LA Digs - Northeast LA Real Estate Blog

State Farm and Allstate have announced they will no longer sell new home insurance policies in California because of wildfire risks and an increase in construction costs. Here are some facts:

1. State Farm and Allstate are not leaving the California Insurance Market:  State Farm and Allstate will continue to service and renew policies of existing clients in the state and will continue to offer new auto insurance policies. However, they will not be issuing any new property insurance policies for the time being in California.
   
   
2. What are the implications of the decision for prospective homebuyers?  In certain high-risk areas of the state, there are very few insurance companies willing to write new policies. In some higher risk areas, State Farm was the last private insurance company writing policies. In those areas, unless the Insurance Commissioner is successful in its effort to get more private insurers to write policies in such areas, the generally more-costly California FAIR plan may end up being the only property insurance available.
   
   
3. Why did State Farm and Allstate stop issuing new policies?  State Farm stated that it made the decision “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Allstate said the company "paused" its offerings "so they can continue to protect current customers." State Farm and Allstate's decision is not necessarily an indication of what other companies will do.
   
   
4. Will more companies follow State Farm and Allstate's move?  There are still a wide range of companies writing policies in California. However, those willing to write new policies in higher risk areas in particular are declining and as stated above, with the departure of State Farm and Allstate, those in more high-risk areas may have no option than the FAIR plan. 
   
   
5. What are the main problems for the insurance market in California?  The California market is heavily regulated and has various strict requirements for rate increases, which were put into place by Proposition 103 in 1988. However, there are two areas where possible changes could result in a better climate for insurance without requiring major changes to consumer-friendly rate increase requirements. Those include allowing insurance companies to have rates that better reflect their reinsurance costs and allowing insurance companies to utilize forward looking risk models. Current law only allows companies to look back when setting rates. However, given the issues with climate change, many insurance companies argue that looking backward does not allow companies to adequately capture risk.
   
   
6. Where can you find more information if you are looking for homeowners insurance?  The California Dept. of Insurance provides several information guides, tips and tools to help you understand home/residential insurance so that you can make the best decision for your situation. You can also call the California Dept. of Insurance Consumer Hotline for assistance.

(information via CAR.org)

There have been a lot of shifts in the housing market recently. Mortgage rates rose dramatically last year, impacting many people’s ability to buy a home. And after several years of rapid price appreciation, home prices finally peaked last summer. These changes led to a rise in headlines saying prices would end up crashing.

Even though we’re no longer seeing the buyer frenzy that drove home values up during the pandemic, prices have been relatively flat at the national level. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), doesn’t expect that to change:

“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”

You might think sellers would have to lower prices to attract buyers in today’s market, and that’s part of why some may have been waiting for prices to come crashing down. But there’s another factor at play – low inventory. And according to Yun, that’s limiting just how low prices will go:

“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”

As you can see in the graph below, we’ve been at or near record-low inventory levels for a few years now.

That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:

“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”

If more homes don’t come to the market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, inventory isn’t likely to rise significantly this year:

“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”

Sellers are under no pressure to move since they have plenty of equity right now. That equity acts as a cushion for homeowners, lowering the chances of distressed sales like foreclosures and short sales. And with many homeowners locked into low mortgage rates, that equity cushion isn’t going anywhere soon.

With so few homes available for sale today, it’s important to work with a trusted real estate agent who understands your local area and can navigate the current market volatility.

Bottom Line

A lot of people expected prices would crash this year thanks to low buyer demand, but that isn’t happening. Why? There aren’t enough homes for sale. If you’re thinking about moving this spring, let’s connect.

Let's take a look at the numbers comparing the real estate activity in the first quarter of 2021 to the same time period in 2019 and 2020.

What does all this mean?  You can interpret these numbers different ways, but the basic truth would seem to be across the board that prices are going up!  That’s surprising as all you read about the economy says that we can’t sustain these prices.  Many of us wonder where these people are getting the money to pay these prices.  Prices went up in 2020, too, even though Altadena’s average sales price didn’t.  I’m going to go out on a limb here and say that the ones who made offers on some of the houses in Altadena, and found that they were competing with as many as 50 offers didn’t think that the market was slowing down.  In other words, well-priced, well prepared houses did well.  Those owners who over-priced their homes or didn’t see why they should make their home attractive to a buyer didn’t do as well. And that’s in every market. There is a lot of thought and experience that goes into pricing and marketing for higher sales prices even though it looks like you can put any price you want on a house and you’ll get it.  

Low interest rates were credited with much of the activity.  Interest rates have increased lately, but mostly to 2019 levels, still under 4%.  Still low by historic levels. And the numbers of houses sold has doubled since 2019 levels, so current interest rates are not affecting number of sales or average sales prices in the first third of 2021. Will it continue?  I wish I knew because I could make much more money if I did, and you could, too. But as they say, my crystal ball is in the shop now.

We are looking at both July and August for this article (see previous months in my last market update). Comparing the two months to last year at the same time gets even more interesting. Only Altadena has a lower average sales price and fewer sales this year over last, and just in August, not July. And that’s contrary to my impression of Altadena sales because it seemed like those sales were going higher and higher. That’s why we compare these things over time. One month doesn’t a market make.

In general, waiting for recessionary price reductions is counter-productive: prices are trending up and sales volume is generally up. I credit the low interest rates that seem to be lasting at least through the end of the year, according to the Federal Reserve (which doesn’t really speak to mortgage rates but it does influence them). 

The trick is qualifying for a loan either to buy or refinance a home loan.  If you are lucky enough to still be working you can lock in rates at their lowest ever!  Even South Pasadena is up in both volume and price after a disappointing May and June, when we usually see the robust result of the spring buying season.

If you’ve figured out where you can live cheaper and work from home, now is a really good time to sell.  And who wouldn’t like to lock in a sub 3.0% interest rate for a 30-year fixed mortgage!?

First, the numbers. This spreadsheet compares the number of active and sold properties in each zip code, compared to the same time last year, and the average list or sales price. For a PDF version, click here.

This is very confusing, right? Stay with me here — we are looking at real estate trends and in the light of all that’s gone wrong this year—Coronavirus, civil unrest, job losses, restaurants and bars closing (so you can see where my head’s at), life as we knew it—real estate should be devastated, right?

Well, it’’s not. Sure, there are fewer sales this year than last—after all, we have experienced an incredible loss of jobs and money. Lenders are nervous, people in general are nervous, but true buyers in a certain price range (and it’s generally not the highest range with exceptions) see their chance and are going for it!

We are representing buyers who are up against 10, 39, 40 offers! Some of our buyers have all cash! And they can lose to someone who has more. Once in awhile, we pull off unlikely deals —like we were actually quite a bit lower than the highest offer on one house but we got it because the buyers wrote a great letter and we represented them instead of the out of area unknown agent. The sellers cared about such things. Some do, some don’t. You never know.

If you compare the average sale price of 2020 and 2019, you see that they are higher this year over last year, in every zip code except South Pasadena. This is not the sign of a recession.

What conclusions can we make from all this? You might be thinking that to get the most for your money, you should save on the commission. Not true. You get what you pay for, just like a lawyer or a doctor. 

1. Choose the best agent you can who is experienced and trustworthy (not the same thing as the cheapest or your cousin who just got into real estate) and do what they say! 

2. If you’re a seller, price your house right, and prepare it correctly in line with your price. 

3. If you’re a buyer, the choice of your buyer’s agent can make a difference as well—your cousin from Santa Clarita doesn’t really know this area or how things are done here, and the seller’s agent is more comfortable with someone she knows will get the job done. The possible savings on your cousin’s kicking back some of his commission is not worth what they don’t know and the fact they could be the reason you don’t get the deal. All this is nothing new, but because there are fewer sales than before, you really need to bring your best to the table.

Another conclusion we can come to is that this isn’t bargain-hunting time. And this is the time when sellers who are pricing their homes to sell are succeeding. Sellers who are wishing for a high price are sitting on the market getting stale. And buyers who actually want to buy a house, not “play the market,” can do so.

We are living in a strange new world, and it is still not business as usual anywhere regardless of what people try to tell you. In the real estate part of it, there are a lot of rules and prohibitions regarding seeing houses listed on the market, and people are finding many of the rules very confusing. Plus, just when you think you have it all figured out, the rules change! Here are the high points first, then at the end of this article are some of the actual forms that detail everything. Every state is different, and within states, some counties are different and even some cities are different.  So this is about California, Los Angeles County. Keep in mind, the most restrictive rule is the one that dominates.  Did you know that in New York City they don’t allow any showings at all?!?  The old saying that real estate is a very local business is more true than ever. Remember, we are trying to protect ourselves and everyone else from being exposed to a silent, invisible killer. 

The days of dropping by a new listing’s open house are gone. You have to make an appointment, you have to sign a form that states you don’t have symptoms of COVID-19, and that re-states all the rules regarding a showing. And you’re supposed to do it electronically before you access the property. The property must be sterilized before and after you view it, you generally have to provide proof that you can afford the property (not a law but most listing agents require it), you have to give your contact information, you have to wear a mask and wash or sterilize your hands as you enter the property. 

Then there are more rules about how many people can be in the property at one time, who they can be, and that the occupants of the house must be out during the showings. And there can be no paper changing hands—no flyers, no signed forms, no information regarding anything—everything is to be electronic. And tomorrow, this could all change, depending on the pandemic. 

You’ll notice there are lots of  “musts.” Each one is a limitation that the listing agent is primarily responsible for. You might think there is less that the listing agent does, but the responsibility, paperwork, and liability have increased exponentially. The listing agent generally has to do more negotiating to protect their sellers’ bottom line than they have done in the past. There are many more escrows cancelling than before—both from buyers losing their jobs or having to take a cut in pay, or fear of the future.

And yet properties do sell right now. Buyers go shopping online first, then they generally commit to their own buyer’s agent, lender, get pre-approved, and have their agent arrange for showings. And (here in Northeast Los Angeles and surrounding areas) there are multiple offers on well-priced properties. This is actually a good time to buy or sell, because the marketplace isn’t cluttered with unserious people.

Here are the official rules for showings:

Posted Rules for Entry
Best Practices and Guidelines

(These are the rules and regulations as of June 28, 2020; they can change at any time).

Thanks to the Corona virus shelter-in-place rules changing, people are thronging to all the hiking trails and approved walking paths like the Rose Bowl Loop. This has resulted in the very crowded conditions we are trying to avoid and so they might be closed again soon. Since you can get ticketed and fined for defying the rules, you need to read the news just about three times a day to stay on the right path for your walk. How about avoiding all those popular places and checking out some of the roads less travelled? 

Pasadena and Altadena are treasure troves of historic neighborhoods with gorgeous houses that have documented styles, architects, famous owners, and stories that supply conversational material along with eye-candy to add interest to your walk. As the philosopher Kierkegaard said, “If one just keeps walking, everything will be alright.”

You can access maps, addresses, interesting lore and historical facts, walking and driving tours  and more on the www.CityofPasadena.net site. They even have an app for your phone called Historic Pasadena and you can follow the Bungalow Courts, (walking or driving tours), Victorian tours, Mid-Century tours, even a Neon Signs tour (who knew Pasadena still had so many?) and more! 

My walking buddy Kendyl and I were big users of the Rose Bowl loop until it closed and then we walked the length of South Grand from South Pasadena north to the famous Colorado Street Bridge and back until it became crowded. Now we have walked a few of these historic tours plus some neighborhoods in Altadena and have discovered a wealth of interesting sites and secret places (to us, that is) which I’m going to share with you, dear Reader. Hopefully, you will want to add a bit of your own special twists. Please share!

How are you doing? What’s happening with your job? What do you think is going to happen with it post-Corona? 

These questions and more are in the air along with all those droplets we are avoiding. We can only ask, actually, on the phone or on those endless Zoom calls (for those of us who are trying to live with the new normal physical distancing, yet stay in touch).  We all wish we were Mr. Zoom. He is definitely going to profit from this pandemic.

But you are reading this post because it’s about real estate, right? So what’s going on with the housing market? In our little corner of the real estate market, Northeast Los Angeles and surrounding areas, it’s always interesting and seldom like the national or even the California picture.

As news and information about relief assistance swirls around in the midst of this crisis, there are lots of questions about what to do with your mortgage payments. To some, it can be interpreted that if you just don't pay your mortgage payment right now all will be forgiven. This is not true, and can have some serious affects on your financial health, and truly the health of the economy as a whole. 

Here is information from a lender friend of ours, Scott Groves with Movement Mortgage, that explains forbearance and how it works:

"If you, or your clients, are in dire-straights and having to make the toughest of financial decisions - like, what bills do I pay or how do I buy food - then I understand that you must do EVERYTHING you can to improve your cash-flow situation.

That being said, applying for a FORBEARANCE on your mortgage payment should be an ABSOLUTE LAST RESORT when it comes to your finances.

Things are changing every day in these wild times we live in!

Per the California Associaton of Realtors - "On March 28, the U.S. Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) updated its list of essential services during the coronavirus (COVID-19) crisis and expressly included residential real estate. Since Governor Newsom’s March 4, 2020 order incorporates this list, the order now includes residential and commercial real estate, including settlement services, as essential services in California. However, if a city or county has an order with a more restrictive standard regarding what qualifies as an essential service, or more restrictions on activities, those guidelines will still govern the activities of a licensee.