Decline in Commercial Vacancies Sparks Optimism

The commercial sector, especially with regard to office buildings, is still recovering from the 2020 recession. Fortunately, the stats are showing a positive trend. The industrial market bounced back most readily, since warehouse space was still necessary even without storefront purchasing. Vacancy rates in the retail sector are still above pre-2020 levels, but it’s slowly dropping. Work-from-home has hampered recovery in the office sector, but the numbers are stabilizing.

The most significant changes over the year occurred in net absorption. Net absorption is the total amount of space that is occupied — regardless of how many separate properties that includes. For the industrial sector, net absorption is now in the millions of square feet across SoCal. It was already 3.9 million in the Inland Empire last year, but now it’s up to 6.9 million. Other areas were previously below 1 million. The largest increase, both in raw numbers and by percentage, was in Los Angeles county, which increased nearly ninefold from 417,900 to 3.7 million.

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More: https://journal.firsttuesday.us/decline-meets-optimism-in-socal-commercial-real-estate-markets/80486/

When to Consider a Shorter-Term Loan

The most common mortgage loan length is 30 years, which offers the lowest monthly mortgage payments. But that isn’t the only option. Shorter-term loans require larger monthly payments, but they have other benefits.

Shorter loan lengths, such as 15- and 20-year loans, ultimately result in less money spent over the course of the loan. The reason is twofold: Not only are you paying interest for a shorter period of time, but shorter loans actually also have lower interest rates. The monthly payments will still be higher since it needs to be paid off faster, but you’re saving money in the long run. So, shorter-term loans are a good idea if you’re not worried about being able to make monthly payments. If you have concerns about making payments, consider talking to an accountant about your taxes. Mortgage interest and property taxes are both deductible, as long as you are itemizing. If you weren’t itemizing before, doing so may mean the extra monthly payment really isn’t all that much more.

Refinancing also doesn’t necessarily mean you have to start your payments all over again. It’s possible to switch to shorter-term loan as part of a refi. This is especially beneficial if your loan doesn’t actually have all that much time left. If at all possible, when refinancing for a lower interest rate, try to take a loan with the same length as the remaining life of your current loan. This will ensure that you’re definitely saving money in the long run. You may even be able to find even shorter loan lengths, such as 10 years.

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More: https://www.cnn.com/2021/10/21/homes/which-mortgage-is-best-fe-series/index.html

Small Homes Can Still Feel Spacious With These Tips

The most surefire way to enlarge a space is, of course, to expand it. But what if you don’t have the lot size or the money to expand? There are still things you can do within the square footage you have to make our home seem bigger than it is.

A couple of these methods still involve renovation, but don’t require any additional space, since it’s all within the existing structure. If your kitchen has an island, consider removing it. Island kitchens can be fashionable, and offer more storage and counter space, but can make it harder to maneuver or make the kitchen feel cramped. Open floor plans also increased the perceived size of the property. Look for interior walls that don’t need to be there, such as between the kitchen and dining room, and think about cutting them out. Your space will look much bigger, and not only by the thickness of the wall.

If you don’t want to do anything too drastic, there are psychological effects you can take advantage of. Using see-through materials such as glass enables you to see more of your home’s square footage without necessarily being in the room. These can be glass room dividers, windows in doors, or even something as small as a glass staircase railing. Mirrors have a similar effect, reflecting the square footage behind you into your vision. Your choice of colors also matters. Painting the walls in a lighter color doesn’t change the size of the room at all, yet still makes it feel larger. You can even use lighter shades of wood flooring.

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The Next Steps After a Successful Purchase

Once a transaction closes, new homebuyers are eager to get to the celebrating. Go ahead and celebrate, but don’t get ahead of yourself. While the real estate agent’s job is done, the homebuyer’s isn’t. Owning a new home also means many of your financial specifics have just changed. Don’t fall behind on your paperwork and payments because of out-of-date information.

Make sure your mortgage payments are properly set up. Verify the date of your first payment and get it in before it’s late. Consider setting up automatic payments to ensure that they’re on time. Your property tax amount also may have changed, and you’ll need to update your homeowner’s insurance.

There are also a couple things that may not need your immediate attention, but that you should be aware of. Loans are one thing that banks and other lenders often sell to each other. It’s entirely possible that who you owe money to will change, and this is especially important to keep track of if you are sending physical checks. The other thing to look out for is scams. They’re going to increase in frequency immediately after a sale, as scammers often try to pose as insurance companies selling home insurance or mortgage insurance.

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How to Facilitate High-End Home Sales

Home prices are high, which means fewer prospective buyers are able to afford your home. But the buyers don’t necessarily realize that, without a solid grasp on their financing options. That’s certainly not your fault, but there are things you can do to make sure you are avoiding dealing with people who don’t have a chance. Specifically, take hints from the luxury market. Your home may not have been in the luxury market a few years ago, but it could be now. Even if it isn’t, some of these tips may still be useful for you.

Real estate agents can do a lot of the work for you, if you know what you’re looking for. A good real estate agent will encourage any buyer that they represent to get a pre-approval letter from a lender, regardless of their budget. If they don’t have one, you’re probably better off not dealing with them. The type of open house you have is a big factor. While traditional open houses give you the greatest number of options as far as potential buyers, most of them won’t work out or are just looking and aren’t even interested. Worse, they can open up your doors to potential thieves, who often target higher-end homes. Consider a broker’s open instead, which would be attended only by agents who already have a buyer who is more likely to be seriously invested in buying a home. That will also let you know who the agent is that’s working for them, a potentially important piece of information. If the buyer’s agent is a specialty luxury agent, they will have already vetted their client, since they have as little interest in you do in working with a buyer who can’t afford a high-priced home.

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Lower Stress of Selling Your Home With These Tips

Major life decisions are always stressful, and selling your home is certainly no exception. But many sellers stress more than they need to because they haven’t properly prepared for the sale. While a good agent will be there to advise you, most decisions are ultimately yours to make, so you need to do your own homework as well.

Speaking of good agents, that’s the first thing you need to make sure of. Research agents who work in the area and discuss your goals with them. All agents have their own strengths and weaknesses, even if they don’t specialize, which many of them do. The best performing agent may not be the right agent for your particular needs. Ensure your agent knows whether you’re looking for top dollar or just need to sell fast, because that’s going to affect the listing price and timeline.

Your agent will hopefully provide you with an in-depth analysis of comparable properties. Even before you receive it, you should have a decent idea of your home’s value. If it’s drastically different from what your agent thinks, discuss that with the agent and try to reach an understanding. You could even find that you don’t actually want to sell because you’ll be making much less than you expected. Or maybe there are certain repairs that you didn’t feel were urgent, but may have a significant effect on your home’s value.

Once you start to receive offers, be smart and make appropriate adjustments. Read through the offers carefully, and look for a pre-approval letter if the prospective buyer requires a loan. A first offer doesn’t have to be final — don’t reject every offer with minor issues, but also don’t acquiesce to every buyer demand. Some deals simply won’t work out at all, but many can be negotiated through counteroffers.

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Aging in Place Contributes to Low Inventory

The concept of aging in place, whereby older homeowners simply live in their home instead of moving to a retirement home, has been trending upward in recent years. The COVID-19 lockdowns only amplified that trend — seniors don’t want to be stuck in a home with several other residents. Unfortunately, this is causing a problem for inventory, since Baby Boomers and the Silent Generation own a combined 58% of properties. If over half of the homeowners are aging in place, they aren’t selling.

It’s not entirely their fault, though. After all, they aren’t intentionally lowering inventory out of malice. The trend is merely compounding a different issue, which is that population is increasing, but construction rates aren’t, and it’s especially low for multifamily housing. Recent legislation has made it easier to develop multifamily housing. But if that doesn’t happen, seniors moving from SFRs into retirement homes isn’t going to suddenly open up enough affordable space for everyone.

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More: https://journal.firsttuesday.us/baby-boomers-are-hogging-all-the-inventory/80373/

Landscaping Key Factor in Home Values

It’s common knowledge that first impressions are important, and that maintaining strong curb appeal can boost interest. But curb appeal is important for your bottom line even if you aren’t struggling to get interested parties. A well maintained lawn or garden, just one tree, or even patio decorations can vastly improve your home’s value, perhaps by 30% or more in some areas.

Those buyers weren’t surveyed directly, according to observations by real estate agents, the types of landscaping buyers are most interested in are grass, trees, and flowers. 64% of agents thought grass was most important, 59% say trees, and 52% flowers. Hardscaping — outdoor design that doesn’t involve living things — is also important. 58% of agents stress the importance of well-maintained decks. 54% focus on the driveway, and 47% say an outdoor kitchen is valuable.

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More: https://www.trees.com/poor-landscaping-can-decrease-property-value-by-as-much-as-30

More Deals Falling Through After Appraisal

Though the appraisal process can be waived, and it’s not all that infrequent — about 25% of transactions, as of August — when the appraiser disagrees with the buyer and seller on a home’s value, things can get awkward. For all-cash offers, the appraiser’s opinion doesn’t have any direct effects, though it can still influence the buyer or seller’s decision to stick with the deal or not. But for contracts involving a loan, the lender frequently will only lend up to an amount based on the home’s appraised value, even if the buyer offers more than that. And quickly rising prices make appraisal values frequently lower than the asking price, while many buyers are actually offering over the asking price.

Appraisers’ inability to keep up with a fast-paced market is slowing down many transactions. Buyers want to buy quickly, but appraisals take time. More disastrously, deals are forced into renegotiation when buyers find the appraisal is too low for them to qualify for a loan for the amount they expected. This results in 23% of deals being delayed after the appraisal process. About half of these delayed deals end up completely falling through.

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More: https://magazine.realtor/daily-news/2021/10/11/low-appraisals-stall-23-of-home-sales

Four Inexpensive Storage Strategies

The best way to save money on storage is by utilizing space as efficiently as possible. In some cases, there may be small storage spaces already in your home that aren’t explicitly designed for that purpose, but work just as well. Alternatively, it’s possible that storage areas that are built for that purpose could benefit from a more efficient structure at minimal additional cost.

Every house has a bedroom, or at least a space where you put your bed. In your bed is on a frame, there’s going to be a bit of space under it. That space isn’t an inescapable void where errant socks and jewelry are lost forever. It’s a spot to put a few small boxes. If your home has multiple stories, there’s usually some space underneath the stairs. It may even already look like a storage area, but if it doesn’t, feel free to add a shelf or cabinet.

Your existing cabinets can also be made to use space better. Tilting drawers have two functions: they can conform to a space’s shape while manifesting a slightly different shape while in use, and they can be detached from the cabinet to utilize more of the open space. This method is often used for storing trash bins or creating hanging racks that sit horizontally when not needed. Another way to maximize your space’s shape is to use sliding drawers in narrow spaces where one couldn’t put a cabinet, or even inside a cabinet for extra surface area.

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Many Joint Owners Don’t Share a Last Name

In recent years, co-buying has skyrocketed. This refers to a situation in which a home is purchased jointly by multiple owners. And nowadays, more and more of them don’t share a last name, with this value jumping by 771% since 2014. Of course, there could be multiple reasons for not sharing a name, and they could even be married, but chances are they’re not.

Buying your first home is not easy in the current economic climate. Millennials, who make up the largest chunk of prospective homeowners, have inherited astronomical home prices, crippling student debt, a weak job market, and negligible wage growth. Most can’t afford a home on their own — so they ask their friends or roommates to co-buy a house with them. The percent of co-buyers identifying as neither a married nor unmarried couple is only 3%, but that’s still up from two years ago when it was only 2%. The percent of unmarried couples co-buying also went up from 9% to 11%, as Millennials as a generation are also tending to marry later or not at all, whether for financial or personal reasons.

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More: https://magazine.realtor/daily-news/2021/10/12/co-buying-has-skyrocketed-in-last-7-years

Investments in US at Risk From China’s Economic Struggles

Real estate investment in China is a big business, and one of the biggest investors is a company called Evergrande. The problem is that Evergrande has quite a bit of debt and is rather close to defaulting. The company certainly doesn’t control a majority of the Chinese real estate market, but it’s significant enough to put a dent in consumer confidence if it goes under.

This is merely a symptom of the actual problem with China’s real estate investment market. The truth is that China’s population has been falling dramatically in recent years, but investors haven’t scaled back their investments. This has led to a significant overabundance of supply, as well as compounding investor debt.

Why is this important for the US? Well, a large number of our foreign investors are from China, especially in the commercial sector but also in residential. Chinese investment in US real estate has been slowing already, but it’s high enough that a market crash in China would definitely have aftershocks in the US real estate market. Fortunately, because our market actually has the opposite problem as China — too little supply — investors bailing out and selling could just open up more opportunities for buyers.

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More: https://journal.firsttuesday.us/chinas-looming-real-estate-crisis-casts-a-shadow-here-in-california-too/80252/

2022 Market Projections

Next year is expected to be a bit calmer than this year was. An estimated 439,800 sales are projected for this year by the end of the year, but the model predicts only 416,800 for 2022, a 5.2% decrease. It had increased 6.8% in 2021 from 2020. House prices will still be going up, albeit at a much slower rate. The median home price will have increased over 20% this year. It’s only expected to increase about 5% next year. This will also mean a 3% decrease in housing affordability, from 26% to 23%. The forecast assumes that the pandemic situation can be kept under control, primarily focusing on low supply during a recovering market. 2022’s market is likely to be better for prospective homebuyers who were pushed out due to heavy competition. Those who already couldn’t afford to buy still won’t have much luck, but the slowing rate of price growth is hopeful for them.

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More: https://www.car.org/aboutus/mediacenter/newsreleases/2021releases/2022housingforecast

There’s No Need to Dread Unpacking

For some people, the worst part about moving is unpacking everything once you’ve moved in. Often it’s not actually everything; some boxes frequently end up never reopened and simply sitting in storage. But it doesn’t have to be that way. There are smart ways to unpack that can help you keep organized and reduce the time and stress.

Come up with a good labelling scheme for your boxes. Don’t just throw stuff in a box and figure out what’s in it later. The best way to do this is to organize by room — know ahead of time where you’re planning to put your items, and put the boxes in their appropriate rooms before even opening any of them. The first boxes you should open are the ones with your storage units and organizers, if your items weren’t already packed inside of them. Now, remember those boxes you’re just planning to shove into storage unopened? Maybe those are seasonal decorations, in which case that’s not an issue. But maybe you don’t actually need those items. You may have brought them with you, but that doesn’t mean you’re forced to keep them. Consider donating unneeded items to save storage space and reduce clutter.

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Home Equity Gains Are a Buffer Against Foreclosure

The foreclosure moratorium is over now, putting many homeowners at risk. However, unlike the previous recession, homeowners actually have options this time around. Home prices are high, rather than low, meaning home equity has also increased. This will allow many homeowners to sell their homes instead of being foreclosed on.

The average annual gain in equity this year was $51,500, the highest point in the past 11 years. It’s also five times the value last year. Another important statistic is negative equity, which CoreLogic started tracking in 2009. Fewer homes than ever since the statistic has been tracked have negative equity, at only 2.3%. At the state level, Louisiana is somewhat struggling at 7.8% negative equity share. Among metros, Chicago has the highest negative equity share at 5.2%, but also the second lowest amount of negative equity — meaning more people have lost money than average, but those who have haven’t lost very much. Conversely, San Francisco has the lowest negative equity share at 0.6%, but the highest amount of negative equity.

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More: https://www.corelogic.com/intelligence/strong-home-equity-gains-in-2021-lower-foreclosure-risk/

Renters Overtake Homeowners in Suburbs

Homeownership has been a mainstay in suburban areas, where the typical house is a single-family residence or possibly a duplex. Residents in these areas have tended to be middle- or high-income earners. All of this is starting to change as the demographic is switching to Millennials and Gen Z homeowners. The majority of residents in suburbs are now renters, unable to afford to purchase a home.

Millennials and older Gen Z people inherited the effects of the Great Recession, which delayed their careers and consequently their ability to own a home. This also compounded with student debt, since Millennials are a highly educated generation. All the while, prices are increasing but wage growth is stagnant. While some of these people recovered somewhat since the Great Recession, others were still trying to get back on their feet or were just entering the job market when the 2020 recession hit. Most of Gen Z is still not old enough to own a home, so it’s unclear whether this would extend to them as well.

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More: https://journal.firsttuesday.us/californias-suburbs-flip-as-millennials-and-gen-zs-become-majority-renters/

Cryptocurrency Has Reached the Real Estate Market

Cryptocurrency has been around for a bit now and is in widespread use, with its major appeal being how difficult it is to counterfeit or manipulate. It’s usually used to make smaller payments, such as purchasing software or electronics. But as with physical money, cryptocurrency can be used for payments of any magnitude. That includes thinks like home purchases or mortgage payments.

If you’re unfamiliar with cryptocurrency, you may think that because it’s generally used for smaller payments, it must take a lot to be able to afford a house. That’s not exactly true. One popular cryptocurrency, Bitcoin, is actually worth $43,000 per coin currently — most payments are made in mere fractions of coins. The value of cryptocurrency does fluctuate wildly, but the trend has been generally upwards in the past few years, albeit at a declining rate of increase.

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More: https://journal.firsttuesday.us/the-future-of-cryptocurrency-in-real-estate-transactions/80084/

DIY or Call a Professional?

Some people are rather handy around the house and like to do repair or patch jobs themselves. Or maybe you’d prefer not to have to do it yourself, but money is tight. Whatever your reasons, there are some things you really should call a professional for, if you don’t have experience in that field yourself. If you can’t decide whether you want to try it yourself or not, the bottom like is that structural work and potentially dangerous work should be done by a trained professional, but cosmetic work or simple repairs you can do yourself.

For most people, applying a fresh coat of paint to interior walls or cabinets is not a difficult task, and you may even have leftover paint in storage from when it was originally painted. Exterior walls, however, generally require specialized tools and can have safety concerns. Some plumbing jobs can be done yourself, such as small parts replacement, but leave the pipework and repairing major leaks to an actual plumber. Electrical systems and carpentry are potentially dangerous and should always be handled by a professional.

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C.A.R.’s New Educational Campaign Aimed at Latinx Homebuyers

The California Association of REALTORS® (C.A.R.) has launched a new website,  www.BringYourFamilyHome.com. This page will provide information to prospective homebuyers, especially aimed at first-time homebuyers, about financial literacy, credit scores, steps in the process, and how to contact agents. And C.A.R. hopes to address a long-standing issue by presenting the page in both English and Spanish.

California has a significant Latinx population, and many of them believe they aren’t able to afford a home. While certainly some of them don’t have enough income for the high prices in California, a significant number have misconceptions about what they can and can’t afford. 85% of Latinx prospective homebuyers still see owning a home as a big part of the American Dream, and the majority of those haven’t given up on it. But four out of five aren’t aware that they qualify for mortgage loans. 25% of Latinx people that are renting actually don’t need to because they can already afford to purchase, but don’t realize that and aren’t aware of the process. By providing educational materials in Spanish, C.A.R. hopes to help many more Latinx households achieve homeownership.

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More: https://www.car.org/aboutus/mediacenter/newsreleases/2021releases/hispanicadcamp

Wildfires Causing Property Insurance Costs to Skyrocket

Property insurance is not legally mandated; however, it is a requirement in order to qualify for the majority of mortgage loans. But with wildfires increasing in frequency in California, higher risk means higher insurance premiums for anyone living in a fire-prone area.

Some people can’t even qualify to renew their insurance because they can’t afford it. Since their lenders still require it, that just means they’ll pay even more for coverage under the Fair Access to Insurance Requirements (FAIR) plan. FAIR is a California state insurance program that anyone in a high-risk area qualifies for. Unfortunately, it’s usually even more expensive and generally provides weaker coverage.

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More: https://californianewstimes.com/california-wildfires-ignite-an-insurance-crisis-press-telegram/520475/