Nef Cortez

By Nef Cortez

I wrote last week on the California housing market as reported by the California Association of Realtors’ (C.A.R.) on the subject of the statewide faltering housing market in California.  The data showed that for first time in nearly two years, the rate of home sales in California fell below the 400,000 level for the fourth straight month to 399,600.  The sales rate declined 1.8 % from July, and down 6.6% from August 2017.

The Diamond Bar housing market reflected similarities to that of the State, with the sales number falling in the 2^nd quarter by 24 units, going down to 101 units sold from 125 for the same period in 2017. (This number only includes the Single Family Detached homes transferred in the City of Diamond Bar within this period of time.) This drop represents a decline of 19.2%, a substantial number for Diamond Bar sales.

According to data extracted from the California Regional Multiple Listing Service (CRMLS), the housing market in Diamond Bar also reflected an increase in the Median Sales Price (MSP) of $30,000, going up from $720,000 in the 2^nd Quarter 2017 to $750,000 for the same period in 2018.  This mirrored the State’s rate of price appreciation, and in Diamond Bar it represents an increase in the MSP of 4.2%. For comparison’s sake, the previous period reflected an increase in the MSP of $50,000, an annual appreciation of 7.4%.

The Diamond Bar housing market has seen a greater deceleration of price appreciation than the statewide level.  Diamond Bar’s numbers reflected a deceleration rate of nearly 44%, quite a bit more than the 24% number reflected statewide, which dropped from an annual increase of 7.2% down to the 5.5 % rate reported this last month.

The key to these numbers is that the affordability of homes is reaching a point where less than 1/3 of the households can afford to purchase the median sale priced home in California. What percent of current homeowners do you think would be able to qualify for the Median Sales Priced home in Diamond Bar, which now stands at $750,000.  (Write to me and give me your opinion or give me your estimate at my e-mail address below)

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website http://www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

The California Association of Realtors (C.A.R.) reported that for the first time in nearly two years, the rate of home sales in California fell below the 400,000 level, with the annualized number of sales falling for the fourth straight month to 399,600.  The sales rate declined 1.8 % from July, and down 6.6% from August 2017.

C.A.R. reported also that the statewide median home price was $596,410, up 0.8% from July, and up 5.5% from August 2017. This reflected a drop of nearly 24% from the previous year’s increase, dropping from 7.2% down to the 5.5% rate. In addition to that, the association reported that the statewide active listings rose for the fifth straight month, increasing by 17.2% over the previous year.

The key to these numbers is that the affordability of homes is reaching a point where less than 1/3 of the households can afford to purchase the median sale priced home in California.

“While home prices continued to rise modestly in August, the deceleration in price growth and the surge in housing supply suggest that a market shift is underway,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “We are seeing active listings increasing and more price reductions in the market, and as such, the question remains, ‘How long will it take for the market to close the price expectation gap between buyers and sellers?’”

C.A.R.’s August 2018 resale housing report also concluded that the Southern California region led the state’s sales decline, falling 8% from a year ago, with Orange and Los Angeles counties posting declines of 9.7percent and 8.9 percent, respectively. With more homes to select from, represented by the 17.2 percent increase in active listings on the market in August as compared to the previous year, buyers are taking longer to make a decision on which one to purchase. The number of days a listing is on the market also increased.

“Homes sales activity remained on a downward trend for the fourth straight month as uncertainty about the housing market continues to mount,” said C.A.R. President Steve White. “Buyers are being cautious and reluctant to make a commitment as they are concerned that home prices may have peaked and instead are waiting until there’s more clarity in the market”

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website http://www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

One of the factors driving California housing prices higher is that there are many people stuck in their homes because they cannot afford to sell the home where they live and move to another comparable one, or even one of lesser value. A large number of Californians purchased their homes more than 3o years ago, and their homes have appreciated in value substantially since then.

Many of these homeowners (and Diamond Bar has its’ share) have been able to stay in their homes because of Prop 13.  Since California voters approved passage of Prop 13 on June 6, 1978, a homeowner in the state is able to have their real estate property taxes on their home capped where the tax rate cannot increase more than 2 percent annually. (The effective tax rate cap is a result of the property re-assessment being capped at 2 % annually).

Without Prop 13, many “longtime” homeowners would not be able to stay in their homes because of annual property value re-assessments, and therefore, increases in their property taxes.  A homeowner who purchased their home for $100,000 in 1980, for example, would have had property taxes (based on Prop 13) of $1,000 annually, or about $83 per month, with a maximum increase of about $1.70 per month annually. Without the benefit of Prop 13 limits, that homeowner would have a home now worth approximately $750,000, and consequently, much higher property taxes.  Assuming the 1% cap (without the annual 2% cap on property re-assessment), this homeowner would be paying at least $7,500 in taxes annually, or approximately $625 per month.

The obvious benefit of lower property taxes and maintenance of affordable payments for homeowners who purchase many years ago is now constricting or inhibiting their ability to move to more appropriate housing.  The restriction is the cost of increased property taxes based on the sale of one’s residence, and the purchase of another.  There are a few counties in the state of California that allow for the transfer of the lower tax base for a homeowner 55 years or older, under Proposition 90, from one county in the state to another.  Out of 58 counties in the State of California, only 8? Have approved it for their counties.

Proposition 5 in this years November election proposes to equalize Prop 90 across the entire state. A homeowner otherwise qualified for Prop 90 benefits would not be limited to only one of the 8 counties that have approved it, but be free to move to any of the 58 counties in the State of California and be able to receive the benefits of Proper 90.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Whether or not you are a homeowner, get familiarized with California’s Proposition 5 regarding property taxes.  In one form or another, this measure will affect you or your family members.  As usual, during the elections, you will be hearing about the pros and cons from interested parties as to how they recommend you place your ballot vote.

In a nutshell, as per California Association of Realtors (C.A.R.): A YES vote on Proposition 5 “will allow seniors (55+), the disabled, and victims of natural disasters to move to a home suited to their needs without facing drastically higher property taxes”.

In more detail, this proposed Proposition 5 has to do with the transfer of taxes when seniors have to downsize, move, and sell their property.  When seniors face these life situations, they do not want to be penalized as a result of having to make such moves. Due to health needs or personal desires, seniors are having to move closer to their children who may reside in other counties within the state. Currently, if the senior wants to or has to move to another county, there is difficulty finding another county that does accept the transfer tax base rate. It is therefore difficult to make moves because of the high cost of the new tax rate that exists because only about 8 out of the 58 counties in the state accept a transfer of the tax base of the seller’s previous home.  The ability of a homeowner needing to make this kind of move is restricted, and the move is financially “penalized”.

Proposition 5 expands the benefits of transferring tax base within the State of California.  According to C.A.R., this would provide appropriate relief by allowing those eligible the ability to transfer their current property tax base to the purchase of another home in any of California’s 58 counties.  C.A.R.  believes that this would help boost the housing inventory, facilitating more transactions throughout all counties in the State of California.

As always, before you make your next move, should you sell your home, consult with your tax/certified public accountant as to how current legislation would affect you and your property taxes.  Also, you may find more detailed information from legislative analytical agencies on the internet on the topic of Proposition 5.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

I have reported on home values rising fast in Diamond Bar. Today, we take a look at how fast rents are increasing as well.

Home values typically follow the pattern of economic recessions, with prices increasing as the economy improves, and peaking at about the same time or slightly after the economy has reached its zenith.  Rents, however, appear to be immune to the rise and fall or cyclical nature of home prices or home values.  The predictable thing about home rental values is that over the years, they have consistently trended upward.

As an example, where home values took a dive of almost 30-40% during the Great Recession, rents maintained a level or flat trendline.  Since the end of the Great Recession in 2009, property values across the United States have come roaring back to their current heights.  The median sales price of a Diamond Bar single family residence (SFR) in the First quarter of 2018 reached a level of $735,000.  That represented an increase of 56% from the median sales price of $470,000.00 in the first quarter of 2010.

The Diamond Bar median rental rate for a Single Family Residence (detached) in the first quarter of 2018 stood at $2,860.00. This represented an increase of 30% from the median rental rate of $2,200.00   where it was in the middle of the aftermath of the Great Recession.  This represents an increase of $660.00 per month, which is not an insignificant number, but it is not the “stratospheric” increase seen in the  single family resale market values.  The rate of increase of rentals (30%) in the same period has been almost half of what the rate of the median price increase of homes values (56%) from 2010 to 2018.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

I reported last week that the Diamond Bar Condominium and Townhome market saw an increase of almost 11% year over year (2^nd quarter 2018 as compared to 2^nd quarter 2017) in its Median Sales Price (MSP). What happened to the price of detached homes in Diamond Bar for the same period? According to the California Regional Multiple Listing Service (CRMLS) the Diamond Bar Single Family Detached Home (SFDH) market also saw an increase in the Median Sales Price.  The 2^nd Quarter 2018 saw the MSP number for this segment of the housing market go up to $750,000 for all of Diamond Bar, as compared to $720,000 for the same period in 2017. The $30,000.00 increase in one year translated into an annualized rate of increase of 4.2%. It did not increase at the same rate as Condo/Townhome MSP.  The 4.2% increase was approximately 40% of the rate of increase in MSP for the Condo/Townhouse segment of the market.

The number of sales of Single Family Detached Homes also saw a decrease of approximately 20%, going down to 101 from 125 for the same period of time the previous year. The Condo/Townhouse sales transaction numbers went up almost 21%, with 64 closed sales in the 2^nd quarter 2018 versus 53 for the same period in 2017.

It is evident from the statistics as reported by the MLS, the home prices overall continue to climb here in Diamond Bar, although the rate of increase is slowing down, and the housing sales numbers have definitely seen a slowdown.  Before prices can start to decline, they must first plateau, and before they plateau or flatten out, they must first start to slow down in their rate of increase.  We are at that stage in the housing cycle now.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

By Nef Cortez

The Diamond Bar Condominium and Townhome market continues to roll along! The Median Sales Price (MSP) of Diamond Bar condos and townhomes went up Year over Year by almost 11%. The increase of the condominium/townhouse MSP went up from $360,000 in the 2^nd quarter (April-May-June) of 2017 to $399,000 in the 2^nd quarter 2018 (The Median Sales Price is the price which was the mid-point between the highest and the lowest priced sale). The lowest priced condominium transfer was at $230,000, and the highest priced sale transaction closed at $855,000.00. In comparison, the lowest priced condo sale in the 2^nd quarter of 2017 was at $200,000, with the highest sales price for the same period closing at $742,000.  The MSP price increase paralleled the Single Family Residence (SFR) Medium Sales Price increase in Diamond Bar as well.

The sharp increase in the MSP was not accompanied by the same problem that has plagued the SFR market. Whereas there has been a decreased number of transactions in the SFR market in Diamond Bar for the 2^nd quarter this year as compared to 2017, the condominium and townhome sales number saw an increase at the same time that the MSP increased.  The sales transactions number went up almost 21%, with 64 closed sales in the 2^nd quarter 2018 versus 53 for the same period in 2017. In comparison, the SFR market saw transaction numbers drop by 19%, going down from 120 for the 2^nd quarter 2017 to 97 in the 2^nd quarter 2018 (data drawn from the California Regional Multiple Listing Service-CRMLS). It appears that as the Diamond Bar Single Family Residential Median Sales Price became less affordable (exceeding $735,000 in  the 2^nd Quarter 2018), the buyers shifted over to purchasing the comparatively more affordable Condominium or Townhome. This is typical for  fluctuations that occur in the residential housing market.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

As a licensed agent since 1976, I have seen a few cycles of the Real Estate market.  None that I have seen have been exactly like one of the others.  Lately, there has been a lot of “Chatter” in real estate circles, or in articles written about whether we’re in the middle of another housing bubble, or at the brink of and about to head into a real estate housing recession.

The interest rate environment had been trending upward for the previous few months this year, and it seems to have had an impact on the number of sales being transacted, with fewer properties being sold in the first part of this year as compared to last year.  After reaching an average high of close to 5% in the last few months, the 30 year mortgage has settled back into the mid 4% range.

The decreasing affordability of housing has triggered the increasing number of news articles and housing industry pundit discussions about a slowing down of the housing market.  The increase in home prices year over year exceeding 5% combined with the interest rate increase seen lately in the 30 year fixed rate mortgages are but two financial factors that have led to fewer sales transactions this year (as compared to last year). These discussions lead into the topic of a recession in home prices as well in the not to distant future. The inventory of homes on the market is slowly increasing, with the length of time that homes are on the market slightly increasing as well. These two factors in combination will provide an easing in the upward pressure on prices. Before a drop in prices can occur, a slowing down in the rate of increase must occur, followed by a leveling off in the increase in prices.

According to the Federal National Mortgage Association (Fannie Mae), a Government Sponsored Entity created by Congress to provide liquidity to the housing market, the “Consumer optimism about purchasing a home continued tot fade in July, as low inventory, rising prices and higher interest rates are affecting their market perception”, Fannie Mae said.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Is this an example of “Modern Math”? 1 % can be a BIG number in the Real Estate industry, as well as in the Home Lending industry.  As the economy improves (and this last quarter’s 4.1% increase in the Gross Domestic Product (GDP) indicates that it is), home loan interest rates are expected to go up.  The 30 year home mortgage averaged 4.53% in July 2018, as reported by the Federal National Home Loan Mortgage Corporation (FREDDIEMAC). That number compares with 3.97% a year ago in July 2017. That is a full .55% higher than it was just one year ago, before the economy seemed to start revving up.  It could easily go up another .5% in the next six months, as long as the economy continues to perform at or near its current pace.

How much of a difference in the housing payment would a 1% increase in the interest rate represent to a Diamond Bar home buyer?  The Median Sales Price (MSP) of a Single Family Residence (SFR) in Diamond Bar reached  $735,000.00 for the last quarter including sales from April through June 2018. Assuming the purchase with a 20% down payment, and the monthly interest rate of 3.97%, the 30 year fixed rate conventional mortgage would have a monthly payment of $2,797.00.  Projecting another .5% interest rate increase, a similar mortgage in the amount of $588,000 with a fixed rate at 4.97% (1 % higher than July 2017’s) would have a monthly principal and interest payment of $3,145.00, a difference of $348 per month, representing an increase of 12.5% in the payment as a result of the higher interest rate.

This is a case where 1% (increase in mortgage interest rate) equals 12.5% (increase in payment)! The risk of missing out on the lower interest rate is causing many buyers who have been sitting on the sidelines to “get off the fence” and buy.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Interest rates have been trending at historically low levels for the last decade. Beginning with the Great Recession (which many have termed a Depression), interest rates on home loans carrying a fixed rate and a 30 year payback term, have meandered under 4.75%.  They have ranged from the current 4.5% down to as low as 3.5%.  In that same decade, beginning with the upturn of prices from the bottom point of the real estate market crash of 2008, the Median Homes Sales Price (MSP) of a California Single Family Home (SFH) has been on a steady increase.  Because of the Great Recession, the Median Sales Price of the California median single family home dropped from its high point of $595,000 in May 2007 down to its low point of $245,000 in February 2009. This represented a drop of more than 59%, a huge number. The record number of foreclosures recorded in the last decade were both an outcome and a factor in the spiraling down of the California MSP, as it was across the United States. In fact, many other parts of the world suffered through a similar real estate market recession.

The California Median Sales Price in 1990 was $195,000.00 as reported by the California Association of Realtors (C.A.R.).  The interest rate on a 30 year fixed rate mortgage was approximately 10%, according to the Federal National Mortgage Corporation (FHLMC). A decade later, in July of 2000, the California MSP had risen to $245,000.00, and increase of 25% in ten years.  The interest rate in that same period of time had dropped to close to 8% from 10% a decade earlier.  This represented a drop of 20% in the cost of a mortgage. As the cost of money went down, the Buyer was able to and did pay a higher price in the MSP or purchase price of the home.

The “CRAZY!” increase in home prices between June 2000 and May 2007 was not driven nor greatly influenced by the mortgage interest rates but more so by the crazy disregard for common sense underwriting guidelines.  The California MSP saw an increase from $245,000 in June 2000 to the then record high MSP of $595,000 in May 2007. This represented an increase of 142% in MSP in only 7 years, an astounding 20% annual increase! Totally unsustainable, as was evidenced by the subsequent housing market crash. Where do you think we are now in the current real estate cycle? E-mail me your opinion.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE lic # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Millennials have now surpassed Baby Boomers as the largest segment of homebuyers.  According to a report by the National Association of Realtors (NAR), millennials comprised 38% of all buyers across the US in 2013, surpassing the 32% comprised of Baby Boomers. Since then, Millennials have consistently been the largest segment of the homebuying population.  Millennials are defined as people having been born between 1980 and 2000.

The US Census shows that the Millennial Generation is larger than even the Baby Boomers, who were the largest demographic in the history of the United States. The 92 million Millennials outnumber the 77 million Baby Boomers by more than 16%. According to the National Association of Realtors (NAR), the sheer number of Millennials coming into the prime home purchasing years (25 years old to 45 years of age) will continue to grow and the percentage of millennials purchasing a home will also become a larger segment of the homebuying population.

Another factor that is expected to impact the growing number of purchases by Millennials is that they have been putting off moving out of their parent’s homes and/or getting married. The median age for married Millennials was 30 years old here in the 2010’s, where just 40 years ago, the median age was only 23. Assuming the legal marriage age of 18 as the beginning number, the median number of years that marriage has been put off by millennials is 7 years, an increase of 140% in the median years before marriage.

Marriage is seen by most people as a major life event that in many ways drives people toward home-ownership.  Seeking stability, gaining privacy, and building equity are seen as reasons to buy versus continuing to rent (not to mention sharply rising rents). As a larger number of Millennials reach the current median age of 30 before getting married (and so far, only 40% of millennials have), this factor will be even more impactful on the real estate market.  An overwhelming number, more than 90%, of Millennials age 18-35 who currently rent plan to buy a home some day. That compares favorably with the less than 40 % of Baby Boomers who now plan on buying in the future. That demographic is thinking more of retirement than they are on getting started all over again on a 30 year mortgage.

All indications point to Millennials being the largest driver of the housing market in the next decade.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Consumer confidence, which reached new heights the previous months, retreated slightly this past month as reported by the Federal National Mortgage Association (FNMA). The housing confidence reading of 90.7 was down 1.6 points from the previous month’s record high of 92.3.

One of the contributing factors in reaching historically high home price levels in the US, California, and Diamond Bar is the consumer’s confidence in the housing market. This consumer confidence was demonstrated this past month by the fact that 3.4 million Americans quit their jobs.  Typically, people quit their jobs because they have the confidence that they can quit their current job and easily go find a better paying one.

As noted previously in this column, the current Median Home Sales Price levels continue to press upward.  From the lows of 2010-2012, after the housing market crash of 2008, the median home sales price in Diamond Bar has risen by more than 50%  in the last 6 to 8 years.

So why would consumer confidence scoring be of any importance to me as a homeowner, seller, or buyer?   The answer is that the higher the confidence levels are in the housing market, the higher the probability is of a continuing upward pressure on property values. As a buyer, that lends a sense of confidence in moving forward with the purchase of the home being considered, as there is the increased possibility that one year later it will cost substantially more.  As a home seller, the increased consumer confidence will affect one’s willingness to move forward with plans of selling the home, being confident that the price one believes they will get for the sale of their home will be supported by the housing market.  Many home sellers over shoot the expected value of their home because of “news” tidbits they have heard about the strong real estate market.

Both buyers and sellers need to have a good estimate of value and for that they can go to their Realtor and ask for Comparative Market Analysis (CMA) on their property, or on the property they are considering purchasing.  This will give them a greater sense of comfort in the true market value of their property.  A CMA is one of the tools or methods that a real estate agent may use to arrive at an estimated value for a property.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Homeownership has long been lauded as an important factor in the success of children in school and subsequently in their careers. Much research and many studies have been completed with analysis on the beneficial impacts of homeownership on children. This fact has long been used by the real estate and lending industries to encourage homeownership. I think that the most important factor contributing to the statistical confirmation of greater academic success for children of homeowners versus those of renters…is the improved stability in their family life that homeownership typically affords them.

People who own their homes do not move as often as those who rent. Children of homeowners are able to establish friendships for longer periods of time, going to school together and sharing other community activities that create bonds that sometimes last a lifetime.  This is not to say that children of renters do not do the same thing. It just means that children of homeowners are provided a more stable environment in which to nurture those relationships for longer periods of time. The stability that is provided to children enables them to perform better in school, and it is also impacted by the increased participation in community activities by the homeowners and their families. They become more vested in the community, and the parents are typically more watchful of the participation by their children in healthy activities. Homeowners usually buy in neighborhoods that already have a high rate of homeownership, and therefore the effects of individual homeowners cumulatively have a multiplier effect.

Many of the characteristics exemplified in the actions taken by homeowners, such as the investment of time and money into the improvement of their homes, is a positive modeling of behaviors that are beneficial to the community at large, and to homeowners’ children specifically.  These behaviors are seen and many times adopted by the children involved in these types of activities. Homeowners typically perform these activities more frequently than renters.  These social behaviors that are beneficial to the community are passed on to or learned by the children, and therefore we all benefit.

This article was written by Nef Cortez, a licensed Real Estate Broker, Ca BRE # 00560181 since 1976. He can be reached via e-mail at nefcortez@gmail.com.  Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

As the real estate market continues to chug along with a strong price trend increase, the question of affordability is at the forefront of many discussions. The obvious center of discussion is the real estate industry itself, including real estate agents, mortgage originators or loan agents, escrow companies, title companies, and other affiliated service companies whose businesses are directly tied in to the real estate market.  It is a discussion that is central to the issues of housing the lower income households as well as the homeless throughout the state of California.

The California Association of Realtors (C.A.R.) reported out in May the Housing Affordability Index (HAI) for the first quarter of 2018.  It reported that there was a slight increase in affordability, with the Housing Affordability Index (HAI) rate statewide  increasing from 29% to 31%.  The HAI of 31% means that thirty-one percent of the California households could afford to purchase the $538,640 median-priced home (the median price being the price in which one-half of the homes sold for less and one-half of them sold for more).

The analysis assumes a down payment of 20%, which would be, for the median-priced home in California in the first quarter of 2018, approximately $108,000.00. The analysis also determined that the annual household income needed to be at least $111,500.00 in order to make the monthly payments of $2,790.00, which would include principal, interest, and taxes on a 30 year mortgage at approximately 4.45%.

Utilizing the same assumptions for the Diamond Bar real estate market, the numbers are striking in respect to the low affordability index of the median priced home in Diamond Bar.  The first quarter of 2018 saw the Median Sales Price (MSP) of the Single Family Detached Housing Residence (SFDHR or SFR) at $735,000.00.  The monthly payments of approximately $3,800.00 would require a monthly household income of $12,667.00, or $152,000.00 annual income.  Less than 16% of California households earn sufficient income to qualify for the Median Sales Price home in Diamond Bar.  According to Bruce Norris, an expert in the real estate investment world of Southern California, any time affordability falls below 20% for a housing market it can be one of the indicators of a housing market weakness. Is this an indication of a slowing of price appreciation in Diamond Bar? This is a developing story…stay tuned.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website http://www.nefcortez.com. Please feel free to email any questions regarding real estate.

By Nef Cortez

The housing market continues to steam ahead at a strong pace with upward trends in appreciation of values.  The California Association of Realtors (C.A.R.) updated their projections for sales in 2018 statewide and their revision included an increased number of home sales as well as an accelerated price appreciation. Much of the anticipated price appreciation is due to the continuing shortage of inventory.

The City of Diamond Bar has within its city boundaries a little more than 15,000 Single Family Residences (SFRs).  Owners of these homes have cumulatively gained over one Billion dollars in equity in the last twelve months due to price appreciation.  C.A.R. reported that in February 2017, the median sales price of SFRs sold in Diamond Bar was $687,944.00. That number had increased to $764,000.00 in February 2018. That represented a median increase of value of approximately $76,000.00 per unit. The lower sampling of transactions on a monthly basis gives us a picture that fluctuates more than the quarter by quarter comparisons, which are more stable. Both numbers, however, have shown an increase year over year.

The growth in equity is a reason why you hear many more commercials or advertising about home equity loans and how you can use your home equity to pay off credit cards and other high interest rate loans. In many cases, it does make sense to borrow on the equity of the home, where one can obtain interest rates of 4.5%. That is much lower than many credit card accounts that are running anywhere from 9.9% to 28%. The danger of borrowing against the equity of the home and paying down credit cards is the ease in which the credit card balance can quickly be accumulated again.

The benefit of having the option to do so is largely due to the gain in property values, as noted above, of more than $1 billion in one year alone! Nice to have!

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or websitewww.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Home prices in Diamond Bar, in California, and in the United States in general, have risen substantially over the last 7 years.  As reported previously in this column, the Median Sales Price of a Single Family Residential detached home (SFR) had reached a post Great-Recession high of $735,000.00. This being an election year in California, the question arose “How do elections affect home prices?”

In researching this question, I found that there are varied opinions as to the effect of elections on home prices.  Some research supported the belief that elections tend to create uncertainty in the market, and therefore either slow the market down, or at minimum dampen the increase in sales prices.  Homes.com, a real estate data aggregator, published a report that claimed that in election years, the prices of homes are impacted to the negative by 1/4 to 1/2 of one percent, causing prices to rise more slowly in an election year than in a non-election year.

This afternoon I attended the Quarterly Luncheon meeting of the Real Estate Research Council of Southern California (RERCSC) at Cal Poly Pomona.  The information presented by RERCSC Executive Director Dr. Gerd Welke on the California Housing market and real estate trends seemed to show a fairly steady “real price” value of housing until the last few decades. The “real price” value of housing saw a dramatic increase since the 1990’s. The California legislative policies of the last few decades have resulted with over regulation, causing a decrease in number of units being built annually across the state. While the population of California grew 29 million from 1990 to the now current 39 million residents, the addition of new housing units did not keep up with the growth in demand.

Basic economic theory provides that a growing demand for a product, without the corresponding increase in supply, will cause prices to increase.  We have definitely seen that in the last 30 years, and will continue to see housing price increases without easing up, until the legislature makes it easier and less regulatorily constrained to build new housing. Policies implemented statewide by the legislature are a direct result of who gets elected.  In summary, “Who” gets elected will impact what legislation gets passed, and whether or not it is conducive to new construction or not.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

The Diamond Bar Median Household income has continued to rise to the level where it has now surpassed the national average by more 52%.  The national median household income stood at $59,039.00 as per the last figures available from the U.S. Census. The same data source reported the Diamond Bar number at $89, 845.00.

Last week’s comparison between the California Median Sales Price of a single family home and the Median Sales Price of homes in neighboring states highlighted some major differences. The cost of housing on a straight line comparison of the Median Sales Price of homes in California as compared to Texas showed a 150% higher cost in California.  How much more affordable is housing there when compared to the Median Household Income?

The ratio between the Median Sales Price of a single family home and the Median Household Income for California is 8.6 to 1. The ratio for Texas, in comparison, is 4.1 to 1. That means that the homes are selling for a multiple of 8.6 times the annual household income in California, or  twice as much as they are in Texas.

One of the “comeback statements” to this affordability differential is the job market.  “Sure, homes are more affordable, but there are no jobs there!” is a common retort in conversations about housing costs in different regions. The job market in fact shows that the unemployment rate in Texas sits at 4.1 versus California’s 4.2.  The job market in Texas appears to be as good as or better than California’s.

The conclusion is that California housing stock is definitely out of line with the populace’s ability to pay. At a certain point, the housing affordability issue will “rise its head” and negatively impact the housing market.  As prices continue to increase in California, we get closer and closer to that point in time.  Stay tuned!!!

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

The Legislative Analyst’s Office, which is the California Legislature’s Nonpartisan Fiscal and Policy Advisor, reported earlier this year on the net migration of California’s population. The report stated that between 2007 to 2016, about 5 million people moved to California from other states, while about 6 million left California. As high as that number was, it was about one-half of what it was on average the previous two decades.

The profile of the inbound migration was heavily weighed by the large number of 18-35 year olds  moving from New York, New Jersey, and Illinois, who were typically the college-educated. Families with kids and those with only a high school education predominate among those moving from California to its top destination states (Texas, Arizona, and Nevada). This netted the effect of a wealthier, more highly educated population living in California.

A major factor in the net out-migration of the population was the cost of housing.  In April 2018, the California Association of Realtors reported that the Median Sales Price (MSP) of a Single Family Home detached (SFHH) reached $584,460.00, and the Median Sales Price (MSP) of a California Townhouse or Condominium reached $476,000.00. These prices compared with much lower numbers in other states. For example, the Texas Median Sales Price reached about $231,900.00, more than $350,000.00 LESS than the California Median Sales Price.  On a straight line comparison, the cost of housing in California is 150% more expensive than it is in Texas! That is a BIG factor in the large number of Californians moving to Texas.

Another major factor in the net out-migration to other neighboring states from California is the State income tax imposed on California residents.  Many are opting to move to states that do not have an income tax, such as Nevada and Texas. The typical income tax rate that the California household pays is about 9% of the median income of approximately $67,000.00.  That translates to an annual income tax of nearly $6,000.00, or $500.00 per month.

In summary, not only is the cost of living so much less in neighboring states, but if they do not have a State Income Tax, the household is left with close to 10% more of their income. The key to a move is the job market and the level of pay one is able to secure. Next week we will compare the job market and median household incomes in California and neighboring states.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Investors worldwide are searching for a higher return on their investment! Throughout the United States, some cities are attracting a higher number of  real estate investors due to many factors, but primarily because their Cash on Cash return exceeds the return if they invested in real estate elsewhere.

Today’s worldwide low interest rate environment provides a very low payout or return on savings accounts. Currently Banks are paying under 1.75% for a $100,000 certificate of deposit, while allowing intermittent access to that cash.

Along with the higher return on investment, Investors also look at the security of their investment, always analyzing the probability of being able to get their money back  or the risk of losing it from whatever investment they make.

Two factors that are typically used to determine whether the real estate investment is to be made or not are the price of real estate, and the return on the investment measured in rental income.  A Low Purchase or Market price paired with a high rental rate is most desirable.

Another consideration for the investor is whether the investment will be for short term rental of the property, or for long term occupancy for the tenant, with typical one year leases. Different areas of the country, and more specifically, different cities in the country, will provide better returns for the two different types of investments.

An area that has more of a tourism industry will tend to generate a higher return on the short term rental market.  An area that lends itself to the more stable demographic will tend to be more desirable to the long term investor.

The top five U.S. cities that currently fit the criteria for the long term investor (per Mashvisor, a rental data aggregator) were Columbus Ohio, Denver Colorado, Baltimore Maryland, San Jose California and Anaheim California.  The analysis took into account certain neighborhoods within those cities and not the entire city itself.  Diamond Bar California did not make the top 20, as the median sales price of $735,000 for a Single Family home paired to the median monthly rental income of $2,800 equated to a rate of return of 4.57%, below the leading cities rates of return of 7-12%.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

Nef Cortez

By Nef Cortez

Diamond Bar property values have increased tremendously over the last 8 years, as they have throughout California. Rents have also increased more than 30% for Single Family Residential (SFR) detached homes over that same period of time. This week we will look at the rental rates for Townhomes and Condominiums in Diamond Bar and compare them to the rental rates for SFRs.

The first quarter (3 month period) of 2010 saw the Diamond Bar Townhome and Condominium Median Sales Price at $265,000.00. After dropping a little further in 2011, the Median Sales Price for that segment of the market in Diamond Bar reached $382,000.00 in the First Quarter of 2018. That represents an strong increase of 44.2% in the 8 years, averaging approximately 5.5% annually. The number of sales recorded in this segment of the market in the first quarter of 2010 posted a fairly strong total of 54. The number of recorded Townhome and Condominium sales in Diamond Bar for the first Quarter of 2018 dropped to 33, a steep drop of 39%. For those in the real estate industry, that represents a steep drop in numbers of transactions, almost mirroring the drop in the SFR market.

The number of leases transacted (per the California Regional Multiple Listing service-CRMLS) in the first quarter of 2010 was 76. That number increased by 36.8% to 104 in the first quarter of 2018. It seems that the lower number of recorded sales translated into a higher number of reported lease transactions. This would indicate that an increased number of property owners are choosing to rent out their properties instead of selling them. And why not, with both rental rates and property values increasing, it is a win-win for property owners.

The rental rates for Townhomes and Condominiums in Diamond Bar increased as well. The median lease price for a Townhome/Condominium in Diamond Bar was $1,800.00 in the first quarter of 2010.  That number now has reached $2,500.00, representing an increase of 38.9% in the 8 year period. The median lease price for a Single Family Residence in Diamond Bar for the first quarter of 2018 reached $2,860.00, only 10% more than the median lease value for the Townhome/Condominium market.

I wish I had bought more real estate back when…LOL! Seriously!

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

NEF CORTEZ,
Broker  DRE # 00560181

RE/MAX Universal Realty
1411 S. Diamond Bar Blvd.,
Diamond Bar, Ca.  91765

e-mail: nefcortez@gmail.com

www.nefcortez.com

Office: 909-610-6303
Fax:  909-752-3163
Cell: 909-762-8135