches beyond what might appear to be possible at first glance.

Looking at the range behind the neighborhood averages can help buyers recognize that there are often some relative bargains even in some of Los Angeles’ most affluent neighborhoods.

Article by : Constantine A. Valhouli published in the LA times on May 5th 2016

The number of real estate appraisers is falling.

The number of real estate appraisers is falling. Here’s why you should care

 

The ranks of real estate appraisers stand to shrink substantially over the next five years, which could mean longer waits, higher fees and even lower-quality appraisals as more appraisers cross state lines to value properties.

There were 78,500 real estate appraisers working in the U.S. earlier this year, according to the Appraisal Institute, an industry organization, down 20% from 2007. That could fall another 3% each year for the next decade, according to the group. Much of the drop has been among residential, rather than commercial, appraisers.

Some say Americans are unlikely to feel the effects right now, as it’s mostly confined to rural areas and the number of appraisal certifications — many appraisers are licensed to work in multiple states — has held relatively steady. Others say it’s already happening, and rural areas are simply the start.

Since most residential mortgages require an appraiser to value a property before a sale closes, they say, a shortage of appraisers is potentially problematic — and expensive — for both home buyers, who rely on accurate valuations to ensure that they aren’t overpaying, and sellers, who can see deals fall through if appraisals come in low.

Read: 10 things real estate appraisers won’t tell you

“As an appraiser, I should be quiet about this shortage because it’s great for current business,” said Craig Steinley, who runs Steinley Real Estate Appraisals in Rapid City, S.D. But “what will undoubtedly happen, since the market can’t solve this problem by adding new appraisers, [is] it will solve the problem by doing fewer appraisals.”

A shrinking and aging pool

As appraiser numbers are falling, the pool is aging: Sixty-two percent of appraisers are 51 and older, according to the Appraisal Institute, while 24% are between 36 and 50. Only 13% are 35 or younger.

Industry experts blame an increasingly inhospitable career outlook. Financial institutions used to hire and train entry-level appraisers, but few do anymore, according to John Brenan, director of appraisal issues for the Appraisal Foundation, which sets national standards for real estate appraisers.

That has created a marketplace where current appraisers, mostly small businesses, are fearful of losing business or shrinking their own revenue as they approach retirement. Many have opted not to hire and train replacements.

Read: How to fight back against a low home appraisal

The requirements to become a certified residential appraiser have also increased over the past couple of decades. Before the early 1990s, a real estate license was often all that was needed. Today, classes and years of apprenticeship are required for certification.

And this year marked the first in which a four-year college degree was required for work as a certified residential appraiser. (It takes only two years of college to become licensed, but that limits the properties on which an appraiser can work. Some states, meanwhile, only offer full certification, not licensing.)

“If you come out of college with a finance degree, you can work for a bank for $70,000 [or] $80,000 a year with benefits,” said Appraisal Institute President Lance Coyle. “As a trainee, you might make $30,000 and get no benefits.” For some, especially those with student loans to pay, the choice may be easy.

“There were definitely easier options of career paths I could have chosen,” said Brooke Newstrom, 34, who became an apprentice for Steinley Real Estate Appraisals earlier this year. She networked for a year and a half, cold calling appraiser offices and attending professional conferences, before getting the job.

For residential appraisers, business isn’t as lucrative as it once was. Federal regulations in 2009 led to the rise of appraisal management companies, which act as a firewall between appraisers and lenders so appraisers can give an unbiased opinion of a home’s value.

But those companies take a chunk of the fee, cutting appraiser compensation. Some community lenders don’t use appraisal management companies, according to Coyle, but they are often used by mortgage brokers and large banks.

Appraiser numbers appear poised to continue shrinking, and as appraisers continue to get multiple state certifications they may be stretched more thinly, industry experts say.

For now, any shortages are likely regional, Brenan said. “There are certainly some parts of the country — and primarily some rural areas — where there aren’t as many appraisers available to perform certain assignments that there were in the past,” he said.

Elsewhere, however, the decrease in appraisers isn’t felt as acutely. In Chicago, according to appraiser John Tsiaousis, it may be difficult for young appraisers to break in but customers in search of one shouldn’t have a problem.

“I don’t believe they will allow us to run out of appraisers,” Tsiaousis said. “Some changes will be made [to the certification process]. When they will be made, I don’t know.”

Longer waits, more expensive appraisals, and quality questions

The effects of an appraiser shortage could be substantial for individuals on both sides of a real estate transaction, experts say.

Fewer appraisers means longer waits, which could hold up a closing. That delay means that borrowers might have to pay for longer mortgage rate locks, according to Sandra O’Connor, regional vice president for the National Association of Realtors. (Rate locks hold interest rates firm for set periods of time and are generally purchased after a buyer with initial approval for a loan finds a home she wants.)

Longer waits also affect sellers who need the equity from one sale to purchase their next home. When they can’t close on the home they’re selling, they can’t close on the one they’re buying.

A shortage also means appraisals will likely cost more, which some say is already happening in rural areas. Appraisal fees are generally paid by borrowers.

“Appraisal fees in areas where there aren’t enough appraisers are higher than those areas where there are plenty of people to take up the cause,” said Steinley, who holds leadership roles in the Appraisal Institute and the Association of Appraiser Regulatory Officials.

There is a quality issue, too: In some areas, appraisers come in from other states to value homes. While there are guidelines for these appraisers to become geographically competent, they could miss subtleties in the market, Coyle said.

Craig Steinley

Two appraisers appraising a home after a mold remediation. (Craig Steinley)

And if the shortage isn’t addressed, and lenders are unable to get appraisers to value homes, lenders might ask federal regulators to relax the rules governing when traditional appraisals are needed, allowing more computer-generated analyses in their place, according to Steinley.

Automated valuation models, which are less expensive and quicker, are rarely used for mortgage originations today, Coyle said. They’re sometimes used for portfolio analysis, or when a borrower needs to demonstrate 20% equity in order to stop paying for private mortgage insurance, he added. They might be used for low-risk home-equity loans, Brenan said.

Currently, appraisers are required for mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac. Those mortgages make up about 70% of the market by loan volume and 90% of the market by loan count, according to the Mortgage Bankers Association.

And computer-generated appraisals can’t match the precision of one conducted by someone who has seen the property, and knows the area, many in the industry say.

The industry is beginning to address the issue. Last month, the Appraisal Foundation’s qualifications board held a hearing to gather comments and suggestions, Brenan said.

One of the options being discussed: Creating a set of competency-based exams that could shorten the time people spend as trainees. That way, someone with a background in real estate finance could become certified more quickly, Steinley said. The board is also looking to further develop courses that would allow college students to gain practical experience before graduation, Brenan said.

Proper education is important “because real estate valuation is hard to do, and you need to get it right,” Coyle said. But the unintended consequences of the current qualifications are just too much, he added. “It’s almost as if you have some regulators trying to keep people out.”

June 2015 sales and price report…

June 2015 sales and price repor…

California home sales reach highest level in two years, experience first double-digit increase since May 2012, C.A.R. reports

  • Existing, single-family home sales totaled 437,040 in June on a seasonally adjusted annualized rate, up 3.3 percent from May and 11 percent from June 2014.
  • Statewide sales were above 400,000 mark for third straight month.
  • June statewide median home price was $489,560, up 0.8 percent from May and 7 percent from June 2014.
  • California’s median home price was the highest since November 2007.
  • Available housing supply remained constrained with 3.3 months of inventory.

LOS ANGELES (July 15) – Sales of existing, single-family homes in June reached the highest level in two years and experienced the first double-digit increase since May 2012, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. Home sales in the state have risen year over year for five straight months.

Home sales remained above the 400,000 mark in June for the third consecutive month and rose to highest level since July 2013. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 437,040 units in June, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the June pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The June figure increased 3.3 percent from the revised 423,000 level in May and 11 percent compared with home sales in June 2014 of 393,820. The year-to-year change is significantly higher than the previous 6-month average increase of 4.3 percent observed from December 2014-May 2015.

“Home prices continue to improve but at a more moderate rate compared with the previous year,” said C.A.R. President Chris Kutzkey. “However, in areas such as the San Francisco Bay Area where tight inventory is fueling stiff competition and generating multiple offers, home prices are still rising at or near double-digit rates, and creating a challenging environment for potential buyers in the region. “

The median price of an existing, single-family detached California home edged up in June from both the previous month and year for the fifth consecutive month. The median home price was up 0.8 percent from $485,830 in May to $489,560 in June, the highest level since November 2007. June’s median price was 7 percent higher than the revised $457,700 recorded in June 2014. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

“The housing market remained solid in June as the economy continued to pick up steam following a lackluster first quarter,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Overall, market fundamentals appear strong, and should provide some support for the market to stay above last year’s level in the upcoming quarter.  Housing supply, however, is one variable that remains a concern and could have an adverse effect on the market if the inventory constraints do not improve.”