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Californian exodus? Kind of

Amid cries of hellish prices and low supply, many expect a mass exodus in the Golden State, but new data from Trulia shows the exodus is more like a robust restlessness than a true exodus.

What the numbers show is that though many are indeed seeking to leave the most expensive markets in California, (San Francisco, Los Angeles, San Jose and San Diego), almost as many non-Californians are looking to move to California such that the ratio of potentially outgoing to potentially incoming residents remains mostly steady (see graph below).

Inbound to Outbound Search Ratio, Coastal California Metros

To create this report, Trulia looked at search data, tracking the incoming searches and the outgoing searches.

So where do Californians feel the grass is greenest? Las Vegas, Phoenix, New York, Dallas and Seattle were the five most searched destinations for Californians.

In terms of actual moves, Las Vegas received 8.1% of those who moved from California, New York took 7.3%, Phoenix took 7%, Dallas got 5.5% and Seattle saw 5.1% of outgoing Californians end up on its doorstep as of Q1 2017 (see graph below).

Where coastal Californians are moving

The big determinants in these numbers are job opportunity and affordability. In the four markets Trulia’s report covers the average home price was $720,000 in March 2017 as opposed to the national average of $250,000.

The markets Californians are gravitating toward had median prices of $439,000 or less.

The Trulia report suggests keeping an eye on Tucson which was in the top 10 most searched list in the first half of 2017. The reason Trulia gives as to why Tucson isn’t in the top 10 cities Californians migrated to is because it is a city that attracts retirees whose moves take longer to manifest.

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Counting the costs: Can you afford to become a Realtor?

According to a blog on Inman.com, something like 80% of Realtors don’t renew their membership to the National Association of Realtors after two years.

Why is this? The short answer is: it’s a hard business to make a living in. 

Much of what goes into making life difficult for Realtors is a litany of fees they can accrue just to be competitive.

So could you survive without being nickel and dimed to death. Here’s a case study of someone fighting that very same fate.

Jeff Johnston, a Realtor with eXp Realty (pic, bottom left), is in his second year as a Realtor. He came to the real estate business in search of relief from the absolute battering the energy industry was taking in 2015, where he worked as a capital arranger.

“I went from making a reasonable living down to nothing, and I liked sales and thought, ‘what am I going to go do? Housing market’s good right now, and I like the transition of helping people versus being an outlet for rich people to gamble,’” Jeff said of his decision to become a real estate agent. 

Jeff was excited to start his new career, but what he wasn’t prepared for was how difficult it can be to make a living in the first couple of years of being in the real estate business.

Jeff Johnston, eXp Realty

According to him, what no one tells you is that most new Realtors have to wait six months before ever seeing any money. On top of that, there are expenses that a Realtor racks up over the course of year, some optional, some not.

For Jeff, when all was said and done, he spent more than $10,000, not including what he has to spend on brokerage fees. 

What this means is that Jeff’s take home pay is still roughly 50% what he earns before taxes. He did about $3,000,000 in sales in his first year as a Realtor.

Sounds promising. But even with an industry-standard 3% commission, much of that will go to fees to other, related counter-parties, such as their brokerage. For Jeff, for example, he also spent roughly $11,000 on generating that $3,000,000 in sales.

One of the non-negotiable expenses is a membership to the National Association of Realtors. Most real estate agents have this designation and paying your NAR dues gets you access to the all important Multiple Listing Service, which Jeff wonders how any serious real estate agent functions without. The membership is roughly $800 per year.

Then there are things like closing gifts, gas, dry cleaning, etc. All the little things that become big things when you tally them up year after year. Jeff puts about 2,000 miles on his car per month, and with gas prices on the rise, that’s a large chunk of change to throw into the gas tank and car maintenance over the course of a year.

Other things he spent big money on were marketing materials and leads. This is where you can get in trouble in a hurry.

Online leads from sites like Zillow and Realtor.com are priced based on zip code, and if you want to regularly receive new leads you could easily be shelling out $1,000 per month for leads in a decent area, according to Jeff.

“You can quickly go broke as a brand new agent when you buy into those types of things,” Jeff said.

The crazy thing is that these aren’t the most reliable of leads. Some leads are born from accidental clicks and some of the real leads are from people who won’t be ready to buy for another 12 months.

“What frustrates me getting hit by is the companies like Zillow and Realtor.com and Zurple, etcetera. You know, everybody has that fix for you, but nobody guarantees that fix,” Jeff said.

What Jeff learned in his first year is that there is no silver bullet for real estate success no matter how much people want you to believe their service is it. That said, Jeff knows there is a price that has to be paid. Leads don’t fall out of the sky.

“You can try to do it at low to no cost, you can work at a bunch of open houses…just like almost everything in sales, you can do the sweat equity, or you can pay for your data,” Jeff said.

Jeff’s strategy these days, especially in a cooling sales environment, is to limit his marketing expenses to things he can control, opting for active lead generation over passive lead generation.

For him the looks like paying a monthly fee for a sophisticated dialing system where his pipeline of deals is dependent on how much time he spends calling potential clients. He’s putting in the sweat equity. 

So will he be part of the 80% or the 20%?

“To be determined,” Jeff said.

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JLL: U.S. multifamily housing market increases in competitiveness

Recent research suggests that U.S. landlords experienced an increase in competitiveness, and global real estate investment and corporate activity were at their highest levels for a decade in the first months of 2018, according to a new report from Jones Lang LaSalle.

JLL, a financial and professional services firm, says that multifamily markets are in some part of the peaking phase. The increased competition among landlords in the U.S. multifamily market attributes to a carryover of elevated rate deliveries in 2018. The company expects 370,000 units to be delivered throughout the year, and even as they slow down the demand for housing will continue to be strong.

The analysis also indicates that although last year’s impressive global real estate investment market will be hard to match, a strong economy and positive first-quarter results put 2018 on track for another successful year.

JLL’s 2018 prospects state globally capital values are increasing 4%, and rent prices are increasing 3% in the office sector. Development is peaking at 14%, while the vacancy rate is rising 12.1%.

According to the company, investors are broadening their approach to accessing the real estate sector, resulting in a softening of direct investment volumes. Although their approach is changing, debt financing, merger and acquisition activity and alternative sectors indicate they still heavily rely on the market.

Firms are also experiencing high levels of competition in talent and high-quality space which is directly shaping corporate location strategies. This is apparent because in early 2018 take-up volumes for co-working operators rose in all three global regions, according to the company.

The firm’s analysis suggest that retailers and consumer goods manufacturers are also opening more physical outlets in order to provide customers with more engaging shopping experiences. Therefore, as e-commerce companies expand stores, omni-channel retail climbs.

Lastly, high demands in the logistic sector is pushing vacancy rates to historic lows and increasing competition for quality space, which will accelerate rental growth for the remaining part of the year, according to JLL.

JLL Global real estate

(Source: JLL)

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[Infograph] Military members most likely to utilize zero-down mortgages

It’s Memorial Day! This weekend, as the U.S. takes an extra day off work, grills out and maybe even hangs out at the pool, it will also remember all its military members who died during active service.

In memory of those who serve our country, the National Association of Realtors released an infographic which shows how the home buying preferences of service members and veterans differ from the rest of the population.

Military members often face very different lives than the rest of the population, so it stands to reason that their preferences and actions when it comes to buying a home would also be different.

One of the most notable differences is the down payment, or lack thereof, according to NAR’s 2018 Veterans and Active Military Home Buyers Profile. About 56% of active duty members and 41% of veterans take advantage of zero down or 100% financed mortgages, compared to just 7% of non-military members.

Of course, while there are some zero-down mortgage options available to certain homebuyers, it is much easier for military members and veterans to take advantage of these programs through the U.S. Department of Veterans Affairs.

The infographic below reveals more insights to military members’ home buying and financing preferences. Some of the stats will come as no surprise such as the predicted reason to move in the future, where 82% said it would be for their job.

Military homebuyers

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ATTOM Data Solutions: Home sales to buyers with Chinese last names increased by more than 20% in 2017

Homebuyers with names of Chinese origin outbought and outborrowed all other ethnicities in 2017 in terms of percent increase, according to data analysis from ATTOM Data Solutions.

Home sales to people with the last names of Lin, Zhang, Wu, Liu and Huang increased by more than 20% while the rest of the nation’s homebuying decreased by 4% overall. The top eight hottest buyer last names of 2017 were of Chinese origin, the ninth and tenth were Korean and Vietnamese. Homebuyers with the last names Burns, Jenkins, Cole and Porter posted 15% or more decreases.

To get this data, ATTOM looked at 2.3 million single-family home sales’ deeds to determine the hottest names based on the percentage they increased by in home purchases, and then looked for those names’ origins on Ancestry.com. See the graph below for more details, and check out the article for interactive data broken down by state.

Family tree of hottest homebuyer names in 2017

(Courtesy of ATTOM Data Solutions)

Hottest homebuyer family names by state

(Courtesy of ATTOM Data Solutions)

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These 12 American cities are future-proof

Recent research suggests that some of America’s most popular cities are fully prepared to tackle long-term socio-economic and commercial real estate momentum, according to Jones Lang LaSalle.

Jones Lang LaSalle, a financial and professional services firm, is the creator of the City Momentum Index, which covers 131 global major established and emerging markets and tracks factors that determine which cities have the strongest short-term socio-economic and commercial real estate momentum, and those that are more equipped for long-term success.

Short-term momentum is determined by both socio-economic and commercial real estate momentum. Economic output, population, investment transactions, transparency, construction, consumerism are factors in JLL’s analysis.

According to JLL, future-proofed cities have higher education infrastructures, innovation capability, better environment quality, more technology firms and international patent applications.

The firm’s analysis ranked the top 30 most future-proofed markets, as well as those with short-term momentum. While Seattle was the only American city to appear on the short-term list, 12 American cities were among the top 30 most future-proofed markets globally.

San Francisco topped the list as the no. 1 city in the world to have the most sustainable long-term market with nearby Silicon Valley ranking second. Other major U.S. cities claiming spots on the list include New York, Boston, Los Angeles, San Diego, Chicago, Seattle, Austin, Denver, Washington D.C. and Philadelphia made an appearance on the list, which you can check out below: 

 JLL City Momentum Index 2018 

(Source: JLL) 

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[PHOTOS] Shaq to sell massive Florida mansion for $28M

Shaq is selling his shack. Basketball legend and sport commentator Shaquille O’Neal just listed his Florida mansion for sale.

The 12-bedroom, 15-bath home could be yours for a cool $28 million.

Shaquille O'Neal's basketball court

(Courtesy of Premiere Sotheby’s International Realty)

O’Neal recently moved to Atlanta, and decided it was time to part with his longtime home, which he has owned since 1993. Back then, he bought it for a mere $3.95 million.

Premier Sotheby’s International Realty’s Danial Natoli will be marketing the 31,000 square foot Floridian mansion, according to the Orlando Sentinel.

Shaquille O'Neal's bedroom

(Courtesy of Premiere Sotheby’s International Realty)

“This one-of-a-kind estate was designed for one of the most dominant players in the history of the NBA,’’ Natoli said. “Every exquisite detail has been curated to deliver the ultimate luxury living experience.’’

The house is in Isleworth, a posh private golf club community, and boasts a 6,000-square-foot indoor basketball court, a theater, themed rooms, and an outdoor area dubbed “Shaq-apulco” that includes a 95-foot-long pool complete with a waterfall.

Shaq-apulco

(Courtesy of Premiere Sotheby’s International Realty)

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Capital Economics: With looming rate hikes, home purchase applications see a spike

The single-family housing market is seeing a temporary jump in purchase applications in the face of three expected hikes in the interest rate from the Fed according to a report from Capital Economics. The recent release of job growth numbers revealing that unemployment is below 4% for the first time since 2001, have all but guaranteed the interest rate hikes and potential homebuyers are rushing to pull the trigger and lock down new digs before the impending interest rate hike in June.

The single-family housing market is staring down a shortage that is putting upward pressure on prices, pushing annual growth on the Case-Shiller measure to 6.3% in February according to Capital Economics’ report. To make matters worse, home construction starts dropped 5.5% month-over-month, the largest contraction in over seven years with no sign of supply relief for a strained inventory (see graph below).

Single-Family Inventory

(Courtesy of Capital Economics)

This is good news for those who are selling right now, as evidenced by a slight rise in homes up for sale and a big jump in purchasing applications.

Right now, home purchasing applications are at a nine-year high according to the Capital Economics report. This is in stark contrast to refinance applications, which are near a 10-year low. All this despite steadily worsening affordability which hit a nine-year low in February. Odds are, once the interest rates go up, it will put a chill on this sales rush, and buyers will hibernate until they can get a better deal (see graph below).

Mortgage Applications

(Courtesy of Capital Economics)

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This Florida metro is predicted to see a rising tide of appreciation

In March 2017, the Sarasota Herald-Tribune published an article entitled “7 reasons Sarasota is (still) best place to live in Florida.” Though it may have sounded more like hometown boosterism than homeownership, the list began with weather and was followed by beaches, restaurants, arts, parks, and then activities. Celebrity sightings completed the list, with novelist Stephen King, reality TV’s Jerry Springer, and original Allman Brothers guitarist Dickey Betts were among the cited.

Beyond the visitors’ bureau focus, however, the Sarasota metro area runs on a solid economic engine. That includes the promise of measured real estate appreciation over the next 12 months according to the current VeroFORECAST from Veros Real Estate Solutions. Released in March 2018, the VeroFORECAST report predicts that property values in the Sarasota-Bradenton-Venice Metropolitan Statistical Area will appreciate at a rate of 5.6% through March 1, 2019.

The Sarasota market has a modest supply of homes at 4.5 months, which means slightly better availability than the national average, which according to National Association of Realtors data released last month, was 3.6 months in March 2018, about what it was a year earlier. During the past 12 months it had hovered between 3.2 and 4.3 months.

The unemployment rate in the MSA is also lower than the current nation average of 4.1% (as of this writing). Unemployment in the Sarasota-Bradenton-Venice MSA is currently at 3.6%, after a high in 2010 of more than 12%. It soared to that rate from approximately 3% in 2006, an ascent that began before the financial crisis but began steadily easing over the past eight year, see the chart below for more. 

chart_fred_veros
(Click to enlarge)

Another reason this market is expected to experience good appreciation over the next year is the healthy 10% population growth it has had over the last decade.

The property appreciation projections within the March 2018 VeroFORECAST covered 342 U.S. metro areas, with all but 10 showing some appreciation in value – topping out by more than 11% in the Seattle metro area. The MSAs covered by the report include nearly 1,000 counties and more than 13,600 ZIP codes. The SFRs, condos and townhouses in these markets house more than 80% of the U.S. population. Sarasota-Bradenton-Venice, which is comprised of Sarasota and Manatee Counties, ranks 114 out of the 342.

As I have outlined in previously weekly columns for HousingWire, Veros Real Estate Solutions creates the VeroFORECAST at the end of each quarter. Presented to subscribers as full Metro Market or Custom County reports, data is broken down month-by-month over one-year, 18-month, and two-year horizons, or at the individual property level via the company’s top performing VeroVALUE AVMs and VeroPRECISION reports.

Using comprehensive historic data from our proprietary VeroHPI, or Housing Price Index platform, that goes back 14 years, VeroFORECAST simultaneously looks forward and backwards in time.

Coincidentally, the projected appreciation of property values isn’t separate from tourism. In Sarasota County’s May 2017 “Situational Report” on its Housing Affordability Initiative, it referenced a 2015 newspaper article that used data from

HomeAway, an online service for homeowners who rent to vacationers, stating, “Sarasota’s vacation rental listings are up 46 percent in the past five years, and traveler demand for the market is up 63 percent in that time.” Average monthly rates were then approximately $4,800.

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Multifamily permits are up 19%, but they really shouldn’t be

Most researchers and economists say construction is slowing and will continue to slow. The odd thing is that the number of multifamily building permits does not reflect that sentiment, jumping 19% in March, according to Capital Economics’ monthly housing report.

There is no apparent reason for this spike as developers and multifamily investors seemingly would like to maintain the currently stable rent growth of 1.5%. Capital Economics’ explanation for this confounding data is that permit data is very volatile, and that logic does not support sustained increases in construction.

Vacancy is low, rent growth is stable, supply and demand appear to be in equilibrium and developers want to keep it that way, so more likely than not, these wild permit numbers will not hold for very long.

Multifamily starts and permits

(Courtesy of Capital Economics)

According to a Fannie Mae survey cited in the Capital Economics report, the multifamily market is expected to receive a record high, 5.7% increase in rents over the course of 2018. Zillow’s rent growth index reveals Nevada, Vermont, Georgia, and Delaware as the states exhibiting the fastest rent growth while Wyoming, Arkansas, Louisiana, West Virginia and Alaska exhibit the slowest rent growth.

After a banner year in 2017, most experts are expecting the pipeline to taper to maintain equilibrium. The number of units under construction has leveled at around 600,000 units as the market continues to stabilize after 2017’s record activity according to a report from Capital Economics.

The multifamily market is showing signs of cooling as this is the fourth consecutive quarter where the number of rental unit households decreased, slipping slightly to 43 million this quarter. No one seems particularly worried about this cooling as the market is still performing well above historical averages. (See the graph below)

Rental Households historical

(Courtesy of Capital Economics)

By all indications, the multifamily market is now a sellers’ market, and new product will not be delivering en force for much longer, or else rent growth will halt and reverse. It is highly unlikely developers will allow this to happen.