Conejo Valley Real Estate Services & National Market Updates

Monday, February 20, 2017

Mortgage Rates: Is It a 'Year Full of Surprises'?

Mortgage rates fell slightly for the second consecutive week, taking a path that many economists haven't expected.

"For the last 46 years, the 30-year mortgage rate has been almost perfectly correlated with the yield on the 10-year Treasury, but not this year," says Sean Becketti, Freddie Mac's chief economist. "From Dec. 29, 2016, through today, the 30-year mortgage rate fell 17 basis points to this week's reading of 4.15 percent. In contrast, the 10-year Treasury yield began and ended the same period at 2.49 percent. While we expect mortgage rates to fall into line with Treasury yields shortly, this just may be a year full of surprises."

Freddie Mac reported the following national averages with mortgage rates for the week ending Feb. 16:

30-year fixed-rate mortgages: averaged 4.15 percent, with an average 0.5 point, dropping from last week's 4.17 percent average. Last year at this time, 30-year rates averaged 3.65 percent.
15-year fixed-rate mortgages: averaged 3.35 percent, with an average 0.5 point, falling from last week's 3.39 percent average. A year ago, 15-year rates averaged 2.95 percent.
5-year hybrid adjustable-rate mortgages: averaged 3.18 percent, with an average 0.4 point, falling from last week's 3.21 percent average. A year ago, 5-year ARMs averaged 2.85 percent.

Source: Freddie Mac

Thursday, February 16, 2017

5 Signs That Traditional Retail Isn’t Dead

Is e-commerce destroying the retail sector in your market? Can traditional brick-and-mortar shops and big-box retailers survive in a turbulent market that is constantly adapting to technological advances and bold moves by companies like Amazon and Wal-Mart?

Read more: Physical Retailers Aren't Dead Yet

Shifts from brick-and-mortar locations to online vendors, the rise of omnichannel approaches that blend online shopping with traditional retail, consumer desire to find the lowest price at any cost, and heightened customer expectations for delivery have forced innovation and led to downsizing for traditional stores like Macy’s and JC Penney’s. Can brick-and-mortar weather these transitions?

These questions might matter more than you think. According to The International Council of Shopping Centers (ICSC), 1-in-11 jobs are related to shopping centers and retail is the largest employer in more than half the states in the U.S.

“Retail is very healthy,” says Tom McGee, President and CEO of ICSC. Despite all of the upheaval, McGee is confident the downsizing of traditional anchor stores is merely a sign of adaptation, not a cause for panic. “More than 90% of sales still happen in a store,” says McGee, noting industry enthusiasm about what he sees as a blend of “bricks and clicks.”

Four commercial real estate experts told NAR’s Commercial Connections magazine about adaptation in their own markets, echoing McGee’s optimistic outlook:

“E-commerce can’t paint your nails, cut your hair, or serve you a burrito,” says Travis Carter, CCIM. “Consumers still need to see, touch, and feel those tangible goods,” Carter says, noting that the biggest change in retail he’s seen in his Greensboro market is visible in the dynamic of the shopping center tenant mix, which continues to shift towards businesses that provide services. Heightened competition in the retail sector has raised the stakes, even for national chains. “Retailers have more real estate options and consumers have many more options in retailers.”

“Retail is about connecting and forming loyalty to consumers,” says Barbara Tria. “They connect with the core product and that builds loyalty to the brand.” Tria is excited about the innovations between merchants she is observing in her Miami market. Because of e-commerce, she sees many retailers doubling down on engagement with their clientele, even partnering with other merchants in their trade areas, creating an exciting atmosphere of experiential retail.

“A decade ago developers would do speculative projects in hopes that tenants would come along,” says Ken Robberechts, CCIM. “You don’t see that as much in Chicago now. In general, developers communicate well with the community, organizations, and alderman in order to deliver the right tenant mix on a development.” Robberechts sees e-commerce really impacting retail in the inventory off of Main and Main. “Those mom and pop type startups may not want to be in the middle of the block to test their proof of concept as e-commerce provides an alternative avenue. That is where you’re seeing landlords having to get more creative on vacant space.”

“I don’t think it’s lip service to speak to the importance of experiential retail,” says John Propp, CCIM. “I can see the pendulum swinging back away from everything happening online.” Propp’s Denver market is in the midst of a commercial real estate boom unlike anything he can remember. He feels the last real impediment is the issue of sales tax. Purchases made online don’t typically include a state sales tax, a decision stemming back to a 1992 Supreme Court decision. “Once this is settled there will be even less conflict between the two.”

While no one can predict the future, it seems reports on the death of traditional retail are greatly exaggerated. Anchor stores continue to change, pivoting from big-box retailers to smaller service providers, medical facilities, restaurants, and multi-unit residential. National chains are downsizing and refocusing on personalization, catering to more specific clientele rather than trying to be everything to everyone. Omnichannel approaches and experiential retail continue to take root in all facets of the market, from e-commerce giants like Zappos to boutique boot shops in Memphis.

Source: "Pixels & Mortar: The Continuing Evolution of Retail ” Commercial Connections (Feb. 3, 2017)

The 10 Most Affordable Places to Live in U.S.

Home affordability is more than the price a buyer agrees to pay a seller. In a new study, SmartAsset factored in closing costs, real estate taxes, homeowner’s insurance, and mortgage rates for every county and city in the U.S. with a population of more than 5,000.

Read more: Yes, It's Still More Affordable to Buy Than Rent

SmartAsset pinpointed the most affordable cities and counties in its analysis by considering the total housing costs on an average house that accounted for the smallest proportion of the median income.

The following 10 places ranked tops on SmartAsset’s list for affordability (listed below with average annual mortgage payment):

Kermit, Texas: $2,014
Federal Heights, Colo.: $1,613
Pecos, Texas: $2,104
Zephyrhills South, Fla.: $1,775
Shamokin, Pa.: $1,631
Blackwell, Okla.: $2,425
Cusseta-Chattahoochee County, Ga.: $3,064
Hartford City, Ind.: $2,746
Fussels Corner, Fla.: $2,319
Lovington, N.M.: $4,160

Source: “Most Affordable Places in America,” SmartAsset (2017)

Friday, February 10, 2017

Higher wages and seasonal price declines hold California housing affordability in check

• Thirty-one percent of California households could afford to purchase the $511,360 median-priced home in the fourth quarter, unchanged from third-quarter 2016 and up from 30 percent in fourth-quarter 2015.

• A minimum annual income of $100,800 was needed to make monthly payments of $2,520, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.91 percent interest rate.

• Forty percent of home buyers were able to purchase the $413,700 median-priced condo or townhome. An annual income of $81,550 was required to make a monthly payment of $2,040.

LOS ANGELES (Feb. 9) – Rising wages and seasonal price declines held California’s housing affordability steady in fourth-quarter 2016, even while interest rates rose moderately, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in fourth-quarter 2016 remained at 31 percent, unchanged from the third quarter of 2016 but was up from 30 percent in fourth-quarter 2015, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the 15th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent. California’s housing affordability index hit a peak of 56 percent in the third quarter of 2012.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.

Home buyers needed to earn a minimum annual income of $100,800 to qualify for the purchase of a $511,360 statewide median-priced, existing single-family home in the fourth quarter of 2016. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,520, assuming a 20 percent down payment and an effective composite interest rate of 3.91 percent. The effective composite interest rate in third-quarter 2016 was 3.76 percent and 4.07 percent in the fourth quarter of 2015.

Homes were slightly more affordable in fourth-quarter 2016 compared to fourth-quarter 2015, when the affordability index stood at 30 and the median home price was $484,710. An annual income of $96,980 was needed to make monthly payments of $2,420.

The affordability of condominiums and townhomes also was flat compare to the previous quarter. Forty percent of California households earned the minimum income to qualify for the purchase of a $413,700 median-priced condominium or townhome in the fourth quarter of 2016, and an annual income of $81,550 was required to make monthly payments of $2,040.

Key points from the fourth-quarter 2016 Housing Affordability report include:

• Compared to affordability in third-quarter 2016, eight of 29 counties tracked saw an improvement in housing affordability (Contra Costa, Marin, Napa, Los Angeles, Ventura, Monterey, Santa Barbara, and Madera), 10 experienced a decline (San Francisco, Sonoma, Orange County, Riverside, San Bernardino, Santa Cruz, Kern, Kings, Merced, and San Joaquin), and 11 were unchanged (Alameda, San Mateo, Santa Clara, Solano, San Diego, San Luis Obispo, Fresno, Placer, Sacramento, Stanislaus, and Tulare).

• Only three (Contra Costa, Marin, Napa) of nine Bay Area counties recorded higher affordability numbers than the previous quarter, as higher earning Bay Area workers drove up home prices. Housing affordability results were mixed in Southern California but largely declined in Central Valley counties (Kern, Kings, Merced, San Joaquin).

• During the fourth quarter of 2016, the most affordable counties in California were Kings (56 percent); Kern (55 percent); San Bernardino (54 percent); and Fresno (50 percent).

• San Francisco (13 percent), San Mateo (15 percent), and Santa Cruz (17 percent) counties were the least affordable areas in the state.

Housing Affordability slides (click link to open)

Affordability peak versus current
Annual required income peak vs. current
PITI peak versus current
CA housing affordability by quarter (2006-2016)

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

CALIFORNIA ASSOCIATION OF REALTORS®
Traditional Housing Affordability Index
Fourth quarter 2016

C.A.R. Region	Housing Affordability Index	Median Home Price	Monthly Payment Including Taxes & Insurance	Minimum Qualifying Income
CA SFH	31	$ 511,360	$ 2,520	$ 100,800
CA Condo/Townhomes	40	$ 413,700	$ 2,040	$ 81,550
Los Angeles Metropolitan Area	34	$ 463,050	$ 2,280	$ 91,280
Inland Empire	46	$ 317,710	$ 1,570	$ 62,630
S.F. Bay Area	25	$ 797,170	$ 3,930	$ 157,140
US	58	$ 235,000	$ 1,160	$ 46,320

S.F. Bay Area
Alameda	22	$ 779,500	$ 3,840	$ 153,650
Contra-Costa	39	$ 550,000	$ 2,710	$ 108,410
Marin	20	$ 1,149,500	$ 5,660	$ 226,590
Napa	26	$ 620,000	$ 3,060	$ 122,210
San Francisco	13	$ 1,353,000	$ 6,670	$ 266,700
San Mateo	15	$ 1,300,000	$ 6,410	$ 256,250
Santa Clara	22	$ 1,005,000	$ 4,950	$ 198,100
Solano	45	$ 392,500	$ 1,930	$ 77,370
Sonoma	26	$ 589,000	$ 2,900	$ 116,100
Southern California
Los Angeles	28	$ 503,400	$ 2,480	$ 99,230
Orange County	22	$ 745,160	$ 3,670	$ 146,880
Riverside County	41	$ 356,380	$ 1,760	$ 70,250
San Bernardino	54	$ 251,100	$ 1,240	$ 49,500
San Diego	26	$ 593,040	$ 2,920	$ 116,900
Ventura	31	$ 629,860	$ 3,100	$ 124,160
Central Coast
Monterey	27	$ 507,000	$ 2,500	$ 99,940
San Luis Obispo	25	$ 566,550	$ 2,790	$ 111,680
Santa Barbara	21	$ 681,340	$ 3,360	$ 134,300
Santa Cruz	17	$ 800,000	$ 3,940	$ 157,690
Central Valley
Fresno	50	$ 237,300	$ 1,170	$ 46,780
Kern (Bakersfield)	55	$ 225,810	$ 1,110	$ 44,510
Kings County	56	$ 215,170	$ 1,060	$ 42,410
Madera	49	$ 229,790	$ 1,130	$ 45,300
Merced	48	$ 230,720	$ 1,140	$ 45,480
Placer County	46	$ 434,720	$ 2,140	$ 85,690
Sacramento	45	$ 324,300	$ 1,600	$ 63,930
San Joaquin	43	$ 324,570	$ 1,600	$ 63,980
Stanislaus	48	$ 276,000	$ 1,360	$ 54,400
Tulare	49	$ 212,680	$ 1,050	$ 41,920

r = revised