Friendly reminder to make sure you have paid your property tax bill by December 10th to avoid a large penalty. They are very strict when it comes to being delinquent after December 10th so make sure you get it taken care of if you have not already.
Where to pay property taxes online- LA County Property Tax Payment
Proposition 19 passed- Important info on tax changes concerning the property tax exclusion for transfers between parent and child
With Proposition 19 recently passing (and taking effect February 16, 2021), the good news is the increased flexibility for those over age 55 to transfer their property tax base to a new residence, even if it is more expensive (but with some adjustment for a more expensive property). The downside is that Proposition 19 effectively eliminates the property tax exclusion for transfers between a parent and child (and grandchildren in certain cases).
Under current law, parents can transfer their primary residence of any value to their children without any property tax reassessment. Also under current law, a parent can transfer up to $1 million (based on the assessed value, not fair market value) of other real estate without property tax reassessment. After Proposition 19, the exclusion is eliminated entirely for real property other than a primary residence. Further, the exclusion for the transfer of a primary residence is now limited both in amount and by requiring that child use the property as his or her residence.
If you own real properties that you want to keep in your family beyond your generation, I highly encourage you to contact your Estate Attorney to see if any pre-emptive planning can be accomplished. This property tax benefit will be gone after February 15, 2021.
My wife is an estate planning attorney and is very knowledgeable on this subject and has been emphasizing to me the significance of this change in the law. If you have questions, please feel free to contact me.
Exceptional Cape Cod in the heart of Brentwood! Built in 2016 and designed by Clark Remington, this 5 bed and 5 ½ bath home features a large and open floor plan, high ceilings, custom carpentry and designer finishes throughout. The first floor includes a formal living, dining room, guest room with en suite, butler’s pantry, and gourmet kitchen
with a large island, breakfast area, and family room. The lushly landscaped backyard is an entertainer’s dream with a built in BBQ and newly added saltwater pool and spa. The second floor Master Suite offers vaulted ceilings, dual large walk-in closets, stunning oversized bathroom with sperate vanities and a freestanding tub. Three additional bedrooms with en suite bathrooms and an outdoor patio complete the second floor. The home is finished with a full security system, Life Source water filtration system, and is smart home ready. Enjoy this gorgeous and meticulously maintained home while being close to all the spoils Brentwood has to offer.
PROPERTY WEB-SITE (includes full virtual tour and floorplan)
Santa Monica Duplex – 1527 19th Street – $2.250M
A Rare opportunity to acquire a centrally located duplex in Santa Monica featuring two vacant standalone homes with separate entrances situated on a 7,500 sq. ft. lot. The front house is 3 a bed/1.5 bath with hardwood floors, sizable front yard and back patio area. The back house is a 2 bed/ 1 bath recently remodeled home with a nice yard that rented for $4,200 in 2018. Phenomenal location providing easy access to everything Santa Monica has to offer, and from a long-term perspective, the potential ability to build more units with the city under enormous pressure from the state to provide more housing (*must verify with the City of Santa Monica). **Available to show in 1-2 weeks.
*Coming Soon- Stunning home in Venice- 4 bed/3.5 bath – 2,900 Sq. ft / 6K lot — $2.8M
Fully customized high-level home that was extensively remodeled in 2018, featuring an open floorplan, large kitchen, high ceilings, amazing indoor/outdoor flow, A-frame architecture, wide plank hardwood floors, sizable bedrooms, resort style first floor master and amazing yard space. Perfectly situated in a family friendly neighborhood near Penmar Park and a short distance to coffee shops, restaurants and the renowned Abbot Kinney. **Available Jan/Feb. 2021.
*Apologies for the lack of updates…we fortunately got pretty busy through the summer and into the early fall and balancing that between family obligations during this COVID time has been a bit of a balancing act.
*As the media has reported, the single family property market has done very well since April thanks to the perfect storm of tight inventory, record low mortgage rates, the need of families to have more space and Silicon Beach (tech industry) and many high net wealth families thriving despite the pandemic. The fervor was at its strongest in the summer and has slowed down since late October but appropriately priced homes are still garnering multiple offers or a strong buyer in the first few weeks of being on the market, especially for “entry level” homes in sought after Westside/South Bay neighborhoods. Yard/outdoor space has played a much more significant role compared to pre-Covid times.
The higher-end homes are sitting a little longer but that also has to do with inflated list prices. It was mentioned in a recent office meeting the market above $5M was experiencing some softening in specific areas.
Though buyers are being aggressive, they are not straying very far from the comparable values and we have also had more issues with conservative appraisals which have either blown up deals or caused a re-negotiation. We had a brief period of price drops during the early COVID period and the appraisers have lagged the market turn-around. Overall, escrows have obviously been closing but the majority of agents will tell you they have been far more stressful and strenuous during this Covid and intense political time.
*The condo market had a strong run into the late summer but slowed down as we came into the election cycle. Things have picked up, but not nearly the fervor of the single family market. We are seeing condo owners willing to move to the valley or even further out to have a single family home over the ease and accessibility of being more centrally located.
*Single family home supply in Los Angeles is down 1.3 months compared to last year when supply was already tight. People are not moving during the pandemic unless they have to.
*Nationally, we have seen a 49% increase in people looking for single family homes online over last year.
*The well thought of Jon Burns Real Estate economic outlook for 2021 anticipates further appreciation in home prices to the tune of 3-5%. Bank of America is predicting similar appreciation. Main reason given are the fed maintaining the current interest rate policy for three years and expecting a strong economic jolt with Q1 Stimulus money up to $1T to be distributed along with job creation expanding as the economy normalizes into Q3 and Q4 after mass vaccination.
Here is the latest Skinny real-time market update for Los Angeles as we enter the next phase of SIP-
With perspective buyers able to visit properties in person over the last few weeks, the number of deals going under contract has risen significantly. Compass has seen 35% more deals go into escrow this week over last week. Agents are definitely busier and we are constantly receiving e-mails and phone calls from perspective sellers and buyers or just clients wanting to check-in to get a sense of what is happening. This increase in activity has led Compass to raise sales projections for June compared to what was anticipated at the beginning of SIP. While being interviewed on CNBC on Wednesday, Robert Reffkin, Compass CEO, stated “We have seen in-contract listing activity go up back to pre-Covid levels in over 90% of our markets”. Though this is encouraging news, sales volume is still off substantially compared to a normal May.
The California Association of Realtors as well as Compass predicts sales volume to continue to increase significantly throughout the summer as sellers feel more comfortable listing their properties. In terms of valuations, the entry level price points in most So Cal neighborhoods are holding firm while the luxury price points have taken more of a hit (5%+) but not as pronounced as predicted at the beginning of SIP. However, we really will not know the valuation impact for a few more months and whether the recent spike in unemployment will lead to a flood of inventory later this year.
Though we do not have the fervor of buyer activity we experienced in early 2020, the historic drop in housing inventory (new listings dropped by half during the second of week April compared to a year ago), we have seen a surge in multiple offer activity, especially for properties below $1.5M. If you would like information specific to a certain neighborhood, please reach out to us.
A few interesting notes- *LA County saw a drop of 35% in sales volume in April compared to April of last year. However, that was not the case in Pacific Palisades as they experienced the same sales volume for single family homes (12) compared to April of last year. Santa Monica was off 17%.
*Nationally existing home sales volume dropped 17.2% in March. The biggest drop since 2010. The median price rose 7.4%.
*The U.S. mortgage delinquency rate rose to 6.45% from 3.39% in March, the largest monthly increase ever recorded. It was almost triple the previous record gain in 2008, near the beginning of the financial crisis. About 3.6 million homeowners were past due on their mortgages at the end of April, the most since January 2015. The number jumped 1.6 million in a tally that counts forbearances as delinquent if the borrower didn’t make an April payment.
*About 8.8% of U.S. mortgages are in forbearance. The pace of new forbearances requests has slowed to about 27,000 a day, down 85% from April, the mortgage-data firm said.
*Nevada was the state with the biggest increase in mortgage delinquencies during April, climbing 5.2%. New Jersey was next, with a 5.1% gain, followed by New York, 4.9%.
The average U.S. rate for a 30-year fixed mortgage dropped to within one basis point of an all-time low this week. The rate fell to 3.24% from 3.28% last week, close to the 3.23% all-time low reached in April’s final week. The low rates are spurring housing demand as states ease lockdown restrictions, said Sam Khater, Freddie Mac’s chief economist. In fact, in major metro markets like Los Angeles, new mortgage applications have picked up dramatically and are near the same level as last year at this time.
The trend for mortgage rates is downward, according to major forecasters. Fannie Mae projected last week the average this quarter would be 3.2%, followed by 3.1% in the third quarter and 3% in the fourth quarter.
Fannie Mae is forecasting an average of 2.9% for every quarter of 2021.
In terms of the jumbo market which makes up the majority of the sales we deal with on the Westside/South Bay, rates have stayed relatively flat over the past few weeks for both purchases and refinances. Depending on the product (i.e. ARM/30 year fixed), we are seeing jumbo 30-year products being offered around 3% on 30-year jumbo loans. The discount for a 7-10 year ARM compared to the 30-year is not as substantial as one would think unless you place over $500K++ with the offering bank. If you are able to do this, you might get a rate in the 2.4%-2.6% range. We are still hearing stories (though rare) of some institutions offering sub 2% loans when opening a new account with over $1M.
We continue to see each bank act differently when it comes to refinancing and how aggressive they are being. Refinancing volume is on pace to spike at a 17 year-high and to control some of the demand, many banks are not offering advantageous refi rates so they can meet the necessary time-frames of the loans they are currently working on. Thus, we continue to tell clients it is worth the time to shop around with different banks when it comes to refinancing.
Lenders continue to tighten the belt when it comes to credit requirements and reserve amounts, especially on refinances and it appears the only way to get an interest only loan is through the bank that currently has the loan on the property.
*The Federal Housing Finance Agency announced Tuesday morning that Fannie Mae and Freddie Mac will now allow borrowers who went into COVID-19 forbearance to refinance their loan or buy a new home with the support of government sponsored entities (GSE) as long as they’ve made three straight months of payments after their forbearance ends. That’s much different from the previous thinking that a borrower may not be able to get another GSE mortgage for as many as 12 months after they exit forbearance. The CARES Act stipulates that mortgage servicers “shall report the credit obligation or account as current” on any loan that goes into COVID-19-related forbearance.
According to the FHFA, borrowers are now eligible to refinance or buy a new home with GSE backing three months after their forbearance ends as long as they’ve made three consecutive payments under their repayment plan, or payment deferral option or loan modification. Also, there is no waiting period for borrowers once they have repayed the full amount of outstanding payments missed during the forbearance period.
*Even as other parts of the economy tank, lenders will originate $1.5 trillion in refis in 2020, a 51% jump from 2019, according to the forecast. That would be the highest level since 2003 when $2.5 trillion of mortgages were refinanced, according to data from the Mortgage Bankers Association.
New title orders and escrow openings mirror the increase of properties going under contract the past few weeks. Title orders/escrow openings are now down about 30-40% compared to last May while at the beginning of April they were down 50-65% compared to last year. Title officers have noted a recent surge in preliminary title report orders as agents prepare properties to hit the market in June. Escrow cancellation rates have held at around 21% over the past three weeks. They were in the 25% range in mid-April. Cancellation rates were steadily in the 15-17% range pre-Covid.
Earlier this month the LA City Council amended and expanded the scope of the city’s eviction moratorium ordinance and the city is requiring owners to provide NEW written notice of the rights provided by this ordinance to renters by MAY 27th! Owners must use the HCID+LA protection notice and CANNOT write their own notice to renters. You can access the Protections Notice at https://aagla.org/rental-forms/ – *Refer to form J.12.
HAVE A WONDERFUL AND SAFE MEMORIAL DAY WEEKEND!
We hope you and those close to you are healthy and safe during this unprecedented time! Here is another “real-time” market update based on information from sources across the Los Angeles real estate landscape.
Earlier this week, the county of Los Angeles lifted the moratorium on showing homes in-person, and is now allowing agents to show properties with certain restrictions and guidelines. Sales volume continues be off about 50% (we expect this through May). Though the past ten days have seen an uptick in buyer and seller interest across the board. In fact, Compass management for the So Cal region projected at the outset of SIP (shelter-in-place) that just 92 transactions would close in our offices in May and that has been revised to 175. Our Northern California projections have increased from 150 to 309. However, expected closings for June have been revised downward from 259 to 211 in So Cal and from 431 to 376 in No Cal.
Overall, agents are fielding more calls from clients inquiring about properties currently on the market and asking about what might be hitting the market in the next few months. The volume of sales has stabilized and is not fluctuating to the lower levels we saw about a month ago. The properties going into escrow, some of which were only seen on a virtual basis, are mainly entry-level type homes for the different micro-markets that make up Los Angeles county. With SIP orders beginning to show signs of loosening, we will start to see a steady flow of new listings.
Also, starting May 1st, the National Association of Realtors (NAR) has prohibited “pocket listing/coming soon” marketing. The push is to have all inventory hit the market regardless of whether the seller prefers to sell in a quiet manner. The NAR has been working on this with major brokerage firms for the past nine months. Brokerages/realtors who have “coming soon/pocket listings” they have been advertising, are now required to include that in the local MLS. This will obviously help increase available inventory. That said, quiet listings can still be done, but the marketing will basically be via phone calls and realtor networking groups as any print or digital advertising is not allowed. With listing inventory picking up in May/June and continued SIP progress, we expect late June and July closings to show strong improvement and a sense of normalcy to come back to the market in late July/early August.
We really won’t know about the impact on property values for a few more months but new listings that reflect the 5-10% market correction discussed in the last few updates are generating the interest and demand for showings.
Interest rates continue to decline for home purchases and were seeing some more aggressive plays on the refinance front. Wells Fargo and Bank of America are quoting some buyers around 3% on 30 year jumbo loans if you open an account with at least $250K. 7 and 10-year ARM’s are in the 2.3% to 2.5% range when opening an account. I have heard from multiple clients that other banks are being even more aggressive, especially if you open an account with over $1M. Sub 1.8% rates on 7/10 year ARM’s are being quoted. These types of rates are good news for both buyers and sellers.
Most lenders are now requiring at least a 740 credit score and are doing 80% LTV up to a $2M purchase, 75% LTV up to $2.5M and 70% LTV above $2.5M.
Though many banks are not nearly as aggressive with refinances due to a large backlog, some are seeing it as a great opportunity to create banking relationships. Thus, it continues to be really important to do your homework when investigating refinancing. Sub 2% quotes on 7/10 year ARM refinances are happening when large ($1M++) accounts are opened. As we stated in the last update, be careful when asking for a loan forbearance if you don’t really need one, especially if you may be in the market to purchase a home in the next 12 months or looking to refinance. It could create some headaches for a loan approval.
Title and Escrow
New title orders (i.e.- preliminary title reports are typically ordered when a property goes under contract) have stabilized over the past two weeks and are off anywhere from 40-50% compared to this time last year. It appears the low in terms of new transactions opening was early April.
Escrow companies are reporting a nice surge in business over the past two weeks with the cancellation rate decreasing significantly this past week and seeming to have peaked four weeks ago.
Here are a few links to articles you may find informative-
*Two weeks ago an article appeared in the Wall Street Journal about the Seattle housing market and how it was faring during Covid. – Seattle’s real estate market continues to show up
Please feel free to reach out if you have any questions or need further information on your neighborhood, etc and most of all, have a wonderful and healthy weekend!
Here is the latest “Skinny on Real Estate” real-time residential real estate update. The goal of this is to keep you updated on the So Cal market based on information gathered from the major aspects of our industry during this unprecedented time. Most importantly, we hope you and those close to you are healthy and safe!!
After two rough weeks of very little sales activity across the board in So Cal, sales volume positively picked up this week. We had some multiple offer situations in our Westside and South Bay offices in the $1.5M to $3M range. Some of the multiples were solely based on virtual tours without any in-person showings. The market has had such poor inventory for a long time that even under these circumstances, we still have solid buyer demand.
That said, the leverage the seller’s enjoyed pre-COVID-19 has given way to a much more balanced market. The early indications from deals in-escrow with contingencies removed or deals that recently went under contract, home prices are down about 5-10% depending on the price point and location. Properties priced under $1M in good locations are faring the best while the higher end (over $3.5M) is seeing the bigger discounts…but we are still seeing high-end deals closing (Prince Harry and Megan Merkle spent around $15M for a property in Malibu- off-market) and plenty of calls/e-mails inquiring about luxury properties.
At this point (still early to make these assumptions), despite such strong economic turmoil, some real estate economists feel property values won’t take much more than a 10%-12% hit as long as we see shelter In place orders easing in So Cal by the end of May. Under that scenario, a strong 4th quarter of 2020 is projected with home values beginning to inch back up. The combination of continued expected low rates and strong buyer demand for a scarce product are the key factors in this analysis.
A survey of active luxury real-estate agents found about 45% of the respondents felt homes valued above $3M would drop 10-15% in value, 35% state a decline of 5-10% with about 15% stating prices will be similar to pre SIP orders.
A few weeks ago, Compass Westside offices were reporting that new listings were off about 30% compared to this time last year. We have seen that increase to 50%. However, quite a few e-mails are circulating amongst agents about inventory that will hit the market in June and that is when we expect listing volume to dramatically increase.
Interest rates are holding steady on new purchases. 30-year jumbo loan rates are in the low to mid 3% range with the 7/10 year ARM in the 2.55% to 2.85% range.
Be careful when asking for a loan forbearance if you don’t really need one, especially if you may be in the market to purchase a home in the next 12 months or looking to refinance. It could create some headaches for a loan approval. Also, if you have a HELOC and could be using that money in the next few years, you should think about getting that money out. Some banks have started freezing access to that money which could become universal fairly quickly under the current economic environment.
Most of the major lenders are not going above 80% LTV on new purchases.
Nationally, about two million homeowners missed their monthly mortgage payments, a number which is expected to rise further. Approximately 3.74% of home loans were in forbearance Refinance rates are still holding higher than expected due to the backlog of files in the system but we expect these rates to drop.
Loan Article-Mortgage rates drop to 30-year low
New title orders (i.e.- preliminary title reports are typically ordered when a property goes under contract), were down over 50%-60% in the previous two weeks. This was a stronger week with title openings appearing to be off in the 35-50% range.
California is getting closer to allowing virtual notary signings. An announcement on this and the procedures that need to be followed is expected in the next few weeks.
Here are a few links to information/articles you may find useful-
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-
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–
*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.
*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 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.
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…:).