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U.S. Existing-Home Sales Rose in August

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FROM THE WALL STREET JOURNAL: Sales of previously owned U.S. homes rose in August, adding to recent modest signs of recovery in the housing market.

Existing-home sales rose 1.3% in August from the previous month to a seasonally adjusted annual rate of 5.49 million, the National Association of Realtors said Thursday. That was the strongest pace of sales since March of last year. Economists surveyed by The Wall Street Journal expected sales to fall 1.1% last month.

Over the past year, sales in August were up 2.6%, the second month of growth following 16 straight months of year-over-year declines.

“Just perhaps we may have turned a corner for good in terms of home sales, which had been underperforming in relation to jobs, mortgage rates and other factors,” said Lawrence Yun, the trade group’s chief economist. July’s sales were unrevised at a 5.42 million annual rate.

venice2Thursday’s data suggests a recovery could be under way in the housing market, which has struggled for more than a year despite low mortgage rates and a strong labor market.

Last week, 30-year fixed mortgage rates averaged 3.56%, down from close to 5% in November, according to Freddie Mac.

“Having the mortgage rate low for several consecutive months is enticing buyers back into the market,” Mr. Yun said.

That may also be encouraging builders. New-home construction climbed 12.3% in August from the previous month, rising to the highest level in a dozen years, the Commerce Department said Wednesday.


A shortage of homes for sale has been pushing up prices and making it difficult for new buyers to get a foothold, Mr. Yun said. The median sales price in August was $278,200, up 4.7% from a year ago. That was the 90th consecutive month of year-over-year price increases. There was a 4.1-month supply of homes on the market at the end of August at the current sales pace.

Purchases of previously owned homes account for most of U.S. homebuying. 

WRITTEN BY  DAVID HARRISON & LIKITHA BUTCHREDDYGARI
FOR THE WALL STREET JOURNAL

 

 

TV producer Shonda Rhimes sells Hancock Park home for about $7.2 million

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FROM THE LA TIMES:  Television producer and screenwriter Shonda Rhimes, whose scores of credits include “Grey’s Anatomy” and “Scandal,” has sold her home in Hancock Park for a little over $7.166 million, records show.

The 1920s traditional-style home, set on a leafy half-acre lot, first came up for sale in October 2018 for $9.995 million. It had been listed for $8.5 million since May, according to the Multiple Listing Service.

Stock Los FelizOwned by Rhimes since 2010, the 8,300-square-foot house has coffered ceilings, crown molding, scaled formal rooms and a formal entry with a hand-stenciled floor. The chef’s kitchen opens to the den. There are fireplaces in the library, family room and living room.

A total of six bedrooms and nine bathrooms includes a multi-room master suite complete with dual baths, two walk-in closets and a separate study. Another bedroom, formerly another office, is where Rhimes penned screenplays for many of her hit shows.

Outside, the tiered backyard has a grassy lawn and steps leading up to a swimming pool and pool deck. A detached cabana sits near the pool area. A smattering of mature sycamore and elm trees fill the front yard.

Rhimes, 49, is the producer behind such popular television hits as “Private Practice,” “How to Get Away With Murder” and “Station 19.” In 2017, she agreed to a multi-year development deal with streaming service Netflix.

The exact sale price was $7,166,250.

WRITTEN AND PUBLISHED BY THE LA TIMES/ HOT PROPERTIES
for original piece go here: https://www.latimes.com/business/real-estate/story/2019-09-11/tv-producer-shonda-rhimes-hancock-park-home

(Photos in this article are STOCK IMAGES, not images of sold home) 

Here’s the Lowdown for Real Estate & The Current Economy

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FROM REALTOR.COM:
It seems that whenever you pick up a newspaper or turn on the news these days, a scary word hits you in the face: “recession.” 
But although the R-word may be a trigger for those who remember—or even experienced—the mass layoffs, scores of foreclosures, and plummeting home prices of the last downtown, folks shouldn’t panic. And they shouldn’t expect another real estate fire sale.

“This is going to be a much shorter recession than the last one,” predicts George Ratiu, senior economist with realtor.com®. “I don’t think the next recession will be a repeat of 2008. … The housing market is in a better position.”

Federal Reserve Chairman Jerome Powell indicated on Friday that last month’s interest rate cut would be followed by another in September, but cautioned that that might not be enough to counter the trade tensions, which ratcheted up in recent days as China responded to an earlier round of U.S. tariffs with its own, and President Trump responded by making U.S. restrictions even tougher.

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About 2% of economists, strategists, academics, and policymakers believe a recession will start this year, according to a recent survey of more than 200 members of the National Association for Business Economics. Thirty-eight percent believe one will begin in 2020, while 25% anticipate one starting in 2021. Fourteen percent expect it won’t materialize until after 2021.

For sure, unemployment is hovering around the lowest it’s been in the past 50 years. (However, it turns out there weren’t as many jobs in 2018 and early 2019 as previously reported.) Wages are growing, and we’ve entered the longest economic expansion in U.S. history. But a downturn within the next two years still looks likely—particularly if a trade war heats up, making it more expensive to import goods. Those increased costs are likely to be passed along to everyday consumers.

The housing market’s risky mortgages and rampant speculation were blamed for plunging the world into a financial crisis the last time around. But these days real estate isn’t likely to be the cause of a recession.

Will home prices and sales plummet in a recession?

Aspiring buyers hoping that home prices will crash, like they did during the Great Recession, are likely in for a rude awakening. There simply aren’t enough homes being built to satisfy the hordes of buyers. And with more members of the giant millennial generation wanting single-family homes in which to raise their growing families, there isn’t likely to be a drop-off in demand anytime soon.

But the anticipation of a recession in itself could make the housing shortage even worse. Worried would-be sellers may decide to postpone listing until they can get top dollar for their properties.

Yet although a lack of homes for sale typically drives up prices, that effect could be mitigated if there are fewer folks who can afford to buy. In a recession, it could become harder to find a good-paying job or steady freelance work. Even those who remain gainfully employed may worry about their job stability.

“If we do go into a recession, there will be layoffs,” says Ali Wolf, director of economic research at Meyers Research, a national real estate consultancy. “If you move from a two-income household to a one-income household, it doesn’t change the desire to own. But it does impact the ability.”

Realtor.com’s Ratiu believes prices will flatten, but likely not fall. Meanwhile, the number of home sales will also remain flat or potentially even dip, he believes. Other economists expect the recession to take a bigger toll on housing.

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time,” Wolf says. “But prices aren’t likely to fall 50% like they did last time.

“We do expect prices will fall marginally,” she continues. The priciest parts of the country, which saw the biggest price hikes, could see the biggest price corrections. Sales could decline anywhere from 10% to 20%, she predicts.

The luxury market is already seeing price decreases. These high-end homes, usually in the range of $1 million and up, are usually considered a bellwether for the greater housing market.

A big wild card in all of this is mortgage interest rates, which were at an ultralow 3.55% for a 30-year, fixed-rate loan as of Thursday, according to Freddie Mac data. If they continue to fall, it could give the housing market a boost. That’s because low rates translate into lower monthly mortgage payments.

Could rentals become cheaper?

Those hoping for rental prices to be slashed will probably be disappointed as well.

“We expect a little bit of an impact,” says Greg Willett, chief economist at RealPage, a property management technology and analytics company for apartment buildings. “But it’s not doom and gloom.”

He expects apartment price hikes to slow from 3% annually to more minor 1.5% or 2% price increases over the next few years. The rental market is likely to be buffered by those nervous about making what could be the largest purchase of their lives, a home, in uncertain economic times. Those folks may decide to live in a rental until the economy is booming again.

The exception, again, is the luxury rental market. Developers may have to offer concessions (e.g., a free month’s rent) or lower prices a little to attract wealthier tenants. But that isn’t likely to trickle down to the middle or even lower end of the rental market.

Will builders stop putting up badly needed new homes?

A recession could make builders even more reluctant to break ground on new residences, particularly in the priciest markets on the coasts.
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A year ago, about 10% of single-family home builders offered buyers incentives such as discounts to go under contract, says National Association of Home Builders Chief Economist Robert Dietz. Today, about 40% are turning to incentives to spur home sales. That’s not a good sign.

Tariffs on building materials such as steel are already making construction more expensive. And the construction worker shortage is severely limiting the number of homes that can be built. A downturn could make this worse.

“You’ll [have] some local markets where home construction declines,” says Dietz. “Some prospective home buyers could be concerned about making that purchase.”

Will a recession spur another foreclosure crisis?

One of the hallmarks of the Great Recession were the blocks littered with foreclosed properties. Some sold quickly to intrepid young families or investors. However, those with boarded-up windows and overgrown yards blighted many a neighborhood. And losing a home was a devastating blow to many owners.

But foreclosures aren’t expected to be such a problem if a downturn occurs. Lending laws were tightened in the wake of the housing bubble bursting. So now only the most qualified borrowers can secure a mortgage.

“This time we won’t have bad mortgages, just people who are losing jobs,” says Lawrence Yun, chief economist of the National Association of Realtors®.

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Plus, homeowners these days have a record amount of equity in their homes. That means homeowners who lose their job and are unable to make their monthly mortgage payments are much more likely to put their property on the market instead of going into foreclosure.

And with home prices expected to remain high, fewer folks will find themselves underwater on their mortgage. That should make it easier to unload the residences if need be.

 

And more people own their homes outright today than they did just over a decade ago. About 4 in 10 homeowners don’t have a mortgage on their abode compared with 3 in 10 when the last recession occurred, according to Ratiu.

“Foreclosures will definitely increase, but only because [the number of] foreclosures are [already] at rock bottom,” says Andres Carbacho-Burgos, a senior economist at Moody’s Analytics focused on housing. He expects a recession will happen at the end of this year or early next year, and last only two or three quarters.

In addition, Carbacho-Burgos expects home improvement spending to remain flat during the recession.

And home flipping, one of the factors contributing to the previous housing market bust, is expected to slow, he says. That’s because slower home price growth makes flipping less lucrative for investors.

 
WRITTEN BY CLARE TRAPASSO FOR REALTOR.COM

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What is the single best investment for the next decade?

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“For money you wouldn’t need for more than 10 years, which ONE of the following do you think would be the best way to invest it—stocks, bonds, real estate, cash, gold/metals, or bitcoin/cryptocurrency?” 
That question was recently asked of more than a thousand investors in a recent Bankrate survey, and the winner—by a large margin—was real estate. For every two respondents who answered stocks there were more than three who said real estate is the way to go. ( FROM MARKETWATCH.COM)

Are these investors onto something? Have financial planners been wrong all these years? For this column I mine the historical data for answers.

On the face of it, the respondents to the survey need to go back to their history books, as pointed out in a recent column by my colleague Catey Hill. Since 1890, U.S. real estate has produced an annualized return above inflation of just 0.4%, as judged by the Case-Shiller U.S. National Home Price Index and the consumer-price index. The S&P 500 SPX, -0.68%  (or its predecessor indexes) did far better, outpacing inflation at a 6.3% annualized rate (when including dividends).

Even long-term U.S. Treasury Bonds outperformed real estate, producing an annualized inflation-adjusted total return of 2.7%. Check out the chart below:

If this were the end of the story, then this column could end here.

But it’s not the end. The stock and bond markets are currently so overvalued that it’s not only possible, but downright plausible, that real estate will do better than either of these asset classes over the next decade.

Maybe the investing public is smarter than we give them credit.

Let’s start by considering bonds’ prospects over the next decade. Currently the 10-year Treasury is yielding 2.1%, which is just 0.3 percentage points higher than the break-even 10-year inflation rate. (The break-even rate is the difference between the yields on the nominal and inflation-protected 10-year Treasury.) So the market’s best judgment right now is that your return above inflation over the next decade will be just 0.3% annualized.

And if inflation is worse than the market currently expects, bonds will do even worse.

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Next let’s consider stocks’ prospects. Forecasting equity performance is much more difficult than in the case of bonds, given the far greater number of factors that can impact their returns. But you should know that, according to almost all standard valuation metrics, stocks currently are somewhere between overvalued and extremely overvalued. Furthermore, you cannot explain away this overvaluation because of low interest rates.

Given this overvaluation, it’s entirely possible that stocks will join bonds over the next decade in falling far short of their historical averages. How far short? By way of a possible answer, I refer you to the 10-year forecast compiled by Research Affiliates. They currently are projecting that the S&P 500 (including dividends) will produced an inflation-adjusted return of just 0.5% annualized over the next decade, and that long-term U.S. Treasury bonds will produce an inflation-adjusted return of minus 0.7%.

Or take the 7-year forecast from Boston-based GMO. They are projecting that the S&P 500 will produced an inflation-adjusted total return of minus 4.2% between now and 2026, with U.S. long-term Treasury bonds losing at a rate of 1.1% annualized.

These are just projections, of course, and other firms are more bullish than these two. But, at a minimum, these two firms’ forecasts suggest that the respondents to the Bankrate survey aren’t necessarily as ill-informed as might otherwise appear.

Real estate during stock bear markets

There’s one other factor that should be considered when deciding whether real estate or equities is the better bet for performance over the next decade: How will real estate perform during a major stock market decline? Given our all-too-fresh memories of real estate’s awful performance during the financial crisis, you may be avoiding real estate because it’s even riskier than stocks.

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But real estate’s experience during the financial crisis appears to be the exception rather than the rule. In every other stock market bear market since the 1950s, the Case-Shiller Home Price Index rose in all but one. And in that lone bear market prior to 2007 in which the index did fall, it did so by just 0.4%. (I discussed real estate’s performance during stock bear markets in an article several years ago for Barron’s.)

Furthermore, you should know that the Case-Shiller index has been less volatile than the stock market—a lot less. As measured by the standard deviation of annual returns, in fact, the Case-Shiller index is only 40% as volatile as the overall stock market. Perceptions to the contrary that real estate is riskier than equities derive from the leverage we typically use when purchasing real estate. Note carefully that the risk comes from the leverage, not real estate inherently.

So if you were to believe there is a major stock bear market in the cards at some point in the next decade, you might choose real estate just because of its lower risk.

Written by Mark Hulbert for MarketWatch.com

 


DIRECT: 323.762.2561
EMAIL: pete@coregroupla.com
118 N. Larchmont Blvd. Los Angeles, CA 90004

Pete Buonocore DRE# 01279107 | KW Larchmont DRE# 01870534

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