February 2020 – Page 5

Real Estate News

Los Angeles County Home sales and prices tumbled in January as the market reacts to the economic uncertainties of the coronavirus.

Home sales and prices dropped last month in Los Angeles County, and authorities think the worldwide onset of the novel coronavirus may have rattled the market, according to Patch.com. #coronavirus #losangeles

The county’s median home sales price dipped nearly 4 percent from December, the California Association of Realtors reported Wednesday. Statewide, the picture was even worse. California’s median single family home price dropped 6.5%. in a month. #realestate

CAR Chief Economist Leslie Appleton-Young said that the real estate market was rattled at the beginning of the year, like other markets, by the worldwide onset of the novel coronavirus originating in China.

“With interest rates on a declining trend again due to concerns about the impact of the coronavirus, motivated buyers will have an opportunity to stretch their purchasing power in the housing market,” she said. “The economic outlook, however, is less clear than a month ago, before the outbreak of the disease, and we should expect market uncertainties to continue to linger on for the short term.”

In the longer term, the biggest impact to the U.S. may come from the disruption to the world economy as a whole, and global supply chains in particular. South Korean automaker Hyundai has suspended production due to a shortage of parts, while Saudi Arabia has pushed for oil production cuts in light of reduced demand from China.

The California real estate market has been increasingly connected to events in China, as recently reported by the L.A. Loft Blog in articles about financing of OceanWide Plaza and Metropolis new condo projects.

The Real Deal reports on the topic: “The size of China’s economy makes it inevitable that a short-term slowdown will drag on global economic growth, with Asian countries and major trading partners likely to be most affected,” CBRE Greater China analysts stated in a report this week, noting that while improved transport infrastructure in China could contribute to the spread of the virus, advances in surveillance and big data should help efforts to control the outbreak. | BLOG VIDEO

But if the virus cannot be contained, then all bets are off. China, California and the entire U.S. will suffer.

“A coronavirus pandemic would be even more of a ‘black swan ’ than the global financial crisis and Great Recession of 2008-2009,” Moody’s analysts warned in a research report last week, noting that the industrial metals price index has fallen by 7.1 percent since the risks of coronavirus first became apparent.

“It won’t just affect our market — the implications are huge, and we need to brace for the impact,” said Daniel Chang, head of Asia for the Field team at Sotheby’s. Chang recalled how business slowed to a crawl during the SARS outbreak two decades ago, when he worked as a private banker for HSBC.

Panic could end up being the more serious killer. In fact, some statistic infer that Californians are 9,000 times more likely to die of the regular flu than to perish from the recent covid-19 novel coronavirus outbreak.

While the coronavirus may have a bit of a scary effect on LA real estate, the effect is more of a minor catalyst to falling prices. As the LA Loft Blog has reported, the weakness in China, along with local economic pressures toward falling home prices in California had already begun well before the recent outbreak.

https://magazine.realtor/daily-news/2020/02/06/housing-market-is-feeling-effects-of-coronavirus-outbreak

https://therealdeal.com/2020/02/05/inside-the-coronavirus-epidemics-impact-on-us-real-estate/

The smartest people in Los Angeles always have the best questions. Here’s what L.A. Loft Blog readers are thinking and asking:

Q: Where can I find Loft in LA for Short Term? A: There aren’t very many lofts available for short term lease, but there are a few. DETAILS

Q: What is the status of Oceanwide plaza los angeles? A: OceanWide Plaza construction is about 50% complete, but it has been on hold for many months due to a lack of funding from mainland China developers. MORE

Q: Where can I find Mills Act properties in dtla? A: Historic lofts and condos with property tax benefits can be found at www.MillsActLA.com

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LOFT & CONDO LISTINGS DOWNTOWN LA [MAP]

Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE 01889449 We are not associated with the homeowner’s association or developer. For more information, contact 213-880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.

Buying or selling a home is one of the biggest decisions most people make. The country’s total residential property market is worth $34 trillion, which is as much as the value of all its publicly listed firms. The Economist says that buying and selling a property in America is cumbersome and extraordinarily expensive compared with other industries and other countries. | Blog Video

The Economist is missing the mark just a bit when it discusses commissions. Broker fees commonly run at 5% to 6% of the value of a property, which The Economist says is three times the average level in other developed countries. This is misleading. California commissions are always up for negotiation, individual agents usually receive closer to 2.5% (which is sometimes split among more than one agent), and the agents must pay a very large chunk of this for expenses of living and doing business in California, vehicle, gas, parking, advertising, marketing, photography, assistance, transaction coordinator, broker, MLS, Association of Realtors, legal fees and taxes, plus they must pay for their own expensive housing if they live in a price place like Los Angeles. #sellloft #sellcondo #sellhouse

The Economist fails to recognize that other states do many things differently, and other countries do things dramatically differently, so that the commission comparison is completely disconnected. Apples and oranges have different prices. Real estate professionals in other countries follow entirely different rules, engage in totally different advertising, marketing and administration practices, have different training, different laws, different professional practices and much different results. In some of the countries that the Economist has studied, they failed to note that individual brokers were receiving the same amount as California agents, but the condos in Switzerland actually sold much slower, often taking months or years to sell versus weeks to sell in California.

The Economist correctly points out that Americans are moving less frequently today. In the 1950s, 20% of households moved each year; today only 9% do. The frequency of Downtown Los Angeles residents moving has dropped significantly. 2019 saw only about 25% as many transactions as 2017. That caused a substantial drop in total average commission for L.A. loft specialist real estate professionals. Local pros are actually making about 70% less than they made a couple years ago. Try living on a 70% pay cut. We’ve seen several cases of overdose, suicide and homelessness by local real estate professionals in the last two years.

Maisy Wong of the Wharton School of the University of Pennsylvania says that brokers steer buyers away from properties that offer less than 3% commission, keeping fees high. Steering is a provocative word that generally refers to agents suggesting neighborhoods based on racial make-up. In California, real estate professionals have the right to show properties based on commission because that is how they get paid. Like other commissioned sales people, most real estate agents must get paid or their work. A satisfactory commission is the primary motivation for a real estate salesperson. If a home seller or buyer wants the assistance of the best, most motivated salesperson, the buyer or seller will pay some attention to make sure the salesperson is paid well. If the client prefers the professional to be paid salary or a set dollar amount, they may negotiate that instead of the commission percentage. In California, the commission percentage is usually set by the seller and their broker. The commission may be anywhere from $1 to 10% or more, with 5% to 6% being the most common total, which is split up among all participating brokers and agents.

Home buyers and sellers are paying more, and the main reasons include: the increase in home prices, increases in the cost of living, increases in the cost of doing business, and increases in the bureaucracy and administration of real estate transactions. The state of California has steadily increased the legal and administrative burdens on buyers, sellers and real estate professionals. New required paperwork keeps being added: Disclosure form that states the property has a pool or hot tub that may be dangerous, disclosure that there are earthquakes in California that may be dangerous and many other forms and other legal requirements, many designed to protect and educate home buyers. These legal requirements make it difficult or impossible for home sellers to sell their own homes.

Broker commission is the biggest expense for home sellers, which buyers must ultimately pay for. For buyers, lending fees, taxes, insurance and other miscellaneous costs add up.