Sunday, February 11, 2018

ARCADIA NEW HOMES - 2017 SALES PACE STEADY

ARCADIA NEW HOMES – 2017 SALES PACE STEADY –HIGH INVENTORY – STRONG PIPELINE BUT …..

The pace of Arcadia (detached) new home sales held steady in 2017.

In 2014, the MLS reported 61 new Arcadia homes sold, 5.0 sales per month.  2015 was the “peak” year for Arcadia new (detached) home sales. In 2015 the MLS reported 65 new Arcadia homes sold, 5.4 sales per month. In 2016 sales declined 14 percent. Sales totaled 56, 4.7 sales per month. New home 2017 sales totaled 53, 4.4 per month, slightly less than 2016’s.  

New (detached) home inventory remains at a high level. Currently there are forty-three  homes listed for sale on the MLS, five of which are in escrow. Those forty-three homes translate to a ten month inventory given recent new home sale velocity.

Even with the high inventory the pace of new construction should be steady (FOR AWHILE).  The Arcadia Building Department reported 112 single family home (detached) building permits were issued in 2016. In 2017 seventy-three (73) SFR building permits were issued, a thirty-five percent decrease from 2016. THINGS ARE CHANGING. During the 4th quarter 2017, only fourteen (14) permits were issued. This is a significant decline.  It is reported Arcadia demo and building permit applications/requests are “way down”. We should see less SFR construction and construction starts  in coming months.

During the last four years, Arcadia new home prices on a per sq. ft. basis have very moderately declined. In 2014 the average new home price was $3,347625 ($604/sq.ft.); in 2015 the average was $3,919,351 ($587/sq.ft.); in 2016 $3,383,432 ($589/sq/ ft.) and in 2017, $3,361,422 ($574/sq. ft.)

Many factors may contribute to the very moderate decline in new and upper end Arcadia home sales. Chinese individuals have always faced Chinese government constraints to overseas investments. For years wealthy Chinese have figured out ways to get around these  constraints  – a kind of “cat and mouse’ game. The Chinese government has been tightening its monetary policy and further increasing restrictions to slow outbound capital flows. It has had an impact. Chinese home buyers have extended their  reach/search beyond Arcadia/San Gabriel Valley to other Southern Cal locals and US cities  in the last few years. Many of these cities are viewed as more affordable.  Seattle, Portland, Bay Area, Dallas and Florida cities are generating more Chinese interest and investment.

Credit Suisse estimates there are 1.6 million U.S. dollar millionaires in China. These millionaires will continue to figure out how to invest in overseas markets in order to diversify assets and hedge against potential Chinese economic and political uncertainties. Arcadia/San Gabriel Valley with so many attributes will continue to be a primary destination for these millionaires’ capital.


Friday, January 26, 2018

A LUCKY YEAR FOR CHINESE REAL ESTATE BUYERS

The following WSJ article complements my 11/9/17 post "NUMBERS COUNT AND CAN COST"
A Lucky Year for Chinese Real-Estate Buyers
By Nancy Matsumoto
Jan. 25, 2018 10:21 a.m. ET
Chinese will soon be celebrating the Year of the Dog. It could also be the Year of the Deal.
It has long been known in real-estate circles that an address or price that includes the number eight—which when spoken in Cantonese sounds like the word for “prosperity”—can make a property more popular with Chinese buyers. Now some real-estate agents are reporting a reaction to the auspicious year of 2018: The number 18, when spoken out loud in Cantonese, sounds like the phrase “I want to be very wealthy,” says Kelly Xie, a Toronto-real estate agent for Century 21.
Janet Wang, a real-estate agent with the Corcoran Group in New York City, says five of her clients suddenly went from casual browsers to active property seekers. “These clients have been looking for a while, then—I don’t know if it’s related to 2018—but around December 23 or January 1, suddenly they say, ‘OK, this year we’re really going to look.’”
Carrie Law, chief executive of Juwai.com, a Chinese international real estate website, says she knows of Beijing-based buyers who were ready to purchase a home in the $5 million range in New York City last year, but postponed the purchase so they could buy this year instead. “There may have been other factors at play, but that’s the reason they gave us,” she says.
While real estate veterans aren’t banking on a big 2018 bump, Christopher Wein, president of the Toronto-based development company Great Gulf, says the number 2018 very well could spark “enhanced” market activity.
Besides investing in a Shanghai office and equipping its sales sites with Chinese-speaking staff and Chinese-language marketing material, Great Gulf pays attention to lucky numbers. A pre-sale offering of 65% of the units at its desirably located 8 Cumberland Street development sold out in a month, says Mr. Wein.
Chinese numerology has long been an important factor in certain real-estate markets. While the number eight is always beneficial, the number four—which sounds like the word for death—is to be avoided. In the greater Toronto city of Markham, where nearly half the population self-identifies as Chinese, “sellers have to put an eight in the price, and you try your hardest to avoid four,” explains Anthony Tomasone, a real-estate agent with the online listing and referral service Zoocasa.com.
From January to May 2017, 66% of all Zoocasa’s Markham listings contained at least one eight in the offer price, up from 25% in the first three months of 1990 and 35% in the first three months of 1995. In non-Asian-majority neighborhoods in the U.S., eight was the last nonzero digit in just 4% of all home listings in 2017, according to data from Trulia, while in Asian-majority neighborhoods the figure was 25%—up 5% from 2012. Among listings for homes over a million dollars, that number in Asian-majority neighborhoods is 38%.
In New York, Chinese buyers flock to the condo development at 80 Park Avenue between 38th (an especially auspicious number that sounds like “create wealth”) and 39th, says Geovanna Lim, president of the real-estate investment and brokerage firm Park Avenue International Partners.
Some would-be buyers will lobby for a change in house or unit numbers. Seattle Berkshire Hathaway real-estate agent Becco Zou recalls the buyer who liked everything about a $3 million home except for its address: 1044. “He went to the city of Bellevue and got it changed within a day,” she recalls. Tracy An, a sales representative for Sotheby’s in Toronto, says one of her clients, with a neighbor’s consent, was able to change his house address from 44 to 42A.
In New York, Chinese buyers flock to this development at 80 Park Avenue. Not only does its address include the lucky number eight, the building is located between 38th (an especially auspicious number) and 39th streets.
In New York, Chinese buyers flock to this development at 80 Park Avenue. Not only does its address include the lucky number eight, the building is located between 38th (an especially auspicious number) and 39th streets. The Chinese preference for certain lucky numbers has become so well known that even non-Chinese buyers are careful to pay them heed, says Peter Ng, Calgary-based president of multicultural real estate specialist KORE Marketing. In Richmond or Burnaby, British Columbia, he says, where 80% to 90% of pre-sale condo units are snapped up by Chinese buyers, non-Chinese are loath to buy a numerally challenged unit; in a few years, they might find it impossible to sell.
Most experts note that fundamentals still matter the most. Chinese buyers consider factors like interest rates, potential tax law changes, China’s crackdown on the outflow of capital for foreign real-estate investment and, in Canada, a federally mandated stress test designed to raise the financial bar for mortgage seekers.

Coco Tan, a Silicon Valley real-estate agent, projects continued market momentum carrying over from a strong 2017, noting that “uncertainty coming up with tax reform” and a possible interest-rate increase are spurring buyers to strike deals sooner rather than later in the year. The biggest reason for strong sales, she adds, is lack of inventory, a situation replicated in Canada. Still, property values “are already pushed really high,” says Ms. Tan, raising the possibility of a correction. She adds, “It’s going to be an interesting year.”
Ms. Law of Juwai.com thinks otherwise. She predicts a big upsurge in activity in August—because it is 8/18.

“You will likely see buyers and agents scheduling viewings and closings for the eight day of the eighth month of 2018,” and others scrambling to close year-end transactions quickly, “before the calendar ticks over from 2018 to 2019,” she says.e real-estate agents are reporting a positive reaction to the auspicious year of 2018.

Friday, January 19, 2018

LISTING AGENT "DOUBLE ENDING" HOME SALE

Unlikely -  Your (Listing) Agent “Double Ending” Your Home Sale

During the first six months of 2017, the MLS reported two hundred ten (210) Arcadia (detached) home sales. Of those 210 sales, the listing agent also represented the buyer in thirty-six (36) of the sales. An agent representing both the seller and buyer in a transaction is commonly called “double ending”. In other words, from January thru June, 17 percent of Arcadia SFR sales were double ended.

After relating this figure to a number of agents in my office, many were surprised and thought the percentage would be higher. Most did agree that double ending usually occurs when a prospective buyer with no existing agent relationship becomes interested in a home via an Open House or other advertising medium. Subsequently the prospective buyer asks the listing agent to represent them  and draw up an offer which is accepted.

What does this 17 percent figure mean to a home seller interviewing prospective listing agents – discount agent statements “I have many buyers for your home” (list with me). More importantly, select an agent who is experienced, is ethical, knows the market, is a good communicator/listener and will execute a sound marketing plan.


By double ending a home sale, an agent will in most cases double his/her compensation by earning  a commission from “both sides”. It must be stressed that a listing agent who is representing both buyer and seller has the fiduciary responsibility to represent the best interests of the seller  and also has a fiduciary responsibility to the buyer.  Sellers that are concerned about a potential conflict of interest double ending scenario should discuss this concern with their agent before executing the listing agreement.

Zillow ZESTIMATES

Zillow ZESTIMATES
In today’s real estate world, home  buyers, sellers and shoppers routinely go to internet online real estate information and listing sites such as Realtor.com, Redfin, Yahoo Homes and Trulia. The most popular site is Zillow.  In addition to active listings of properties for sale, the site provides square footage, lot size, room counts, tax data and other key information on millions of homes.  It also provides, the often misunderstood “Zestimate”, Zillow’s proprietary AVM, automated (property) valuation model/estimate. AVMs use mathematical modeling to digest the subject property’s physical characteristics, publicly available data and mountains of local market property data to arrive at a value estimate.  Millions/”Zillions” of data points go into a Zestimate.

Zestimate accuracy most depends on the conformity of properties and the availiability (and accuracy) of data in an area. The more accurate  data available,  the more accurate the Zestimate. As an example, AVM estimates are generally more accurate for homes located in “newer” large Planned Development communities where variances for age, lot size, room counts, condition and architectural styles are relatively small versus homes in Arcadia which generally have much larger variances for the same property factors. AVMs utilize physical property data but cannot yet factor “emotional” market factors such a property finish, floor plan, flow and exterior appeal. Zestimates for higher priced home areas are generally less accurate. Nationally, Zestimates now have a median error rate of 4.3 percent. The error rate for some locals can be much greater! Think of Arcadia where the median sales price exceeds $1.3MM+.  A 4.3 percent error  is “big money”. One other thing to think about – the Value Range contained in the Zestimate shows the high and low estimated value of the home. A wider  range should alert one that the area volatility is greater and the value estimate reliability should be questioned even more critically.

In my opinion, the Zestimate for our home fell at the low end of our homes’s value range. Probably most owners have the same parochial thoughts. The Zestimate accurately reflected the physical characteristics of our home (e.g. sq. footage, room count, age …) but failed to reflect a permitted 600 sq. ft. plus loft guest house we built on the property.


The good news, most area sellers and buyers do not accept Zestimates “as gospel” and understand that the Zestimate is just that, an estimate of the value of the home. It is a good starting point but should not be the center point for pricing a home.  Advice – work with an experienced real estate agent who is active in the area, physically inspects the real estate and takes special features, location and market conditions into account. Lastly, make sure your agent is a good communicator and has your objectives as a number one priority.

Thursday, November 9, 2017

NUMBERS COUNT AND CAN COST

NUMBERS COUNT AND CAN COST

Many buildings do not have a 13th floor. It is twelve and then fourteen. Where did that “unlucky” 13th floor go?  In Nevada the number “7” is very popular in residential  real estate listings. When my wife and I visited Shanghai, our hotel, the Meridien, did not have a 4th or 13th floor. Try to find a number “13” in an Arcadia street address.

In real estate superstition can play a large and costly role. Number “considerations” are very strong in high demand Asian neighborhoods.  Eight is a very popular number because its Chinese pronunciation is very similar to the word that means “wealth” and “prosperity”. The Chinese word for “death” sounds similar to the word for “four”. Consequently, the “eight” shows up in many Asian neighborhood property listing prices. The number “four” is avoided in listings.

More importantly, street address numbers can significantly affect property marketability and values/prices. In an address “4’s” are a negative and “8’s” are “good”. Addresses ending in “44” are really “bad”.

Brent Chang, a successful real estate agent in Coldwell Banker’s San Marino office was reported by the Wall Street Journal to have stated about 85% of his Asian clients use numerology when buying or selling.

On my street block in SW Arcadia, four homes which were subsequently torn down (to accommodate new construction) were purchased between July 2011 and March 2012. All of the lots were rectangular in shape and contained 16,909 to 19,451 sq. ft. All of the properties were within 200 feet of each other. The three lots with no numerology issues (street address nos. 21, 37, & 52 sold for $66.83 to $89.25 per lot square foot. It does not appear to be chance the fourth property with a “44” street address  number sold for $60.48 per lot square foot, a $100,000 plus reduced price/discount.  Prior to the sale, the seller of the “44’ property, a long time Arcadia resident and retired nurse requested the City to allow an address change. The request was rejected by City Council and this policy is still in effect. It could be argued an address change from “44”” to “50” would have added tens of thousands of dollars to the selling price.

The cities of Sierra Madre, Pasadena, Azusa, Bradbury, Duarte, Alhambra, Temple City, Monterey Park and Rosemead permit address number changes. The process usually involves a completion of a request application, field inspection to confirm the requested number change is in sequence and after approval  notification of change to approx.. 13 city or county agencies/departments. Fees charged to cover the cost of processing ranged from $106 to $806, depending on the city. None of the cities voiced “problems” with the process.

In Arcadia, there are 350 homes with address numbers ending in “4”. Of those 350, 110 homes have addresses ending in “44”. When the owners of these homes decide to sell, they will be subject to a numerology discount costing them tens of thousands of dollars. I think it is time for the City of Arcadia to entertain and permit address number change requests. Costs incurred during the process can be offset by fees charged which the homeowners would enthusiastically pay.


The home directly across the street from our home has an “88”” address.  When the property sold in 2000, the new owner requested the address be changed  from “84” to lucky “88”. At that time the City of Arcadia approved the request. Over the years I kind of believe our family has received good fortune by being so close to lucky “88”.

Thursday, November 2, 2017

ACADIA NEW HOME SALES PACE SLOWER BIG INVENTORY STRONG PIPELINE BUT......

ARCADIA NEW HOMES – SALES PACE SLOWER –BIG INVENTORY – STRONG PIPELINE BUT …..

The pace of Arcadia (detached) new home sales continued to decline in 2017.

2015 was the “peak” year for Arcadia new (detached) home sales. In 2015 the MLS reported 68 new Arcadia homes sold, 5.6 sales per month. In 2016 sales declined 19 percent. Sales totaled 55, 4.6 sales per month. So far this year new home sales have continued to slow. The MLS reported 43 new Arcadia homes closed escrow in the ten month period of January thru October. This 4.3 sales per month pace conforms to the declining sales trend.

New (detached) home inventory is at a very high level. At the end of October, fifty-one (51) homes were listed for sale on the MLS, four (4) of which were in escrow.  Those fifty-one homes translate to more than a ten (10) month inventory given recent new home sale velocity.

Even with the high inventory the pace of new construction should be steady (FOR AWHILE).  The Arcadia Building Department reported 112 single family home (detached) building permits were issued in 2016. Through September 2017 fifty-nine (59) SFR building permits were issued. This is a strong pipeline but THINGS ARE CHANGING. During the months of August and September only seven (7) permits were issued. This is a big drop-off. It is reported demo and building permit applications/requests are “way down”. It appears the slower new home sales and large inventory are finally having an effect on the market.

Many factors contribute to the steady decline in new and upper end Arcadia home sales. Chinese individuals have always faced Chinese government constraints to overseas investments. For years wealthy Chinese have figured out ways to get around these  constraints  – a kind of “cat and mouse’ game. The Chinese government has been tightening its monetary policy and further increasing restrictions to slow outbound capital flows. It has had an impact. Chinese home buyers have extended their  reach/search beyond Arcadia/San Gabriel Valley to “more affordable” US cities  in the last few years. Seattle, Portland, Bay Area, Dallas and Florida cities are generating more interest and investment.

Credit Suisse estimates there are 1.6 million U.S. dollar millionaires in China. These millionaires will continue to figure out how to invest in overseas markets in order to diversify assets and hedge against potential Chinese economic and political uncertainties. Arcadia/San Gabriel Valley will continue to be a primary destination for these millionaires’ capital.


Monday, January 23, 2017

HUD SUSPENDS RECENT MORTGAGE INSURANCE PREMIUMS REDUCTION

An hour after President Trump was sworn in Friday, the Department of Housing and Urban Development announced it suspended the recently initiated one-quarter percent reduction of Mortgage Insurance Premiums. Concern regarding the credit quality of FHA originated home loans has been expressed by many. The suspension of the one-quarter percent reduction should have a minimal effect on FHA loan origination volumes.