The barriers to homeownership for Black and Latinx buyers

Throughout the country, Black homeowners pay an average of 13% higher property taxes than White homeowners. This is because of assessed values, which are on average 10% higher in Black and Latinx neighborhoods relative to the sale price. Local governments use higher property tax rates to push for gentrification, which they know new white owners can pay but the minority families already living there cannot. White buyers are also more easily able to appeal their property tax assessment.

The problem is worse in California, where Prop 13 is limiting property tax rates on unsold homes by basing property tax assessments on the value at time of sale. The proposition is designed to protect older residents who are on a fixed income and could otherwise lose their homes. But there are some negative consequences for low-income buyers. As soon as the home is sold, the new buyer is potentially facing significantly higher property taxes than the previous owner was, which prices out some people who are otherwise able to afford the purchase itself. And in the meantime, local government has less revenue from property taxes, so they have to make up the difference elsewhere. This often comes in the form of sales tax, which, because the rate is identical regardless of the buyer’s income, is proportionally a larger burden for Black and Latinx indivduals who tend to be lower-income earners.

Taxes aren’t the only issue Black and Latinx people face, though. When the economy crashed in 2007-2009, minorities were disproportionately affected because of discriminatory lending practices. Lenders would statistically charge higher fees to minorities with equal qualification as whites, or steer minorities towards subprime loans regardless of credit history. This meant they were less likely to be able to pay their mortgages after the crash. With all these barriers to homeownership, Black and Latinx individuals lose out on one of the largest sources of wealth, owning a home.

Photo by Masaaki Komori on Unsplash

More: https://journal.firsttuesday.us/the-unequal-property-tax-burden-on-black-and-latinx-households/72464/

New LEED guidelines established for COVID-19

In order to help combat COVID-19, the U.S. Green Building Council has established new LEED safety guidelines. The new recommendations cover layout, materials, air quality, and smart technology, and are focused on senior care facilities.

The guidelines suggest that facilities renovate to create more single-occupancy rooms. Flexible layouts and multipurpose rooms can help to address both current and future concerns without needing additional space. Uncoated copper alloys are best for knobs and rails, as the copper alloys have an antimicrobial factor. Curtains should be replaced with glass or plexiglass. Countertops and floors should use nonporous or less porous materials such as quartz and Corian for countertops and porcelain, vinyl, or wood for floors. Ventilation is of utmost importance, particularly in bathrooms, and should be maintained regularly. Touchless features go a long way, such as automatic doors, touchless faucets, and voice activated lights.

Photo by CDC on Unsplash

More: https://magazine.realtor/home-and-design/feature/article/2020/07/elder-care-updates-to-counter-viral-spread

Microunits may be permitted in some multi-family areas

California bill AB 3173, introduced in February, would require some cities and counties to permit microunits in areas zoned for multifamily residences. The city or county must have a population of 400,000 or more to qualify for this requirement. Because of the way zoning laws operate, the bill would not apply on city land in a city with a population under 400,000 even if the county has a population over 400,000. The bill also establishes size and affordability requirements for the microunits.

Using 2019 population estimates for cities and the 2010 Census data for counties, the bill would apply in 8 cities and 21 counties. Eligible cities are Los Angeles, San Diego, San Jose, San Francisco, Fresno, Sacramento, Long Beach, and Oakland. It’s possible that Bakersfield, with an estimated population of 384,145 last year, has now passed the 400,000 mark. Eligible counties are Los Angeles County, San Diego County, Orange County, Riverside County, San Bernardino County, Santa Clara County, Alameda County, Sacramento County, Contra Costa County, Fresno County, Kern County, San Francisco County, Ventura County, San Mateo County, San Joaquin County, Stanislaus County, Sonoma County, Tulare County, Solano County, Santa Barbara County, and Monterey County. It’s very likely that Placer County, with a population of 398,329 at the 2010 census, has now surpassed the requirement.

Photo by Lachlan Gowen on Unsplash

Read the full bill: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB3173

2020 — The First Six Months in South Bay

Faced with the Covid-19 pandemic, a particularly contentious national election, and weeks of nation-wide civil rights protests, It looked like there was no way 2020 could ever be called a normal year. Then we learned about a growing recession. So halfway through the year, what do we see?

Prices – Up and Down

The South Bay is a nice place to live. Here, the real estate market is frequently shielded from the vagaries of the nation at large. And it’s no different this year. In this chart we compare the average sales prices during the first six months of 2019 versus 2020, by zip code. In nearly all cases the average property price is still going up. Torrance was very nearly flat and 90274 actually dropped slightly. (If your zip code or city is not included here, and you would like statistics, give us a call.)

Volume – Mostly down

With prices are still climbing, albeit slower than they were, what about sales volume. Here we see some negative impact. Hermosa Beach is the only local city not experiencing a drop off in sales. In Manhattan Beach, for example, sales are off by 38% for the first six months of this year. South Redondo is off by 35%. Torrance and the peninsula cities are all down by roughly 5-10% from the number of homes sold in the same period of 2019.

My Crystal Ball

Our Market Trend chart is designed to show whether market conditions generally favorable for sellers or buyers. The year started as a buyers’ market and moved even further toward buyers in February. Since then we have been seeing a slow, but steady movement toward a sellers’ market. Things could change dramatically before the year is out, but right now the red trend line indicates the probability the South Bay will be in a sellers’ market before the end of 2020.

Recent changes to California UBI bill

California proposed a Universal Basic Income bill in February, which would be administered by the State Department of Social Services, called AB-2712. This May, AB-2712 was amended, establishing new requirements for eligibility as well as shifting administration to the Franchise Tax Board.

Under the amended UBI bill, the CalUBI Program would be an opt-in program that granted $1000 per month to eligible California residents over the age of 18. The amount is unchanged from the February version, but the amended bill establishes new requirements. The new requirements are:

-Currently reside in California
-Lived in California for the past 3 consecutive years
-Not currently incarcerated in a county jail or state prison
-Income no greater than 200% of the median per capita income in the county of residence

In addition, the amendments make this income non-taxable under state tax law, and won’t affect income eligibility for state programs. Rather than a flat value-added tax of 10% proposed by the original bill, the amended bill gives the California Department of Tax and Fee Administration until July 1, 2024 to report on the feasibility of a value-added tax.

Photo by Tingey Injury Law Firm on Unsplash

See the full bill: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2712

Recession hits commercial real estate

In May of this year, commercial property sales were at their lowest level in a decade, and commercial renters are struggling to pay rent. Retail and hotel tenants, who were hit the hardest, are current on leases at rates of only 41% and 37% respectively as of June. This also affects the income of the landlords and investors.

Currently, California’s state of emergency is protecting commercial tenants from eviction. However, tenants don’t presently have protection for any length of time after the state of emergency is over. There is a bill proposed, Senate Bill 939, which would protect tenants for 90 more days, and allow 12 months for repayment.

One sector of commercial real estate is notably resilient: industrial. With so many people forced to move to online shopping, industrial properties suitable for e-commerce aren’t struggling nearly as much. Nevertheless, commercial real estate is still not going to be a great investment for the time being. We can expect this trend to continue for a couple more years, as 2022 is the earliest expected year of recovery.

Photo by Wonderlane on Unsplash

More: https://journal.firsttuesday.us/commercial-real-estate-is-reeling/72262/

Homes are selling fast — for now

Even though number of sales is down from last year, the homes that are being sold are actually selling faster. There is plenty of demand and fierce competition, due to low interest rates. High demand and low supply is also keeping home prices up. The average days on market is now 22 nationwide, down from 25 this time last year. Some cities in California are seeing significant decreases, such as San Diego with a whopping 10-day decline, from 25 days last year to 15 days.

It’s not going to stay that way for long, though. New listings are trending upward, which may feel like the beginnings of a recovery, but it’s more complicated than that. If supply starts to outpace demand, high house prices are not going to be sustainable. Sellers will be forced to either accept a lower price or wait for a better time. With many buyers still not having recovered from the economic chaos of COVID-19, it will be some time before demand can catch up to increasing supply. Recovery won’t truly start until California reaches the bottom, projected to be in 2022.

Photo by chuttersnap on Unsplash

More: https://journal.firsttuesday.us/despite-historically-low-sales-volume-homes-are-flying-off-the-market/72266/

Mortgage application rejection on the rise

I’ve previously mentioned that COVID-19 and the current economic downturn have resulted in an increase in mortgage forbearance requests. But what about mortgage applications? Interestingly, even as fewer people are able to pay their mortgages, people are still applying for mortgages, looking to take advantage of the current low interest rates on mortgage loans. And getting rejected at a much higher rate.

Lenders will always want to ensure that people are able to pay back the money they borrow. Obviously if the borrower has a mortgage in forbearance, well, that borrower doesn’t stand a great chance of being able to pay back a new mortgage. But even beyond that, lenders have been tightening restrictions in the wake of lessened economic stability. They are requiring higher credit scores, larger down payments, and more savings. Someone who was largely unaffected by the economic downturn may think they have a good chance at getting their mortgage loan approved. Not necessarily, if they were basing their expectations on old lender restrictions. Lenders are going to need to find the right balance between encouraging borrowers — since that’s how they make their money — and avoiding risky lending practices.

Photo by Cytonn Photography on Unsplash

More: https://journal.firsttuesday.us/forbearance-requests-rise-while-mortgage-credit-availability-falls/72172/

A look at the housing future of Gen Z

I recently wrote regarding the influx of young adults living with their parents and grandparents during the past few months. These young adults belong to Generation Z. Though economic factors were not the only thing at play in this trend, they’re still a big part of it. So the current situation of this group can help us to understand the implications for housing for the entire generation.

We don’t yet know exactly how long this economic slump will last, but we have some guesses. The optimistic analysis is that the economy will begin to recover as soon as the general population has access to a COVID-19 vaccine, which will allow them to resume their normal lives as both producers and consumers. But housing is expensive, perhaps prohibitively so for low-income workers, and it’s still going to take some time to be able to save enough money for a house. This is especially true when we recognize that a downturn was already coming before COVID-19 hit — the pandemic exacerbated the problem, not created it, so eliminating the pandemic won’t fully eliminate the problem. We may be into the next decade before Gen Z is back on track for home ownership.

Photo by Maria Ziegler on Unsplash

More: https://journal.firsttuesday.us/young-adults-flock-back-to-the-nest-how-long-will-they-stay/72174/

Living with parents is the norm for young adults

During the months of March, April, and May, approximately 2.9 million adults in the US moved in with parents or grandparents. Many of these were college students whose classes were cancelled due to the COVID-19 epidemic, but the enormous spike during those months is also a result of the economic downturn. Young adults aren’t able to justify the expense of living on their own during these times, even if they are able to afford it, which many aren’t.

An adult living with their parents has been stigmatized in the US, seen as the mark of a lazy or irresponsible person. Current events are demonstrating that this isn’t necessarily the case. And the numbers also disagree — in fact, it first became the most common living arrangement for young adults all the way back in 2014. This isn’t a new trend, and it’s not a bad thing. The upward trend may have started with economic imbalances, likely the Great Recession in the late 2000s, but this serves only to obscure the fact that non-economic factors are also at play. More people are going to college and graduate school. Couples are marrying later and having their first child later. The timeline of a young adult’s life has been shifting for nearly 15 years. Of course they would be buying homes later as well.

Photo by Nikola Saliba on Unsplash

More: https://www.theatlantic.com/family/archive/2020/07/pandemic-young-adults-living-with-parents/613723/

Don’t let unemployment shatter your home-buying dreams

Record-high unemployment since the Great Depression is worrying for people looking to buy a home. And it’s true that it’s very difficult to buy a home while unemployed, since lenders are are looking for stable income. Unemployment income is considered temporary income, which lenders aren’t going to look at. Even once you find a job again, lenders typically want two years of continuous employment. Gaps in employment older than two years don’t impact your chances of lending negatively, though, so that won’t be a concern in a long run.

Another problem is that lack of income could put a strain on your credit score. While you will eventually become employed again, changes to your credit score can be much harder to erase. In order to maximize your chances of getting a loan in the future, you should do as much as you can, starting now, to keep your credit score intact. Always make minimum payments if possible. Ask your landlord and credit companies about other payment plans, deferment, or forbearance. Cut back on unnecessary spending. The good news is that even if your credit score does take a dive, once you’ve settled the debts and start to rebuild your credit, it shouldn’t take too long to get your credit score back up — roughly six months to year, meaning you may have already recovered your credit before lenders will consider your employment to be stable.

Photo by Bermix Studio on Unsplash

More: https://www.realtor.com/advice/finance/how-unemployment-can-affect-your-plans-to-buy-a-home/

Coronavirus exposes the wealth gap

For some people, the impact of coronavirus was minimal and short-lived. These are the people who had job security and a place to work from home, enabling them to continue to earn money while many people were left unemployed or temporarily out of work. Many low-income workers, a group with a large percentage of minorities, were already priced out of owning a home before COVID-19. The economic shutdown exacerbated this issue, while those able to live in relative comfort are looking to enjoy low interest rates by purchasing additional homes, beyond what they already own. This has meant that the housing market has started to rebound relatively quickly, especially in tech centers such as San Francisco, since those with money who are most able to engage in the process were only minorly inconvenienced at the same time that lower-income people fall further behind.

Photo by Sean Pollock on Unsplash

More: https://www.forbes.com/sites/brendarichardson/2020/06/22/coronavirus-housing-rebound-exposes-the-wealth-divide/

Eviction laws under the Tenant Protection Act

The Tenant Protection Act of 2019 (TPA), enacted last fall, establishes regulations for just cause evictions. The laws primarily apply to apartment units, but may affect other types of residences in certain scenarios. Just cause is required if all tenants have lawfully occupied the residence for 12 consecutive months, or if at least one tenant has lawfully occupied it for 24 consecutive months. In addition, the landlord may be required to provide relocation assistance for no-fault just cause evictions.

The TPA provides several forms used for various types of just cause evictions. The primary distinction is between at-fault and no-fault evictions. The possible reasons for a no-fault eviction are intention to occupy, withdrawal from the rental market, demolition or renovation, or if a government agency determines the property to be unfit for habitation through no fault of the tenant. At-fault evictions are much more complex, and may require either a Three-Day Notice to Perform or a Three-Day Notice to Quit. The latter is also the next step should the tenant not respond appropriately to the former. At-fault just cause may include a breach of lease terms, a default on payment, or criminal activity, among other possibilities.

You can find more information about the TPA at https://journal.firsttuesday.us/2020s-tenant-protection-act-part-i-just-cause-eviction/72036/, or you can call or email us for more information or assistance regarding tenancy or evictions.

Photo by Jose Alonso on Unsplash

Forbearances down overall, but not for private loans

Data has been showing that forbearances on mortgage loans have been trending downwards in June from the peak on May 22, albeit at a slow rate. However, this doesn’t tell the whole story. The downward trend totalling 158,000 is almost entirely from loans backed by Fannie Mae or Freddie Mac or FHA/VA loans. Loans backed by banks or private securities are actually up 6000.

This trend points to trouble particularly for self-employed borrowers. Even with some people returning to work or working from home as lockdowns are phased out, in an uncertain economy, self-employed people don’t have the same reliability of income. Most private loans are held by self-employed workers. Without a stable income, self-employed people aren’t certain whether or not they’ll be able to pay back their mortgages until the economy re-situates itself, so more of them are requesting forbearances.

Photo by Jp Valery on Unsplash

More: https://www.cnbc.com/2020/06/19/coronavirus-mortgage-bailout-shrinks-further-but-bank-held-loans-are-faring-worse.html

June COVID-19 Impact Update

Two months after reopening, the California economy is recovering unevenly, but recovering nonetheless. The housing market is a strong leader in the recovery process, with low interest rates contributing to a surge in activity after the last two months’ lull. The recovery will take time, though. The UCLA Anderson Forecast predicts a GDP decline of 42% in this quarter before easing back up 11% and then 7.6% in the next two quarters of this year. The total change from last year is expected to be a decline of 8.6%.

May was probably the trough for home sales, and they will pick up in the coming months. The extension of the foreclosure and eviction moratorium coupled with all-time low interest rates should allow buyers to regain their bearings quickly, and thus demand hasn’t suffered. Low supply and and a smaller than expected decrease in unemployment claims could point to a slower pace, but shouldn’t prevent recovery.

Call or email us if you want more information or are ready to buy or sell. Also, if you live in the South Bay or are interested in data about the area, stay tuned for a special South Bay update in early July.

Photo by Eric Rothermel on Unsplash

More: https://www.car.org/knowledge/pubs/newsletters/newsline/covid62420

Scams are an increasing threat to online real estate

Don Sabatini, a real estate agent in Willow Glen, CA, relates his true story of his client becoming the victim of a digital real estate scam. The COVID-19 outbreak meant that Sabatini had to conduct much of his business via email, though he and his client agreed to present the cashier’s check in person, while following social distancing guidelines. Despite this agreement, a scammer had been looking in on the email exchange. The client received several emails posing as the title agent, lender, and even Sabatini himself, increasingly threatening in tone. The scammer told the client that the offices will likely be closed, so she should simply wire the money. Feeling pressured by the barrage of threatening emails, she did so. The client and Sabatini realized she’d been scammed the next afternoon, but by then some of the money was irreparably lost. Fortunately, she was able to recover most of it, losing only $2000, and complete the transaction.

This story isn’t an isolated incident. The most recent data is from 2018, with the FBI estimating 11,300 people became victims of an online real estate scam in that year alone. It was an increase of 17% from 2017. Even without data from this year, you can imagine that with current pandemic increasing the rate of online real estate transactions, the rate of scam attempts is also increasing.

We are still conducting business, so don’t hesitate to call or email us if you are looking to buy or sell, but do be careful of scams.

Photo by Markus Spiske on Unsplash

More: https://www.mercurynews.com/2020/06/15/new-pandemic-concern-digital-real-estate-scams/

Investors are Still Eyeing Real Estate

According to a Gallup poll of favorite investment options, real estate remains at the top where it’s been since 2013, currently at 35%. It has been over 33% since 2016. After dropping by 6% since last year, the popularity of stocks and mutual funds is down to 21%, its lowest since 2012. While the percentage favoring savings accounts and CDs, gold, or bonds has increased slightly, their numbers remain low at 17%, 16%, and 8% respectively.

Even stockowners are now less likely to favor stocks as the best investment, but that doesn’t mean stocks are going away. Stock ownership is still stable at 55%, and hasn’t veered too much from that number since it started falling off during the Great Recession. It may not be the best option, but the number that think stock investment is a good option remains nearly identical to the number that think it’s a bad option.

If you’re interested in investing in real estate, we can help! Call or email us about buying or selling investment property.

Photo by Chris Liverani on Unsplash

More: https://news.gallup.com/poll/309233/stock-investments-lose-luster-covid-sell-off.aspx

Foreclosure and eviction moratorium extended

As a result of the COVID-19 outbreak, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac (the Enterprises), had instituted a moratorium on foreclosures and evictions for Enterprise-backed single-family mortgages. The moratorium was scheduled to end on June 30th, but on June 17th, the FHFA announced that the date will be extended to August 31st. The FHFA plans to continue to monitor the situation and make further adjustments as needed.

Photo by Mangopear creative on Unsplash

More: https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-Foreclosure-and-Eviction-Moratorium-6172020.aspx

May 2020 report demonstrates slowdown

The California Association of Realtors (CAR) released their May sales and price report on June 16th, and the numbers are showing a definite slowdown. Existing single family home sales totalled 238,740 in May, down 13.9% from April and down 41.4% from last May. The median home price was $588,070, a drop of 3% from April and 3.7% from last year. May also saw a year-to-date statewide home sale decrease of 12.9%. The Bay Area seems to have been hit the hardest. The impact of the COVID-19 pandemic was California home sales falling to the lowest level since the Great Depression.

The good news is that May was probably the worst of it. The market shows signs of recovering, especially buyer demand shooting up from record lows. One county, Del Norte, even reported a year-over-year increase in sales, and 31 reported a year-over-year increase in prices. Interest rates are also down from last year.

Interested in data for your area? You can find the full table of statistics at https://www.car.org/aboutus/mediacenter/newsreleases/2020releases/may2020sales, and you can also call or email us for more information.

Photo by Adeolu Eletu on Unsplash

Expanded rent control to appear on 2020 ballot

It’s no secret that California has a problem with rent prices and rental availability. Which solution to pick remains controversial. Rent control is the most immediate solution, but is a stopgap measure that can potentially do more harm than good over long periods. Building more affordable housing is a more permanent solution, but is a long-term plan with vocal opponents.

Currently, rent control is governed by the Costa-Hawkins Rental Housing Act, which prohibits rent control for housing units with a single title or that were first occupied on or after February 1, 1995. Proposition 10 appeared on the ballot just two years ago, seeking to repeal Costa-Hawkins and give more control to individual cities. The measure didn’t pass. Seeing the response to Prop 10, a new initiative, the Rental Affordability Act, decided to meet opponents halfway. Rather than entirely repeal Costa-Hawkins, this new measure seeks to amend it with a sliding timescale of 15 years, rather than a fixed year of 1995, to prevent the number of homes qualifying for rent control from remaining static.

Increasing the number of available rental units is a more appealing solution. It takes time and effort, though. California’s legislature has already adjusted laws regarding zoning, parking and landlord conduct, but it hasn’t been enough. Builders also need to do their part to make these plans a reality, and residents often oppose plans to build large, multi-family residences that could potentially decrease average home value in the area.

If you have any questions about rent control or finding a rental property or tenant, call or email us. We’d be happy to help!

Photo by Gabrielle Henderson on Unsplash

More: https://journal.firsttuesday.us/2020-ballot-initiative-seeks-to-expand-rent-control-in-california/71958/