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Monday Morning Quarterback
(Monday, March 11, 2024)
Americans Are Moving Less. Fewer Americans are moving within the US, and boomer homeowners in more expensive states may explain why. In a new working paper, economics professors William Olney and Owen Thompson at Williams College determined that residents of states with high home prices, such as California and New York, have become less likely to move as a result of those high prices. The researchers argued older homeowners primarily drove this decline in internal migration. "The decline in internal migration appears to be primarily driven by the migration decisions of older homeowners in expensive urban states becoming less responsive to local home prices," the researchers wrote. Over the last few decades, US internal migration has fallen substantially. Census data shows internal migration has slowed since the 1970s amid deindustrialization and a weaker economy. Zooming out, the researchers noted that people tend to migrate from the Northeast, Midwest, and California to the Northwest, Southeast, and Southwest. Net migration has been strongest out of California, Illinois, Massachusetts, New Jersey, and New York, which have relatively high housing prices. Net-positive states like Georgia, North Carolina, Tennessee, and Texas often have lower housing prices. Still, the inflow rate for Sun Belt States, though still much higher than most other states, has declined most rapidly over the 23-year period. The researchers found that states with high housing prices, including California, New York, and New Jersey, experienced the greatest declines in sensitivity to home prices. Meanwhile, renters, college graduates, and younger people are becoming slightly more sensitive to home prices. "For instance, migration is significantly less common among homeowners, older individuals, parents, and those that are employed, while it is significantly more common among the more highly educated," the researchers write. In other real estate news, let’s get under the hood…
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Median Down Payment for a House By States. Creator Julie Peasley maps the median down payment on a single-family home by U.S. state, using data from Realtor.com, accessed through Bankrate (a publisher and rate comparison service focused on the banking industry). Importantly, a “single-family home” is legally defined as a “structure used as a single-dwelling unit.” Ranked 4th and 5th are Washington State and California, requiring median down payments in the mid-$80,000s. Unsurprisingly the median down payment patterns follow how expensive housing is in that particular state, which in itself is a reflection of jobs, income, population, amenities, and the desirability of the location. By looking at the median, it also cuts out the “high end” that would skew the average (mean) payment higher. At the bottom of the list, Alabama, West Virginia, Louisiana, and Mississippi all average less than $10,000 in median down payments. However, looking at the percentage of the total value put down as a down payment in those states (10%) indicates homebuyers there tend to have longer repayment plans. This is in contrast to the median down payment in Washington, which is close to one-third of the total house value. The U.S. housing market has seen quite an upheaval in the last few years. Between December 2019 and November 2021, house prices rose nearly 24%, the fastest rate on record. Research found that areas that were more exposed to remote work experienced higher price growth. Following the trend of skyrocketing house prices, the national average for down payments has also more than doubled from $13,250 in Q1 2020 to $31,500 in Q3, 2023, per earlier linked Bankrate data. Rents have also climbed significantly, pricing young adults out of moving out of their parents homes, which in turn has fueled luxury spending with more disposable income. On the other hand, the commercial real estate market has struggled with falling demand and higher interest rates, putting downward pressure on prices in that sector.
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Mortgage Rates Fall First Time In Five Weeks. The 30-year fixed-rate mortgage averaged 6.88% as of March 7, according to data released by Freddie Mac last Thursday. It’s down 6 basis points from the previous week — one basis point is equal to one hundredth of a percentage point. A year ago, the 30-year was averaging at 6.73%. The average rate on the 15-year mortgage was 6.22%, down from 6.26% last week. The 15-year was at 5.95% a year ago. Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage. Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging at 6.97% as of Thursday afternoon. The Mortgage Bankers Association’s survey noted that the 30-year was at 7.02% as of March 1. “Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” Sam Khater, chief economist at Freddie Mac, said in a statement. “While mortgage rates are expected to fall further in 2024, short term movements in mortgage rates will be influenced by [Federal Reserve Chair] Jerome Powell’s remarks during the semiannual monetary report to Congress [on Thursday] … and the January jobs report which will be released Friday,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. “A small decline in mortgage rates last week led to a nearly 10% jump in mortgage applications, with refinance and purchase activity both posting solid gains,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement. The MBA releases a separate report on application data based on a survey of lenders. “Housing inventory remains tight and home prices are elevated, but first-time buyer interest is strong this spring,” he added. “FHA purchase applications jumped 16%.”
Renting a Home Still More Affordable Than Owning. Maybe your tenants know something you don‘t. I say this because ATTOM database just released its 2024 “Rental Affordability Report,” which shows that median three-bedroom home rents in the U.S. are more affordable than owning a similarly-sized home in nearly 90 percent of local markets around the nation. The report shows that both renting and owning a three-bedroom home continue to pose significant financial burdens for average workers, consuming more than one-third of their wages in the vast majority of county-level housing markets. But median rental rates still require a smaller portion of average wages than major home-ownership expenses on three-bedroom properties in 296 (88 percent) of the 338 U.S. counties. That gap extends trends from 2023 even as rents have commonly risen faster than home prices over the past year around the U.S. “Finding an affordable home remains a daunting prospect around the country for average workers, regardless of whether they want to buy or rent. Continuously increasing home prices contribute to the escalation of rental costs, making both buying and renting properties a challenging endeavor across most of the United States,” said Rob Barber, CEO at ATTOM. “But the latest data shows that even as rents are growing faster, they remain more affordable than owning.” That has happened as elevated home prices have become further and further out of reach for average workers, preventing those with marginal finances from obtaining mortgages and leaving them with few options other than renting. Home prices kept going up in 2024 despite rising mortgage rates, in part because of a tight supply of homes for sale. Still, despite renting and ownership consuming more than a third of average wages in most local markets, rents haven’t escalated enough to keep them from being the more affordable option for average workers. That trend has held throughout the country but remains most pronounced in the most populous urban and suburban markets. Among 45 counties with a population of at least 1 million included in the report, the biggest gaps are in Honolulu, HI (median three-bedroom rents consume 67 percent of average local wages while typical single-home affordability consume 134 percent); Kings County (Brooklyn), NY (72 percent for renting versus 136 percent for owning); Alameda County (Oakland), CA (51 percent for renting versus 108 percent for owning); Santa Clara County (San Jose), CA (29 percent for renting versus 83 percent for owning) and Orange County, CA (88 percent for renting versus 136 percent for owning).
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The $2.3 Billion Sphere Event Venue. If you find yourself driving down the Las Vegas strip, passing the towering neon-ornamented casinos, you’ll likely notice “The Sphere.” This brand-new state-of-the art structure, which officially opened last month and cost an estimated $2.3 billion to construct, is so groundbreaking that locals rightly call it the “8th Wonder of the World.” This one-of-a-kind living, breathing billboard boasts 16k resolution LED panels that wrap around it’s orb-like exoskeleton, flashing visuals of an eyeball, planet earth, an actively winking smiley emoji, and even ads for the upcoming Trolls movie sequel. It rivals the bright lights of the gambling resorts that surround it. If the constantly shifting graphics displayed on the venue are enough to cause traffic blocks from wonderstruck onlookers, the technology, design, and enormous screens inside the Sphere transform the typical live-music experience into a multidimensional, immersive trip. Sphere is located right off of the Las Vegas strip in Paradise, Nevada. It’s next to the Venetian resort, with a pedestrian walkway connecting the resort to the venue. The inside of the performance area is alight with a curving 270-degree screen that regales showgoers in its more than 18,000 seats with quick shifting digital trompe-l’oeils. Every aspect of the venue, from the VIP areas to entry bridges, is intentionally designed with performance and future experiences in mind. The overarching objective is to create immersive experiences that engage the senses and transport fans and attendees to a new world. The spherical structure facilitates this. Without any columns inside, everyone in the audience enjoys “an uninterrupted vantage point.”
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The Narrowest House in the World Sits in a Public Park in France. Last week we featured the newest and oldest houses in Los Angeles. In response, one of my loyal readers asked about the narrowest house in the world. Sure enough (thanks to Google) we found it in Normandy France. The house, aptly named “Narrow House,” is the narrowest house in the world (it is roughly 23 feet tall, 52 feet long, but only 4.5 feet wide). Yes, only 4.5 feet wide! This 1960s-style suburban house is permanently exhibited outdoors is in Le Havre, Normandy, France. Narrow House, with its unmistakable silhouette, looks like it could be the set of an early silent film—a funhouse plucked from a Buster Keaton movie but with much deeper significance. Designed by Erwin Wurm, the installation (surrounded by a garden planted with trees), is an updated and fantastic reinterpretation of his parents’ home. Walking inside is an undeniably disorienting experience: The objects and furnishings appear squashed and look unreal. As the visit proceeds, the rooms follow one another until they finally become too narrow to access, accentuating the feeling of claustrophobia and pushing the visitor to flee out the exit door in search of relief. A series of photographs on the walls of the house give visitors some clues about its inhabitants. The house is yet another of Wurm’s reflections on the relationship between living spaces and individual freedom. As you can see, humor and playfulness are key ingredients in a work by Wurm.
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Skinniest Village in the World. Why limit ourselves to just one skinny house when we can look at an entire skinny village. In fact, let’s look at the skinniest village in the world! And we found it (thanks to Google, once again) in Spain. And it’s a doozy! Castellfollit de la Roca is a town in the Province of Girona, Catalonia, Spain. The village sits on a basalt craig that is 50 meters high (160 feet) and almost a kilometer long, but is very VERY skinny. The village of approximately 1,000 inhabitants in less than 1km of surface, which makes it the skinniest municipality in the world. This tiny municipality is limited by the confluence of the rivers Fluvià and Toronell, in the middle of which rises this spectacular basaltic cliff. What is a basaltic cliff? Glad you asked. A basalt cliff is the direct consequence of the erosive action of the two rivers on the remains of lava flows from volcanic eruptions that took place thousands of years ago. The lava, when solidified, gives rise to basalt, a rock of great hardness, which takes different shapes depending on the process of cooling, contraction and cracking of the lava. Specifically, this cliff is the result of the super-imposition of two lava flows; the first, 217,000 years old, comes from the Batet area and is formed by slabs. The second, younger, is native to the volcanoes of Begudà, is only 192,000 years old and adopts prismatic shapes. Castellfollit is home to the only active basalt quarry in Spain. This quarry is operated by the Ortiz family since 1929. There are basically two applications for basalt extracted: an industrial one (such as antacid rock) and a domestic and decorative one (fireplaces, flooring, etc.). A good example of the usefulness of the extracted material is the pavement of Castellfollit de la Roca. The town, of medieval origin, is made up of narrow and shaded squares and streets. The houses are, for the most part, built of volcanic stone. But how narrow is it? It takes exactly one minute to walk from one side of the village to the other.
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People Hosting Their Own “Living Funerals.” Wouldn’t it be nice to hear all the lovely things friends and family might say about you at your funeral? Picture the scene: all your friends and family gathered together to celebrate your life. They share heartfelt tributes about how much you’ve meant to them and they laugh together at memorable embarrassing moments. Some use it as a chance to say the things they wish they’d said to you earlier. This probably sounds like a regular funeral, but what if there was one crucial difference? What if the person on the receiving end of this outpouring of love was still alive and able to attend? “Living funerals,” which are also known as “Pre-Funerals,” offer a chance for people to say goodbye to their friends and families on their own terms and to celebrate their life while they are still alive. It’s not an entirely new concept. Living funerals started gaining popularity in Japan in the 1990s, where they’re known as seizenso (“funeral while living”), with the idea that it would take the pressure off family members or friends organizing a funeral after someone died. The practice has also taken off in South Korea. In 2019, 25,000 people took part in living funerals to face their mortality and embrace living. With the notion of living funerals still being relatively new, awareness of the benefits they offer is only now increasing. Last year, the founder of the breast cancer charity CoppaFeel, Kris Hallenga, who has stage 4 breast cancer, had a “FUNeral” that involved Dawn French delivering a eulogy as her character Geraldine Granger from British TV’s The Vicar of Dibley. Living funerals offer the chance to break with tradition and have an uplifting celebration. Georgia Martin, founder of A Beautiful Goodbye, which provides a living funeral service, has been helping people organize these events on a voluntary basis since 2016. “Some people think it will be morbid,” she says. “They picture a funeral in a church with a coffin and everyone wearing black. With a living funeral, however, nothing is set in stone. You can do whatever you want.” There are many reasons why someone might have one. They might be terminally ill, or they might simply be getting older and want to celebrate their life and relationships while they still can. Georgia Martin says that what makes these events so meaningful is how they allow people to tell each other how they feel, so nothing remains left unsaid. “I think when you say these things out loud, it takes away an element of grief, because you’ve said everything you wanted to say. It gives you clarity that you otherwise wouldn’t have.”
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"Fixing and Flipping in 2024." Join us on March 14, 2024, as Jeremy Ruben will be visiting us from the central coast. Jeremy is a veteran flipper who will discuss the current state of the flipping business in Southern California. Join us as Jeremy shows us the how to fix and flip in 2024. Thursday night, March 14, 2024, 6:30 to 9:30 pm. Plus, come early and enjoy our Vendors Expo. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034. FREE Admission. RSVP: LARealEstateInvestors.com.
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Vendors Expo Returns! Our world-famous, super-duper "Vendors Expo" returns on Thursday night, March 14, 2024. The Vendor Expo opens starting at 6:30 pm. We'll have 40+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Stick around after and enjoy our guest speaker. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, CA 90034. FREE Admission. Metered and free street parking. Please RSVP at www.LARealEstateInvestors.com.
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This Week. Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy ahead of the next meeting on March 20. For economic reports, the Consumer Price Index (CPI) will be released on Tuesday by the Bureau of Labor Statistics. CPI is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will come out on Thursday by the Census Bureau. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of our economy. Import Prices will be released on Friday.
Weekly Changes:
10-Year Treasuries: Fell 010 bps
Dow Jones Average: Fell 300 points
NASDAQ: Rose 100 points
Calendar:
Tuesday (3/12): Consumer Price Index
Thursday (3/14): Retail Sales
Friday (3/15): Import Prices
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For further information, comments, and questions
Lloyd Segal
President
Los Angeles County Real Estate Investors Association, LLC
www.LARealEstateInvestors.com
This email address is being protected from spambots. You need JavaScript enabled to view it.
310-409-8310
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