by Steven Felschundneff | [email protected]
The local real estate market may not be as wild as it was 18 months ago, but this news might come as a surprise to anyone genuinely looking for accommodation in the City of Trees.
According to Paul Steffen of Wheeler Steffen Sotheby’s International Realty, his office reportedly saw 30 offers on a well-priced home last year – now it’s more like six to eight, but of those offers, all are solid.
Make no mistake, this is still a seller’s market with historically low inventory and many qualified buyers, resulting in homes selling within days, driving up already inflated prices for the markets. purchase and rental.
A year ago, mortgage interest rates were at historic lows, which only exacerbated the feeding frenzy. At the time, conventional reasoning held that when interest rates rise, the market should cool, but that just hasn’t materialized yet.
“The idea that interest rates reaching 5% would slow the market did not materialize. The demand is still there and quite honestly, people are still coming in with all-cash offers, so the interest rate isn’t slowing them down,” Steffen said. “There’s still a pent-up demand for housing, and there’s a lack of housing, especially in Claremont.”
The result? The median home price in Claremont is $900,000, up 15% year over year for the first quarter of 2022.
Looking casually at the current inventory of homes for sale, it seems like $1 million is what it realistically costs to buy in Claremont, especially for single family homes.
According to a popular online platform that provides public access to the multiple listing service, on April 23 there were 25 homes for sale in Claremont, 12 of which were worth more than $1 million. Of the 13 under $1 million, two were condominiums and two were single-family homes with the added fees of a homeowners association. Only three single-family homes were listed for less than $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 the rapid price gains of recent years are expected to slow to just 5% over the next 12 months, according to the clearing house of CoreLogic real estate data.
The median-priced home in the Southern California area has set records in 12 of the past 14 months, rising nearly 17% since March 2021 to $735,000, according to CoreLogic data released last week. Los Angeles County’s median price rose 12.0% to $840,000, but the county saw fewer sales, at just 7,531, a 5.5% drop.
“New listings haven’t kept up with the large number of families looking to buy, which has led to home sales that are fast and often above list price,” said Frank Nothaft, chief economist at CoreLogic. “This imbalance between an insufficient number of homeowners looking to sell versus buyers looking for a home has led to the record appreciation of the past 12 months. Rising prices and mortgage rates are eroding affordability for buyers and should dampen demand in the coming months, resulting in moderating price growth in our forecast.
Those predictions seem like a distant dream here in Claremont, where on average homes have only been on the market for 18 days and have typically sold for between $50,000 and $150,000 above asking price.
At the start of the pandemic, many people left congested urban areas in favor of the suburbs where they could have a yard and room to stretch out. This trend continues and with skyrocketing real estate prices in many Southern California ZIP Codes, many potential buyers are bringing in big bucks. Moving to Claremont from the West Side of Los Angeles always makes our town feel like a bargain.
“I sit in my sales meetings thinking I know the prices, but I just gawk when we sell stuff,” Steffen said of the steady rise in home prices.
The super-competitive market pushes away some potential buyers who qualify for a conventional loan with a 20% down payment, but must compete with others who offer all the money or can make hefty down payments of 50% or more.
“You still see them [borrowers with 20% down] but they’re not as prevalent as they used to be, which is kind of a barrier for first-time home buyers because that’s all they can get,” Steffen said.
Along with house prices, rents in Southern California have skyrocketed recently, with CoreLogic reporting the median rent for a single-family home in February at $3,342 per month in the Los Angeles, Long Beach and Glendale area, up 10% from last year.
Tenants may also flee urban areas. According to data collected by The Washington Post, rents have only increased 6.7% since 2019 in Los Angeles County, but over the same period, rents jumped 23.4% in San County. Bernardino and 21.9% in Riverside County.
“Rents for single-family homes are up more than three times from a year earlier and more than four times the pre-pandemic rate,” said Molly Boesel, senior economist at CoreLogic. “Strong employment and weak supply have pushed single-family vacancy rates to low levels and contributed to strong rental growth.”
In Claremont, there are simply too few rental units due to a lack of apartment construction over the past few decades and a shortage of family landlords, which has really strained the rental market. .
Steffen said years ago many Claremont residents owned a few rentals in addition to their primary residence. But since these people died, their children chose not to own them and sold the houses to people who mostly chose to live there.
So what is the solution? Steffen hopes to see more high-density housing, including multi-story buildings with many single-story apartments that residents could access via an elevator. He pointed out that many young homebuyers aren’t obsessed with mansion-style single-family homes, and many would prefer the flexibility of a smaller unit within walking distance of restaurants, transportation and colleges. These units would also be popular with older residents looking to downsize.
Which brings us to South Village, which is currently going through the commissioning process, but initial designs include many units as Steffen describes. His only complaint so far is the lack of units offered for sale.
“A lot of [South Village] will be on the rental market, which is unfortunate in my opinion. I actually think there’s a demand for people to get equity in their homes and it’s a chance to build that equity. And at least be in the housing market where they can enjoy appreciation and leverage from there.
One thing he’s not a fan of is all the laws coming out of Sacramento regulating what gets built and where.
“I think they’re trying to legislate a solution to the lack of housing and they’ve almost gotten no one to want to build the type of housing they’re trying to legislate in,” Steffen said, citing AB 1482 which limits rent increases, among other regulations.
“Would you like to own a building where your repair costs could skyrocket and where you still have to maintain [the building], but you can’t adjust the rent? People might say that [Consumer Price Index] protects you, but the truth is, construction costs don’t correlate very well with the CPI,” he said. “It’s a much tougher world for landlords and it’s no longer an attractive investment for a lot of people.”