Your May Market Update

Here’s why ours is still a strong seller’s market with multiple offers.

Are we headed for a housing market crash? Today I’ll share the latest market data from April to draw contrasts between the calamity of 2008 and our current crisis. Believe it or not, we’re still currently experiencing a strong seller’s market, and prices are stable. Though total sales were down significantly year over year for April (1,087 compared to 1,683), the average sale price this year was much higher, and inventory remains low.

To clarify, the data that I’ve compiled describes communities that fall within this perimeter: the western limit is along the 710 freeway (Pasadena down toward Montebello and Monterey Park); the northern limit would be the 210 freeway; the southern limit is the 60; and the eastern limit is along the 15 (Rancho Cucamonga, Ontario, and a small portion of Eastvale).

Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch it in its entirety, or use these timestamps to browse specific points at your leisure:

0:46 - Total sales, average sale price, and average price per square foot for April

1:41 - Comparing April 2020 to April 2019

2:26 - How the strong market of early 2020 (January through March) outpaced early 2019

3:40 - Using our low inventory to explain how the current crisis differs from the 2008 crash

4:53 - Offers subject to inspection in our marketplace

6:08 - Low rates are keeping employed buyers motivated

7:00 - My final thoughts on whether or not we’ll experience another housing crash

As always, I welcome your comments. If you have any questions about what was discussed in this message, or if you’re interested in buying or selling a home soon but aren’t sure how to proceed in these times, please reach out to me. I’m here to help, and I look forward to hearing from you!

How Homeowners Can Pay Down Their Mortgage Through ADUs

Today I’m sharing how first-time buyers can use ADUs to help pay down their mortgage. 

Welcome to part one of my new series on how to retire without savings through real estate. This information can benefit anyone, including millennials who have just purchased or are about to purchase their first homes. A quick note before we settle into today's topic: Remember that we do have down payment assistance programs for first-time buyers through FHA and conventional loans which only require 3% to 5% down.
One way new homeowners can utilize real estate is by having tenants essentially pay their mortgage for them. This can be achieved through a combination of mortgage interest deductions and accessory dwelling units (ADUs).

Let’s say that you have a mortgage PITI (principal, interest, taxes, and insurance) of $2,800, and that home can be rented out for $2,500 or $2,600. Well, the deduction on the interest rate and then on the property tax will mean your PITI will be lowered.

The ADU law allows you to build an addition to the main house with its own separate entrance.

If it’s 20% on the federal tax and then 5% on the state tax, then from $2,400 in interest you can deduct roughly $600. Now you’re looking at $1,800 instead of $2,400. This means that renters could cover your mortgage for you if they rent for $2,500 or $2,600.

The ADU law has changed the whole landscape for first-time homebuyers. If you purchase a home that has a garage, you can convert it into a rental unit complete with a kitchen, bath, and its own water heater and electric meter. So already you’ve turned an existing space into rental. Then, the ADU law allows you to build an addition to the main house with its own separate entrance up to another 500 square feet to 1200 square feet (whatever you can afford).

So, you could have a total of three units: the owned one in which you live and two rentals.

My friend’s kids are single and rent out their main house while living in an ADU so that the tenants pay down their mortgage.

Stay tuned, because in the coming video messages I will break down the mechanics of how to do this and share more specific numbers. Until then, feel free to reach out to me by phone or email if you have any further questions. I always love hearing from you.

How Has the COVID-19 Lockdown Affected Real Estate?

Our market has slowed since the COVID-19 lockdown began, but not substantially so.

What do the latest numbers say about our Southern California market?

First a quick reminder: I sent out a slew of emails before the CARES Act was passed about the SBA’s Economic Injury Disaster Loan. If you’ve applied for this loan and received it, I welcome your feedback. Also, for those I referred to a small community bank that processes this loan faster than big banks, I estimate that 50% of them have been approved, and some already have funding in their account. 

Now, for this market report, I’ll share the latest stats from the area bordered by the 710 Freeway to the west, 15 Freeway to the east, 210 Freeway to the north, and 60 Freeway to the south. 

In this marketplace, there were 1,499 closings between March 1 and March 31. During March of 2019, there were 1,466 closings. Between March 20 and April 15 (the “lockdown period”), there were 722 new listings taken and 709 escrows opened. These numbers are lower than usual, but not substantially lower. There were also 1,065 closings that took place during this period, compared to 1,348 last year.
Since there are more buyers than sellers on the market, demand is at an all-time high.

I’ve fielded a lot of phone calls from sellers preparing to list their homes once this lockdown ends. I’ve also gotten calls from buyers who are getting pre-approved in anticipation of the market opening back up. In the meantime, video communication is the new normal, and I’m doing listing presentations via Zoom.

There are a lot of people filing for unemployment insurance, but there are many others who are looking to pick up where they left off after the lockdown ends. When that happens, interest rates should still be at all-time lows. FHA loans are as low as 3%, while conventional loans are between 3.5% and 3.75%. Since there are more buyers than sellers on the market, demand is at an all-time high. 

Until my next video blog, stay safe and healthy! If you have any questions or would still like to buy or sell a home, don’t hesitate to reach out to me. I’m here to help no matter what.