REAL ESTATE TRENDS...10 reasons for San Francisco’s insanely competitive housing market

San Francisco’s housing market has sparked intense competition among buyers and a surge in appreciation for the last three years, but how did it get this way?

According to research from Paragon Real Estate Group, one answer isn’t enough to explain how the city’s real estate market came to be. Instead, the company considered the main factors at play, some of which reflect general macro-economic trends and some of which are specific to the city itself:

1. Population Growth: Every year San Francisco has been adding approximately 10,000 new residents per year and still there is not enough additional housing to meet the increase in demand. There is a lot of new construction in the city but much of it is expensive and would be considered luxury housing. Wealthier residents are “sopping up” much of the added inventory without relieving population pressures.
2. Employment Growth: Job numbers continue to grow in San Francisco as new companies start up and existing ones expand. According to the San Francisco Business Times, "The city's tech workforce has more than doubled in the last three years, and Indeed.com, a recruitment site, still lists 8600 unfilled software engineer positions in the city." This city also currently has the highest number of employed residents in its history.

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1. Surging stock market: The S&P 500 is up over 60% from January 2011 to January 2015. The affluent community has benefitted most from the recent large increase in the value of financial asset. When people feel wealthier they tend to spend more money on homes.
2. Brand new wealth: In recent years many millionaires and even billionaires have gotten their start in the Bay Area from stock options, IPOs and company sales. According to Wealth-X, San Francisco ranks 3^rd in the nation for number of “ultra-high-net-worth” residents.
3. High rents: Many people choose to purchase a home in San Francisco due to the possibility of future appreciation rather than pay an extraordinarily high rent.
4. Low interest rates: As of February 2015, the average interest rate on a 30-year fixed loan is well over 4%. From previous years, this reduction makes an enormous difference in affordability and the ongoing cost of housing.
5. Renting instead of selling: High rents and low interest rates have caused many owners to rent out their homes instead of selling them. This action depresses the supply of new listings coming on the market, exacerbating the inventory from 2013-2014.
6. Work there, live here: Many people who have taken jobs in Silicon Valley for example now insist on living in the city, creating a “reverse commute” effect.
7. Magnet effect: San Francisco has become a magnet for smart, creative, ambitious people who are willing to pay a premium to live there. Many post graduates aged 24-39 are moving back into urban areas like San Francisco.
8. Limited supply: New housing construction has not fulfilled the city’s needs in over 35 years. Almost two thirds of the city’s housing is in rental units, much under rent control. The number of homes ready for occupancy and ready to purchase is relatively small.

Almost all the factors listed could stall or even go into reverse. A lot of times real estate and financial markets are difficult to predict and typically go into cycles: up, down, fat, up again (repeat), according to Paragon Real Estate.

San Francisco is about three years into its latest recovery and recoveries typically last 5 to 7 years before a significant market adjustment. However, there is never really a guarantee for the future.

REAL ESTATE NEWS...California Real Estate Market

Latest Market @ A Glance
C.A.R. closely monitors and analyzes trends in the residential real estate industry. The table below contains the latest reported existing home sales series, median home prices, unsold inventory index, median time on market, first-time buyer housing affordability index, and the latest mortgage rates.

Market @ A Glance
California	Reporting Period	Current Period	Last Period	Year Ago	Change from Last Period	Change from Year Ago
Existing Home Sales (SAAR)  *	February-15	368,160	351,480	359,600	4.7%	2.4%
Median Home Price  *	February-15	$428,970	$426,660	$406,460	0.5%	5.5%
Unsold Inventory Index (months)  *	February-15	5.0	5.0	4.7	0.0%	6.4%
Median Time on Market (days)  *	February-15	47.0	52.4	40.1	-10.3%	17.2%
Traditional Housing Affordability Index (HAI)  *	2014 Q4	31%	30%	32%	1.0%	-1.0%
30-year fixed-rate mortgage (FRM)  **	February-15	3.71%	3.67%	4.30%	0.04%	-0.59%
SOURCES * CALIFORNIA ASSOCIATION OF REALTORS®, ** Federal Home Loan Mortgage Corp.

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REAL ESTATE TOPICS..'Live Lecture' vs. Online.

LIVE LECTURE DISCUSSION

Exert from 'Comparing the Effectiveness of 

Classroom and Online Learning: 

Teaching Research Methods'

Anna Ya Ni

California State University–San Bernardino

InterAction

An important component of classroom learning is the social and communicative interactions between student and teacher, and student and student. A student’s ability to ask a question, to share an opinion, or to disagree with a point of view are fundamental learning activities. It is often through conversation, discourse, discussion, and debate among students and between instructors and students that 

a new concept is clarified, an old assumption is challenged, a skill is practiced, an original idea is formed and encouraged, and ultimately, a learning objective is achieved. Online learning requires adjustments by instructors as well as students for successful interactions to occur. Online courses often substitute classroom interaction with discussion boards, synchronous chat, electronic bulletin boards, and e-mails. The effectiveness of such a virtual interactive venue is not without debate. 

Our Live Lecture Course are easy going, fast, affordable and very passable. Click link below for complete details

HTTP://WWW.REALESTATELICENSE-CA.COM/

REAL ESTATE NEWS...Americans Love Big Hot Suburbs

The neighborhoods outside of sunny metro areas are gobbling up the country, just like they were before the Great Recession.

Houston/Wikimedia Commons

The new Census population estimates are out today, and only two metros added more than 100,000 people between July 2013 and July 2014. Houston and Dallas—both in Texas.

Only one metro with a population greater than 1 million people grew by 3 percent last year. It's Austin—also in Texas.

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And you'll never guess what state had the most entries in the list of 50 counties with the greatest population gains. I'm kidding, you definitely will guess, because it's Texas.

If you pretend that the United States is populated exclusively by twentysomething graduates of national research universities, you'll develop the sense that everybody is moving to the city centers of New York, Chicago, San Jose, and Boston. In fact, all three of those metro areas have seen more Americans leaving than coming in the last five years. The cities with the highest levels of net domestic migration since 2010 are Houston, Dallas, Austin, Phoenix, Denver, and San Antonio. Once again, we're talking about Texas. More broadly, we're talking about sprawly metros with fast-growing suburbs in the Sun Belt.

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Where Americans Are Moving: Net Domestic Migration Between 2010-2014, by Metro

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The unavoidable takeaway from the Census report is that Americans have resumed the westward suburban ho of the early 21st century, before the Great Recession came crashing down. None of the 20 fastest-growing metros are in the northeast. Rather, they're in the sunny crescent that swoops from the Carolinas down through Texas and up into the west toward the Dakotas. Americans are back to sun-worshipping, as the New York Times explains in an all-too-clear graph:

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Like Moths to a Flame: Population Growth in 2014, by Average January High Temperature

New York Times | Data: Trulia

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The story of immigration is slightly different. The list of cities with the greatest foreign-born influxes since 2010 includes some of these warm metros, like Houston and Dallas, but also filling out the top-ten metros for immigrants are areas where more native-born Americans are leaving, like New York (#1), Los Angeles (#2), Boston (#7), and Chicago (#9).

But the upshot seems to be that even as the recession sparked interest in an urban revival, the metros that seem to be winning the population lottery are suburbs of warm metros—including many of the very Sun Belt areas that seemed devastated by the recession.

REAL ESTATE TOPICS...CHARACTERISTICS OF HIGH-BURDEN AND LOW-BURDEN RENTING HOUSEHOLDS

CHARACTERISTICS OF HIGH-BURDEN AND LOW-BURDEN RENTING HOUSEHOLDS
Source: Zillow Research

A number of economic and societal forces have converged to push rent burdens toward historic levels in many of America’s urban areas, which has led America’s cities to experience an affordability crisis with the share of income renters should expect to pay on rent each month continuing to rise.

Making sense of the story

• Today’s influx of renters – many of whom likely would have opted to buy homes a generation ago – has led to tight supply, rising prices, and stark contrasts between the affluent and the struggling.

• Rents are generally somewhat lower for households with a high rent burden, but most of the differences between low and high rent-burdened households can be attributed to wide differences in household incomes.

• The median household income among households with the lowest rent burden is typically four to five times the median household income among households with the highest rent burden. In San Francisco, it is nearly six times higher.

• Among the households with the greatest rent burdens, upward of half of household income is routinely dedicated to rental payments. In Los Angeles, the share is even higher: The highest rent burden households dedicated 68 cents of every dollar they earn to rent.

• The median age among households with the lowest rent burdens was three-to-five years younger than households with the highest rent burdens.

• Adults aged 25 to 54 living in low rent burden households are much more likely to have earned a bachelor’s degree or higher than adults in high rent burden households.

• Between 20 percent and 50 percent of households with a high rent burden have children present.

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TALKING POINTS …

• Mortgage applications moved decidedly higher last week, continuing their strong stride into spring, with total volume increasing 4.6 percent sequentially, according to the Mortgage Bankers Association (MBA).

• Lynn Fisher, MBA's vice president of research and economics, commented, “This week's mortgage application survey falls right into line with recent indications that home sales – new, existing, and pending – are on the rise, as is consumer sentiment.”

• Mortgage applications to purchase a home rose 6 percent week to week and were 8 percent higher than one year ago. Applications to refinance, which are more dependent on interest rate levels, rose 4 percent for the week and are 44 percent higher than they were one year ago.

REAL ESTATE NEWS...Bay Area Is Almost Rock-Bottom in U.S. for Housing Creation

The latest confirmation that the housing supply in the Bay Area can’t possibly meet demand comes from Zillow. In fact, the region lags behind only Los Angeles in its ability to provide newcomers with a place to live. But if you’re willing to move to Detroit or Pittsburgh or St. Louis, finding shelter won’t be an issue. And it will be much easier to pay for, given that affordability is compromised when the housing supply is low.“ There’s a real mismatch between where homes are located and where people want to live,” said Svenja Gudell, Zillow’s director of economic research, during a phone interview. New research from the real estate service, which is based in Seattle, found that only 193 housing permits were issued for every 1,000 new residents in the Bay Area, making the region second-worst in the country — and just as unaffordable as it seems. Zillow’s survey analyzed population growth for 2013 and 2014, and housing permits from 2012 and 2013. Nationally, the average was 384 permits per 1,000 new residents. If things get much worse in the Bay Area, the region could surpass Los Angeles County, which issued a mere 187 permits per 1,000 new residents. Zillow’s analysis said Bay Area residents can expect to pay a whopping 44 percent of their income on rent or 39 percent of their income on their monthly mortgage payment. “For-sale affordability is starting to look not so great, and for-rent affordability — it’s by far the worst it’s ever been in San Francisco,” Gudell said. “It kind of makes me wonder where that leaves people. Those are your two choices in terms of living, if you ignore your parents’ basement for a moment.” She added, “San Francisco is an extremely unique case.” Zillow looked at the 35 largest metro areas in the United States. The most affordable places are areas like Detroit, where the population is growing slowly, or regions such as Chicago, where housing construction is keeping pace with growth and 906 permits were issued per 1,000 new residents. Pittsburgh was at the other end of the spectrum from L.A. and the Bay Area — 42,258 permits were issued per 1,000 new residents, despite the fact that people aren’t exactly flocking there. Cities like San Francisco and San Diego are drawing people partly because of tech jobs and intrinsic appeal. But regions with warmer climates, such as Las Vegas, Phoenix and Miami, are growing, too, Gudell said, and are especially attractive to foreign investors, snowbirds and retirees. “In San Francisco you have a great job market, and it’s booming,” Gudell said. “So you’re attracting a lot of new people. But you have growing pains because you’re not able to keep up on the housing side of things. That’s a real challenge right now.” The permit data pertain to housing units, Gudell said. So, a 50-unit apartment building, for example, would count as 50 permits. The Bay Area was tops in the country, at $715,800, in Zillow’s February calculations for its home value index — the median of estimates of what homes are worth. In this category, Los Angeles ranked second, coming in at $533,700. Detroit, at the other extreme, was $114,400. And the U.S. median was $178,700. Meanwhile, Zumper, a website that lists and analyzes rentals, has just released its national rent report for March, which found that San Francisco is still the most expensive city in the United States — although rents dropped by 1.7 percent to a median of $3,400. Oakland is now No. 4 in the country, with a median rent of $2,000. It’s tied with Washington, D.C., and trails New York and Boston.

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REAL ESTATE TRENDS..Baby boomers, flush with stock gains, drive record vacation home sales.

Bolstered by stock-market gains, affluent Americans bought more than 1.1 million vacation homes last year, up 57% from 2013 and the most since annual sales of the properties were first surveyed by the National Assn. of Realtors in 2003.

The strong sales of second homes contrasted with a weaker year for purchases of principal residences and a decline in sales to investors.

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Vacation home sales represented a record 21% of all home purchases last year, the Realtors group said Wednesday.

California witnessed a contrasting trend, with the percentage of vacation home sales falling to 5% last year from 6% in 2013, according to a tally by the California Assn. of Realtors.

Sky-high housing prices impeded the sales, though the methodologies of the surveys were similar, said Lotus Lou, a spokeswoman for the state group. Indeed, vacation home sales fell throughout the more expensive West and Northeast, the survey showed.

The national lobbying group’s survey of about 2,000 home buyers calculated that purchases by investors fell about 7% last year to just over 1 million and purchases by owner-occupants declined 13% to 3.2 million.

Aging baby boomers boosted the sales by buying homes for retirement, often with help from stock investment gains in recent years, said Lawrence Yun, chief economist for the real-estate association.

“The steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” Yun said.

The Realtor group said the typical vacation-home buyer last year had a median household income of $94,380, up from $85,600 in 2013.

The median vacation home price fell 11.1% to $150,000. Yun attributed the trend in part to higher sales of condos and town homes versus single-family homes.

Buyers also increased their purchases of distressed properties and of homes in the relatively affordable South.

REAL ESTATE TOPICS...Millennials prefer Suburban to city

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REAL ESTATE TRENDS...U.S. Home Prices Are Surging 13 Times Faster Than Wages

U.S. HOME PRICES ARE SURGING 13 TIMES FASTER THAN WAGES
Source: Bloomberg

In yet another troubling sign regarding the affordability of homeownership, new data shows that the growth in U.S. home prices is beating wage increases 13 to 1. RealtyTrac found that home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during the past two years.

Making sense of the story

• Wages climbed by 1.3 percent from the second quarter of 2012 to the second quarter of 2014, compared to a 17 percent increase in home prices during that time.

• “Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers,” said Daren Blomquist, vice president at RealtyTrac.

• Among the 184 metro areas analyzed, the average wage growth over the two years ending Q2 2014 was 3.7 percent while the average home price appreciation in the two years ending in December 2014 was 13.4 percent.

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• Metropolitan statistical areas with the highest ratio of price appreciation to wage growth included Merced, Calif. (141:1), Memphis, Tenn. (99:1), Santa Cruz, Calif. (94:1), Augusta, Ga. (78:1), and Palm Bay-Melbourne-Titusville, Fla. (62:1).

• Other metro areas where home price appreciation has outpaced wage growth by a wide margin during the housing recovery included Sacramento, Calif. (17:1 ratio), Riverside-San Bernardino, Calif. (15:1 ratio), Las Vegas, Nev. (14:1 ratio), and Detroit (12:1 ratio).

• Among the 140 markets where home price appreciation has outpaced wage growth during the housing recovery, 45 metro areas (32 percent) with a combined population of 63 million had a median home price in December that required more than 28 percent of the median income for monthly mortgage payments.

• Experts believe those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up.

REAL ESTATE TRENDS...Here's how millennials are funding home purchases

Parents do more than assisting with down payments

Student debt is one of the greatest barriers to millennials trying to jump into the housing market. But a study by loanDepot reveals that parents might be stepping up to save the day, and in more ways than the common option of letting their kids move back into the house.

It is not new news that millennials are loaded with student debt. With many reports, like this one, showing a growing number of millennials moving back in with their parents.

New research shows the number of parents who expect to help their Millennial-age children purchase a home in the future will increase by 31% compared to the past five years, from 13% to 17%.

"Support from parents is playing a significant role in the housing recovery, and this new research indicates the trend will increase," said Dave Norris, president and chief operations officer at loanDepot.

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"First time home buyers comprise 28% of the today's home buying market, an almost all-time low. Through the survey, 75 % of Millennial-age home-buyers who received financial support from their parents said that assistance made it possible for them to buy a home. Without that financial support, it's likely the pool of Millennial first-time home buyers would be even smaller than today."

But they way the parents are planning on helping their children finance a home is changing.

Click to enlarge

Source: loanDepot

Click to enlarge

Source: loanDepot

In the future, parents are more likely to help their kids pay 'other expenses' or student loan debt and to welcome their boomerang children back to the nest than in the past.