Growing demand for apartments pushes up rents

In LA we have seen rents rise quite a bit over the past few years. Almost to the point of being unfordable for some! Please read below to see where the current rental market is headed.

These are good times for U.S. landlords. For many tenants, not so much.

With demand for apartments surging, rents are projected to rise for a fifth straight year. Even a rise in apartment construction is unlikely to provide much relief anytime soon.

That bodes well for building owners and their investors. Yet the landlord-friendly trends will likely further strain the finances of many renters.

A 6% rise in apartment rents between 2000 and 2012 has been exacerbated by a 13% drop in income among renters nationally over the same period, according to a report from Apartment List, a rental housing website, which used inflation-adjusted figures.

“That’s what we call the affordability gap,” says John Kobs, Apartment List’s chief executive. “I don’t see that improving in the near future.”

Demand for rental housing has grown as the U.S. economy has strengthened since the end of the Great Recession nearly five years ago. Steady job growth has made it possible for more people to move out on their own and rent their own apartments. Yet rising home prices are preventing many from buying.

A combination of rising rents and sluggish pay gains will likely continue to weigh on the U.S. economy, which relies primarily on consumer spending.

Rental demand has risen in much of the U.S. since the housing market collapsed in 2007. A cascade of foreclosures forced many people out of their homes and into apartment leases. At the same time, construction of apartments was stalled until the last couple of years because many builders couldn’t get loans during the credit crisis.

Add to that several recent trends, from rising mortgage rates to stagnant pay, which have combined to discourage many people from buying homes. It’s resulted in fewer places to lease and a bump up in rents.

The national vacancy rate for apartments shrank from 8% to 4.1% from 2009 to 2013, according to commercial real estate data provider Reis.

As a result, landlords were able to raise rents in many markets. The average national effective rent rose 12% to $1,083 during those years, according to Reis, which tracked data for apartments in buildings with 40 units or more. Effective rent is what a tenant pays after factoring in landlord concessions, such as a free month at move-in.

Over the same period, the median price of an existing U.S. home has risen about 14%, according to data from the National Association of Realtors.

Among major U.S. markets, rents rose the most in Seattle in 2013, up 7.1% from the year before, according to Reis. The second-biggest increase, 5.6%, was in San Francisco. Nationwide, effective rent rose 3.2% last year compared with 2012. Rents rose even as the nation added about 127,000 apartments, the most since 2009, according to Reis. The addition of those apartments hasn’t been enough to absorb the surging demand for rentals.

The Picerne Group is among the apartment complex owners with buildings under construction. The company, which owns properties in California, Arizona, Nevada and Colorado, expects to break ground soon on luxury rental buildings in the Southern California cities of Cerritos and Ontario. The buildings, which have nearly 500 units combined, are due to open next year, says Brad Perozzi, managing director of the company, based in San Juan Capistrano, Calif.

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Dodgers home opener to unveil stadium upgrades, traffic adjustments

Fans heading to Dodger Stadium on Friday for the team’s home opener against the San Francisco Giants can expect a number of changes in areas such as traffic management, amenities and security measures.

The team’s new ownership, which includes former Laker Magic Johnson, has also invested more than $150 million in the ballpark the last two seasons, upgrading the infrastructure and adding some fan-friendly features.

There are now expansive plazas beyond right and left field with a team store, bar and a variety of concessions. A new walkway allows fans to circle the field inside the stadium for the first time, with potential stops at lounge areas overlooking both bullpens.

There are also large children’s play areas.

The stadium’s approach to security will also be different, an issue that came to the fore after Giants fan Bryan Stow was badly beaten in the parking lot.

The home opener comes just days after an assessment by Major League Baseball found there was a “culture of apathy and indifference” among stadium staffers prior to the attack. The findings were revealed in court documents in a lawsuit against the Dodgers that accuses the team’s previous management under Frank McCourt of not adequately protecting fans.

The plaintiffs’ attorney in that case, Tom Girardi, told The Times that the team had made “huge” safety improvements and addressed concerns raised in the MLB report since coming under new ownership.

Weeks before Friday’s home opener, Giants third base coach Tim Flannery also reflected on the Bryan Stow incident in a video posted to YouTube.

But for the residents who live around the stadium in Chavez Ravine, traffic and gridlock will be the foremost concern ahead of the sold-out 1 p.m. game.

For the first time in almost 20 years, a gate on Scott Avenue will be unlocked and used as a fifth permanent entrance and exit for the stadium, raising traffic fears among residents.

The gate had been closed since 1996, when Echo Park residents successfully lobbied then-owner Peter O’Malley to leave it shut to quell game-day traffic.

Renata Simril, the Dodgers’ senior vice president of external affairs, said the decision to use the fifth gate was part of an effort to alleviate traffic that backs up on Sunset Boulevard on game days. About 15,000 to 20,000 cars show up at the stadium for any given game.

“Our goal is to get them off the public streets and into the stadium as quickly as possible,” Simril said, calling the change part of a multipronged effort to deal with what’s anticipated to be record attendance.

Two of the lanes that funnel up Elysian Park Avenue from Sunset will turn left on Stadium Way and then take a right on Scott Avenue, she said, providing new space for cars to queue up. Simril emphasized, however, that Department of Transportation officials will man Scott where it intersects with Stadium Way and with Echo Park Avenue to deter game traffic from lining up along residential streets for stadium access.

Janet Marie Smith, the Dodgers’ executive supervising the renovations, said the team was also encouraging fans to use the Dodger Stadium Express, a complimentary shuttle service between the stadium and the Patsaouras Transit Plaza near the east portal of Union Station. The shuttle is free with a Dodgers game ticket, $1.50 without a ticket. The service starts 90 minutes before game time and ends 45 minutes after the final out. Parking at Union Station is $6.

 

Freddie Mac: Average 30-year mortgage rate at 4.4%, up from 4.32%

By E. Scott Reckard

March 27, 2014, 8:26 a.m.

Fixed mortgage rates rose early this week, with Freddie Mac’s survey showing lenders offering 30-year loans to solid borrowers at an average of 4.4%, up from 4.32% in the previous week.

The average rate for a 15-year fixed loan rose from 3.32% to 3.42%, and the average start rate rose from 3.02% to 3.1% on hybrid loans that become adjustable after five years at a fixed rate.

The increase reflected concerns that the Federal Reserve might begin raising interest rates in early 2015, as the Fed’s new head, Janet Yellen, suggested late last week, Freddie Mac chief economist Frank Nothaft said. The comment caused a sharp spike in rates, including the yield on Treasury securities.

As this week wore on, the yield fell on 10-year Treasury notes, a barometer for fixed-rate mortgages, suggesting that the upward tick in home-loan rates would be short-lived.

Freddie Mac asks lenders each Monday through midday Wednesday about the rates they are offering to low-risk borrowers who pay less than 1% of the loan amount in upfront lender fees and discount points. It then averages the responses.

Actual rates fluctuate daily and are calculated in increments of an eighth of a percentage point. The Freddie Mac survey shows the typical rate was 4½% for a 30-year fixed mortgage at the start of this year but has since fallen a bit, zigzagging in the 4¼% to 4 3/8% range since mid-January.

Payments to third parties such as appraisers and title insurers, which generally come out of consumers’ pockets, are not included in the survey. Borrowers can obtain lower rates by making additional upfront payments or get zero-cost loans by accepting higher rates.

 

Freddie Mac: Average 30-year fixed mortgage rate falls to 4.32%

Home Building At The Great Park Neighborhoods Ahead Of Construction Spending FiguresBy E. Scott ReckardMarch 20, 2014, 8:30 a.m.

Fixed mortgage rates fell early this week, with Freddie Mac reporting the average for 30-year loans dropped to 4.32% from 4.37% last week.

The McLean, Va., housing finance company said lenders were offering 15-year fixed home loans, a popular option for refinancers, at an average of 3.32%, down from 3.38% last week. The start rate fell from 3.09% to 3.02% on so-called hybrid loans that become variable after five years at a fixed rate.

The rates seemed likely to move higher, though, following remarks by Federal Reserve Chairwoman Janet L. Yellen at midday Wednesday, about the time Freddie wrapped up its weekly survey of the terms lenders are offering to low-risk borrowers.

QUIZ: How much do you know about home loans?

At her first news conference as head of the Fed, Yellen suggested short-term interest rates, which the central bank has kept near zero since December 2008, could begin rising as early as spring 2015.

Investors, still skittish about the Fed’s gradual pullback on a bond-buying stimulus program, reacted late Wednesday by sending stocks lower and the yield on the 10-year Treasury note, a proxy for fixed mortgages and other long-term borrowings, up sharply.

“If this holds, interest rates may begin to trend higher going into next week,” Frank Nothaft, Freddie Mac’s chief economist, said in announcing the mortgage rate survey Thursday morning.

If the sharp reaction to Yellen’s remarks showed investors are still edgy, another indicator appeared to show that the attitude of consumers toward housing debt is returning to historical norms.

A new study from the TransUnion credit bureau found that as of September U.S. borrowers had begun regarding it as more important to pay their mortgages than their credit-card bills.

This reverses a trend dating to September 2008, when the mortgage crisis drove consumer preferences toward paying credit cards first.

As unemployment rose and home prices cratered, many Americans were forced to make difficult choices, said TransUnion Vice President of Research Ezra Becker, the study’s author.

“Many chose to value their credit card relationships above their mortgages,” Becker said.

Freddie Mac’s survey, a widely followed gauge of mortgage rates, dates to 1971. It asks lenders about the terms they are offering to solid borrowers who pay less than 1% of the loan amount in upfront fees and discount points to lenders.

Third-party closing costs typically borne by borrowers, such as fees for appraisals and title insurance, are not included. Borrowers can obtain lower rates by paying additional points or get zero-cost loans by accepting higher rates.

 

Housing prices surpass bubble peak in some Southland ZIP Codes

Most are in the San Gabriel Valley or on the Westside, markets driven by Asian buyers and the tech industry. Still, many areas remain well below their pre-recession highs.

By Andrew KhouriMarch 12, 2014, 5:00 a.m.

In some corners of the Southland, it’s as if the housing crash never happened.

Home prices in a dozen Southern California ZIP Codes have passed their peaks during the housing bubble, according to research firm DataQuick. Most are either in the San Gabriel Valley, a magnet for buyers from Asia, or on the Westside, where the technology industry is booming.

Across the region, home prices remain far below their peaks despite an explosive run-up in the first half of 2013. But nominal prices in some affluent neighborhoods have entered uncharted waters.

The return of bubble-era pricing could foreshadow a spillover effect, experts said. As buyers get priced out of prime areas, they may look to adjacent neighborhoods — juicing demand there and pushing up prices.

“A lot of the action is at the higher end of the market,” said Christopher Thornberg, founding partner at Beacon Economics. “That is what is driving the show.”

Many other regional markets have stalled since last summer. Higher prices and mortgage rates, along with a shortage of homes, have turned off many would-be buyers. Sales have tumbled overall, but they continue to climb in wealthy communities.

Of the 12 ZIP Codes where the non-inflation-adjusted median price has passed its bubble-era peak, six are in the San Gabriel Valley and one is in affluent Irvine. All are hubs for buyers from China looking to move to the U.S. or invest here. Another is ritzy Los Feliz, where homes near Griffith Observatory command top dollar.

Four other areas are on Los Angeles’ Westside, in Venice, Palms, Mar Vista and Culver City. Buyers from the area’s burgeoning technology industry — known as Silicon Beach — have fueled price increases, along with broader gentrification.

Despite steep prices, experts don’t see a bubble forming in these areas.

“There are important, fundamental reasons that prices moved up,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate.

The neighborhoods are near job centers, the urban core and, often, good public schools, Gabriel said. The areas have also recovered faster because prices there simply didn’t fall as steeply as in other areas during the crash. And each has unique factors driving the current price growth.

In the San Gabriel Valley, an influx of Chinese buyers has shifted the market into overdrive, real estate agents say. Many Chinese see U.S. real estate as a solid investment, cheaper and more stable than in China.Others buy homes with their children in mind, seeking cleaner air and solid schools.

An epicenter for previous waves of Asian immigration, the valley is a natural landing place.

In Arcadia’s 91007 ZIP Code, the median sale price for a previously owned house reached $1.33 million last quarter — 30.5% higher than its peak in 2007. In the city’s 91006 ZIP Code, prices are 23.7% higher. Other areas with nominal prices exceeding their peaks, though less dramatically, are Walnut, Temple City, San Marino and a ZIP Code that covers parts of San Gabriel and East San Gabriel.

“It’s crazy,” said Pamela Rose, a San Gabriel Valley real estate agent. “We are experiencing a lot of overseas money.”

On the Westside, the arrival of hip cafes and other amenities catering to tech industry workers has, in turn, attracted others to these areas.

In rapidly gentrifying Venice, the median price in the fourth quarter of 2013 was $1.34 million. That’s nearly 3% higher than during the bubble and 84.4% more than the bottom during the crash.

“There is a tremendous amount of demand from the tech industry,” said real estate agent Tami Pardee. “It’s really driven up the prices in Venice, which has driven up the prices in Mar Vista.”

That spillover is welcome news for current owners looking to build home equity. Some have cashed in, selling to developers who have built larger, new houses with affluent buyers in mind.

But not everyone benefits from the surge in prices.

“It’s not good news for the police and firefighters and teachers and nurses — the people who do important work in our communities but cannot afford to live in our communities,” UCLA’s Gabriel said.

Freddie Mac: Mortgage rates down; 30-year fixed averaging 4.28%

FILE: US Existing Homes Sales Fall  Home Prices Rise Sharply In MayBy E. Scott ReckardMarch 6, 2014, 9:08 a.m.

The cost of a home loan dropped early this week on less than robust news about the economy and housing, with Freddie Mac reporting that the average interest rate for a 30-year fixed mortgage was 4.28%, down from 4.37% a week earlier.

The average for a 15-year fixed mortgage was 3.32%, down from 3.39%, Freddie Mac said Thursday in its weekly survey of what lenders are offering to solid borrowers.

The average start rate for a popular type of adjustable mortgage with a fixed rate for the first five years edged down from 3.05% to 3.03%.

Rates rose late last year when it became clear that the Federal Reserve would scale back its enormous purchases of mortgage bonds and Treasury securities, a program designed to stimulate the economy by keeping long-term rates low.

But the 30-year fixed rate has since fallen back about a quarter of a percentage point, a decline attributable at least in part to an economic recovery too weak to raise fears that inflation could become a problem.

Freddie Mac’s chief economist, Frank Nothaft, noted that the news early this week included a downward revision in the fourth-quarter gross domestic product and a weaker than expected report on private-sector job growth.

Freddie Mac asks lenders each Monday through midday Wednesday about the terms they are offering creditworthy borrowers who pay less than 1% in upfront lender fees and discount points to obtain mortgages. Charges for services such as appraisals and title insurance are extra.

Actual rates fluctuate, sometimes more than once a day. Borrowers can pay additional points to obtain lower rates, or get zero-cost loans by accepting a higher rate.

US 30 Year Mortgage Rate Chart

 

Fannie Mae offering cash incentives to some home buyers

By Kenneth R. Harney February 23, 2014, 5:00 a.m.

To reduce its inventory of foreclosed homes, Fannie offers qualified owner-occupant purchasers cash incentives toward closing costs of 3.5% of the purchase price.WASHINGTON — If you’re planning to shop for a home in the next few weeks, here’s an early spring buying season come-on that just might save you some money if you qualify.

Fannie Mae, the largest mortgage investor in the country, has a bulging portfolio of houses acquired through foreclosures nationwide. About 31,000 of these properties are listed on its HomePath (www.homepath.com) resale marketing site. To move them quickly out of inventory, Fannie temporarily is offering qualified owner-occupant purchasers — but not investors — cash incentives toward closing costs of 3.5% of the purchase price. But you have to submit your initial offer no later than March 31 and close by May 31.

What sort of houses are we talking about? Visit the site and you’ll see. They run the gamut — from a one-bedroom condo in San Diego to a four-bedroom, four-bath single-family home in suburban Montgomery Village, Md. Some states have thousands of HomePath listings online: Florida has nearly 12,000; Illinois, 4,360; Ohio, 2,800; California, more than 2,300; Washington state, nearly 1,800; and Nevada, about 1,400. Asking prices range from $30,000 to $600,000 or more. On a $400,000 house, the 3.5% closing cost incentive would amount to $14,000.

To ensure that buyers who intend to occupy its homes get an opportunity to fully check them out and bid without competition from investment groups offering all-cash deals, Fannie has instituted what it calls a First Look program. It essentially prohibits bids from investors on properties during the first 20 days after listing (30 days in Nevada). After that, investors are free to jump in. Each First Look listing has a countdown clock attached to it that indicates the number of days remaining before bidding is opened to all comers.

The new 3.5% closing cost offer is available only during active First Look periods from mid-February through March, so there’s not a lot of time to get involved. Bidders will need to indicate upfront that they want to be considered for a closing-cost discount.

Who is eligible? First, you’ve got to be a bona fide owner-occupant purchaser and commit to live in the house as a primary residence for at least a year. You’ll need to fill out a certification to that effect that can be found on the HomePath site. Properties are not available in all states.

You don’t have to be a first-time buyer, though the Fannie program is likely to attract substantial numbers of them. The 3.5% closing cost discount helps with one of the biggest problems faced by first-timers — upfront cash.

As with most home purchases, you’ll need to be able to qualify for mortgage financing. Though Fannie may end up owning or securitizing the loan you obtain, it won’t be financing you directly. On HomePath purchases, you shop for a mortgage just as you would on any other house. Ideally, you nail down a financing source and get prequalified for mortgage money up to a specific dollar limit at current interest rates. If you’ve already located a First Look property and qualify, the lender is likely to take the 3.5% closing cost incentive into consideration in evaluating your application.

While you shop on HomePath, however, keep this important factor in mind: These are foreclosed, previously occupied homes. Though some of them are repaired, painted and spiffed up before they are listed, many could use some additional work. They are sold “as is” and that’s built into the pricing. Fannie identifies what it calls “improved” properties on the HomePath site — those that have undergone significant repairs — with either the “Home Depot” logo (when repairs have been made by contractors from that company) or a hammer and roof symbol (when repairs have been completed by independent contractors hired by Fannie).

If you can’t find the First Look house you want, don’t give up. Freddie Mac, the other giant federal mortgage investor, also has thousands of foreclosed homes that it’s trying to dispose of — and its own First Look program — at its HomeSteps (www.homesteps.com) marketing site. Though Freddie currently has no closing cost incentive offer, it does provide a $500 allowance toward the purchase of a home warranty policy, and it promotes special mortgage financing options on houses in some areas. If you qualify, that could mean a loan with no mortgage insurance, no appraisal and a 5% maximum down payment.

Definitely worth checking out.

kenharney@earthlink.net

Distributed by Washington Post Writers Group.