Monday Morning Quarterback
(Monday, November 25, 2024)
Ironically, the states with the poorest Americans have the highest home-ownership rates. This is because the ease with which a person is able to buy one is highly correlated to the wealth of the state where they live. When comparing personal wealth data with homeownership, this curious pattern emerges: Many states with high homeownership rates have the lowest income levels and vice versa. Demographics, competition for homes and strict zoning regulations all play a role in the cost of real estate. According to Federal Reserve data, West Virginia’s average personal income of $52,585 per capita is the second-lowest in the US. However, despite its relatively low personal income levels, it has the highest homeownership rate of all 50 states, at 77%, according to US census data. Mississippi (the only state with a lower average personal income than West Virginia) has the third-highest homeownership rate in the country. Although there are some outliers, the trend is apparent: New York, California and Massachusetts have the highest levels of personal income yet count themselves among the states with the lowest homeownership rates. One of the main reasons for this low homeownership, according to economists, is that those states all contain major cities, which attract a younger, more mobile?population and offer more rental and multi-family living options compared to rural areas. Many of these cities, such as New York City?and San Francisco, also attract buyers from across the US and internationally, bidding up the price of homes. According to the Federal Reserve, the median sales price of houses sold in the US was $420,800 as of 2024. A scroll through Zillow listings shows many three- and four-bedroom homes for sale in West Virginia under $200,000. In contrast, the average value of a home in Manhattan is $1,102,025 and $1,299,639 in San Francisco, according?to Zillow. ?In other investor news, let’s get under the hood.
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Mortgage Rates Inch Up Ahead Of The Holiday Season. Mortgage rates inched up closer to 7% ahead of the holiday season, delivering another blow to home affordability. The 30-year mortgage rate increased to the highest level since mid-July, averaging 6.84% as of Nov. 21, according to data?released by Freddie Mac.?That’s up 6 basis points from the previous week. (One basis point is equal to one hundredth of a percentage point.)?A year ago, the 30-year rate was averaging 7.29%. The average rate on the 15-year mortgage was 6.02% as of Nov. 21, up from 5.99% last week. The 15-year rate was at 6.67% a year ago. Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.?Home buyers are facing an expensive housing market. Mortgage rates are climbing as financial markets try to digest what a second Trump administration could mean for the U.S. economy.? President-elect Donald Trump has proposed several policy initiatives, including tariffs and the mass deportation of illegal immigrants, that could push up inflation. That would affect the Federal Reserve’s interest-rate decisions, which would indirectly affect the direction of the 30-year mortgage rate. “Rates may not come down next year as much as some are hoping,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. Rates should fall in 2025, but “not fall as fast as some had expected earlier this year,” she said. “Home buyers will continue to face a challenging market in 2025, with affordability still a major constraint.”?
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Housing Starts Declined in October. Homebuilding was weak in October, but not quite as bad as it looks.?Overall housing starts missed consensus expectations and declined 3.1%, entirely due to a 6.9% drop in the single-family category. Housing starts appear to be stuck in low-gear, down 4.0% from a year ago, and sit at roughly the same levels as 2019.?The same cannot be said for completions.?Despite a 4.4% drop for the month, completions were at a faster pace than any month in 2021-2023 and are up 16.8% in the past year.?With strong completion activity and tepid growth in starts, the total number of homes under construction continues to fall, now down 12.7% since the start of 2024.?That type of decline is usually associated with a housing bust or recession.?The lack of new construction is why home prices have remained elevated while rents are still heading up in much of the country: we are building too few homes while lax enforcement of immigration laws mean rapid population growth.?The home building sector seems strangely slow given our population growth and the ongoing need to scrap older homes due to disasters or for knockdowns. Economists think government rules and regulations are likely the major hurdle for builders in much of the country, but home construction might also be facing headwinds from a low unemployment rate (which makes it hard to find workers) as well as relatively high mortgage rates.?Notably, while mortgage rates were trending lower leading up to the first rate cut announcement from the Federal Reserve in September, these rates are up more than 50bps since then. That said, there are some tailwinds for housing construction, as well.?Many owners of existing homes are hesitant to sell and give up their fixed sub-3% mortgage rates, so prospective buyers will often need new builds.?In addition, Millennials are now the largest living generation in the US and have begun to enter the housing market in force, which represents a demographic tailwind for activity.?Putting it together, economists don’t see housing as a major driver of economic growth in the near term, but don’t expect a housing bust like the 2000s, either.??
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Sales of Existing Homes Rise for First Time in 3 Years. Sales of previously owned homes rose in October following a brief dip in mortgage rates, posting the first year-over-year gains since 2021. Total existing-home sales increased 3.4% from September to a seasonally adjusted annual rate of 3.96 million last month, the National Association of Realtors reports. The October sales figure, which excludes new construction, represented a 2.6% gain from one year ago. Median home prices continued to rise on an annual basis last month, increasing 4% from October 2023 to $407,200. It marked the 16th consecutive month of year-over-year price increases. The annual gain in home sales was the first seen since July 2021. However, the year-over-year gain was boosted by the low number of sales a year earlier, when mortgage rates reached their recent peak of nearly 8% in October 2023. The supply of unsold homes was 1.37 million units at the end of October, up 0.7% from September and a 19.1% jump from one year ago. That represented a supply of 4.2 months at the current sales pace, down from 4.3 months in September but up from 3.6 months a year earlier.
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LA Could Cap Rent Hikes Next Year To 2% Under New City Rent Control. Landlords listen up! Los Angeles housing officials have released a long-awaited report recommending changes to the city’s rent control policies. If adopted by the city council, the new proposals would considerably lower rent hikes next year for the 42% of L.A. residents who live in rent-controlled housing. The L.A. Housing Department’s recommendations stem from an economic study commissioned by the city. That study found that L.A.’s existing rules have allowed annual rent increases to outpace inflation at rates substantially higher than what is permitted in most other California cities with rent control. Annual rent increases are always determined by how high or low inflation has been running in the L.A. area. L.A.’s formula for determining annual rent increase limits dates back to the 1980s, when inflation was especially high. At the start of that decade, the consumer price index rose 15.8% in a single year. Over the past year, the consumer price index has risen 2.8%. The housing department’s November report?makes a host of recommendations for changing the formula, including: Reducing the maximum annual allowable rent hike from 8% to 5%.?Lowering the floor on rent increases — the minimum landlords can charge every year, even if their costs are not rising — from 3% to 2%. Removing a provision that lets landlords increase rents by another 1% if they cover a tenant’s gas bill, plus an additional 1% if they also pay for electricity. Changing a key part of the formula for how increases are determined: inflation. Instead of basing it on the?Consumer Price Index?that includes housing, the city would use the index that excludes it. Rising housing costs play a big role in inflation.
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1.???????????????Oshkosh, Wis.
2.???????????????Hartford, Conn.
3.???????????????Manchester, N.H.
4.???????????????Rockford, Ill.
5.???????????????Akron, Ohio
6.???????????????Monroe, Mich.
7.???????????????New Haven, Conn.
8.???????????????Rochester, N.Y.
9.???????????????Janesville, Wis.
10. ???????????Providence, R.I
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Manufactured Homes Are Surging In Popularity. Did you ever hear the saying “everything old is new again”? Well, let me re-introduce “manufactured housing.” Manufactured housing (sometimes called mobile homes), are homes made in a factory rather than constructed on site, and they have been surging in popularity this year amid America’s housing crisis. Elevated mortgage rates and a chronic shortage of homes in the US have pushed homeownership increasingly out of reach for many Americans, fueling their economic angst. A September CNN poll conducted by SSRS found that the cost of housing?was the most important economic issue for nearly one-fourth of likely voters who rent their homes. Around 6% of the housing stock in the US is manufactured homes, mostly in rural areas. More than 77,000 new manufactured homes were shipped in 2024 through September — a 16% jump from the same period last year, according to data from the US Census Bureau. And believe me, today’s manufactured houses don’t look anything like your grandfather’s mobile home. Recent manufactured homes available on Amazon (including a foldable home that retails for less than $25,000 and a multi-story home made of recycled shipping containers for $29,000) have gone?viral on TikTok and YouTube among young people looking for an affordable path to homeownership. Those interested in purchasing a manufactured home these days need to ensure their dwelling complies with their area’s local rules. “Literally every jurisdiction has its own zoning, its own building codes and its own regulations., “Down to town level there could be a whole different set of codes that don’t match the next town over.” Some towns don’t allow manufactured housing at all, Norman said. A 2023 Urban Institute paper argues that mobile homes are “uniquely vulnerable” to natural disasters compared to other housing. Mobile home parks are often built on less-expensive land prone to hazards like floods and wildfires, the paper argued.
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4,000-Year-Old Town Found Hidden in Saudi Arabian Oasis. In the arid desert of Saudi Arabia, the Khaybar Oasis?holds a remarkable discovery: the ruins of an ancient town that tell a story of slow, transformative urbanization. Buried for millennia beneath layers of black basalt rock, this amazing settlement (named “al-Natah” by researchers) offers a glimpse into the lives of people who transitioned from nomadic herding to organized urban life over 4,000 years ago. Archaeologists have uncovered the remnants of this once-thriving town, reshaping our understanding of early urbanization on the Arabian Peninsula. Led by French archaeologist Guillaume Charloux and his team, a French-Saudi collaboration has uncovered this Bronze Age site near the present-day city of Al-'Ula. The team's findings, published recently in the journal PLOS One, reveal that al-Natah likely housed around 500 residents and covered approximately 3.7 acres. A 14.5-kilometer wall enclosed the town, shielding it from potential threats and marking the boundaries of a unique social structure. Al-Natah is unlike other cities of the same era, such as those in Egypt or Mesopotamia. Instead of large, bustling centers with well-established infrastructures, this small settlement shows a slower, community-centered form of urbanization. Researchers call this process "slow urbanism," highlighting a gradual shift from pastoral lifestyles to small-scale, organized communities that adapted to life in the desert. Evidence from pottery fragments supports the idea of a structured community with clear social organization. Researchers found pieces of simple but attractive ceramics, which they believe point to a relatively egalitarian society. According to Charloux, these ceramics, along with grinding stones and other artifacts, indicate that these unique people lived in close-knit communities focused on sustenance and survival rather than vast wealth or elaborate displays of power.
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Duct-Taped Banana Sells For $6 Million At Art Auction. Have you heard? A piece of conceptual art consisting of a banana duct-taped to a wall?sold for $6.2 million at an auction?in New York last Wednesday. Yes, you read that right; $6.2 million for a banana! “Comedian” by Italian artist Maurizio Cattelan, was a phenomenon when it debuted in 2019 at Art Basel Miami Beach, as festivalgoers tried to make out whether the single yellow piece of fruit affixed to a white wall with silver duct tape was a joke or cheeky commentary on questionable standards among art collectors. At one point another artist took the banana off the wall and ate it. The piece attracted so much attention that it had to be withdrawn from view, but three editions sold for between $120,000 and $150,000, according to the gallery handling sales at the time. Five years later, someone has now paid more than 40 times that higher price point at the Sotheby’s auction. Or, more accurately, they have purchased a certificate of authenticity that gives them the authority to duct-tape a banana to a wall and call it “Comedian.” Bidding started at $800,000 and within minutes shot up to $2 million, then $3 million, then $4 million, as the auctioneer joked, “It’s slipping through the auction room.” The final hammer price announced in the room was $5.2 million, which didn't include the about $1 million in auction house fees, paid by the buyer. Sotheby’s calls Cattelan “among Contemporary Art’s most brilliant provocateurs.” The $121.2 million price included the auction house’s fees. The buyer was a telephone bidder whose identity was not disclosed.
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Shark Tank. Thursday night, December 12th. Welcome to “Shark Tank” where lenders compete to fund your loans.?Yes, just like the TV show, you bring your projects, (purchase or refinance) and watch our four incredible mortgage brokers fight over who’s going to finance your deals. They won’t hold back - nor should you. This will be hand-to-hand combat! This could get bloody! See you on Thursday night, December 12, 2024, and enjoy the fireworks.?6:30 to 9:30 pm.?Free Admission.?Iman Cultural Center, 3376 Motor Avenue, Culver City. Please RSVP at: www.LaRealEstateInvestors.com.?
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Vendors Expo Returns!?Our world-famous "Vendors Expo"?returns on Thursday night,?December 12, 2024. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA.?FREE Admission.?Please RSVP at www.LARealEstateInvestors.com.
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This Week. Investors will continue to look for additional guidance from Fed officials on their plans regarding future monetary policy and rate uts. For economic reports, New Home Sales will be released on Tuesday from the Census Bureau. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out from the Bureau of Economic Analysis on Wednesday. Markets will be closed on Thursday and will close early on Friday for Thanksgiving.
Weekly Changes:
10-Year Treasuries:?????????????Fell????005 bps
Dow Jones average:???????????Rose??700 points
NASDAQ:?????????????????????????????Rose??300 points
Calendar:
Tuesday (11/26):?????????????????New Home Sales
Wednesday (11/27):???????????Core PCE
Wednesday (11/27):???????????Personal Income
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For further information, comments, and questions:
Lloyd Segal
President
Los Angeles County Real Estate Investors Association, LLC
310-792-6404
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