Monday Morning Quarterback

Lloyd Segal

President of Los Angeles County Real Estate Investors Association

Published Nov 11, 2024

(Monday, November 11, 2024)

Homebuyers are older and wealthier than ever. Yep, the median age of first-time home buyers in the US rose to a record 38 this year, up from 35 last year. And the median age of all US homebuyers rose to 56 from 49. Fewer than a quarter of purchased homes were bought by first-timers, a four-decade low. Housing affordability was a big issue in the election, and the fresh housing data is another sign that younger generations are being boxed out of home ownership:

Older + richer: The median income of first-time buyers climbed to $97K and their down payments rose to 9%, a more than 25-year high. Nearly a third of repeat buyers used cash.
Racial disparity: 83% of US home buyers were white, up from 81% last year, though more than a third of first-time buyers were non-white.

In September, existing-home sales fell to a 14-year low and home prices hit a monthly record (a median of $404K). That has many young Americans (a key voting demographic) feeling dejected that they can’t afford a white-picket fence. To win them over, both the Harris and the Trump campaigns offered housing solutions. VP Harris pitched a plan to build 3M new housing units, proposed a $40B fund to jump-start local building, and suggested up to $25K of down-payment assistance for some first-time buyers. President-Elect Trump said he’ll open federal lands for housing development, eliminate regulations to make it easier to build, and bring down mortgage rates (note: presidents can’t directly do this). Homeownership is a key to wealth. As house prices skyrocket, the gap between homeowner and renter wealth is growing; in 2022 it reached a median of $390K. While renting is typically more affordable monthly, renters aren’t building equity with the money they spend on housing and can’t benefit from the rise in home values. For Americans looking to build generational wealth, home ownership is becoming more important (and more expensive) than ever. With that in mind, let’s get down into the weeds.

Voters Reject California Rent Control Measure In Blowout. For the third time, Californians have said no to a measure that would allow municipal governments to expand rent control by voting against Proposition 33. The proposition would have repealed the Costa-Hawkins Rental Housing Act, which dictates how local governments can apply rent control. Doing so would have left decisions about which properties can be subject to rental regulations — single-family homes and newer apartments, for example — up to local governments, which would be able to expand rent control to those properties if they chose. Just over 62% of voters rejected the proposal, according to the New York Times, which called the race Wednesday morning. Commercial real estate and real estate interests generally came out in force to oppose Proposition 33. As of midday Monday, groups opposing the proposition had raised nearly $125 million, more than double the roughly $48M raised in support of it, the Los Angeles Times reported. The largest opposing donors were a California Apartment Association committee and state and national real estate associations, according to the LA Times. Supporters, including the proposition’s majority donor, the AIDS Healthcare Foundation, emphasized that allowing local governments to regulate rents on a broader range of properties will help deliver relief to renters who are strained by the ever-increasing cost of housing. But opponents said allowing rent control to expand would only aggravate the state’s affordability crisis by depressing property values and discouraging developers from building new housing.

Crisis-Era Mortgage Strategy is Making a Comeback. High home prices and elevated mortgage rates are making it expensive to buy a home, but state agencies are offering interest-free “piggyback loans” to aspiring homeowners. In 2022, only about 10,400 households used the agency’s down-payment-assistance programs. In 2023, about 11,200 households used them. The government has reached out to local real-estate agents and mortgage lenders to encourage more people to utilize them, but with little success. “It’s shocking to me, after doing this for eight years, how many folks still don’t know about our programs.” Though home buyers have been slow to take advantage of the state agency’s piggyback-loan program, second mortgages are growing in popularity nationwide, especially among first-time buyers and people with low to moderate incomes. Between June 2022 and June 2024, the share of mortgages backed by the Federal Housing Administration that had a secondary lien rose more than 7 percentage points, to 18% from 10.8%, real-estate-data company CoreLogic says ina new report. The buyers include many who have found it difficult to meet traditional down-payment requirements or who lacked the credit history needed to qualify for a conventional mortgage, CoreLogic notes. In the first six months of the year, among buyers who used a conventional mortgage and paired it with a secondary mortgage, the median loan size on the piggyback mortgage was $15,000, Yanling Mayer, the author of the study says. For first-time home buyers with an FHA-backed mortgage, the median size of the piggyback loan was $10,500. Last in vogue in the early to mid-2000s, piggyback loans were a tool to make down payments seem more affordable. Instead of taking one 30-year mortgage to finance the purchase, home buyers would take a second loan at the same time to borrow additional money to lower the down payment. Piggyback loans typically have higher interest rates than a borrower’s primary mortgage, and those rates are often adjustable, according to the Consumer Financial Protection Bureau.

Saudi Arabia Built a $16 Billion Clock Tower. The Makkah Royal Clock Tower is a triumph of engineering. Constructed at an estimated cost of $16 Billion it is one of the most expensive buildings ever constructed, and at 600 meters high it contains to this day the highest occupied man-made space in the world. Seeing the tower rise above the city of Mecca it's hard to get a true sense of its unbelievable scale. Construction firms from over ten different countries worked on the skyscraper, including a German firm which designed the dock. But because of its location in Mecca many of the German engineers and architects could not visit the site. After all, only Muslims are allowed in the sacred city. Some of the construction team, including glazing experts from Poland and Germany, converted to Islam just so they could work on the project. Which is amazing considering I can't even get my contractors to show up at the job site. But the Makkah Royal Clock Tower isn't just a hotel. It's located in the heart of one of the most culturally significant cities in the world. Every year up to 3 million Muslims travel to Mecca to complete a pilgrimage known as the "Hajj.” Those completing the Hajj circle around the Kabah seven times. It's an ancient ritual that every Muslim must complete at least once in their life. This site is thousands of years old, extremely delicate, and constantly crowded. And just a few hundred meters away, across the road, is where this enormous hotel was built. Mecca has the largest number of hotel rooms in the Arab World, far surpassing Dubai. It really then comes as no surprise that this enormous hotel would be constructed here. The hotel needed to be more than just a commercial building, because of its location. It needed to be something spiritual. The hotel was originally supposed to be only 450 meters high - which would have still made it the tallest building in the world at the beginning of its construction in 2002. Upon deciding to transform it into a grand minaret the height was then extended to 600 meters. But making this hotel into an enormous minaret wasn't enough. The owners wanted even more. The world's tallest clock! The hands themselves measure an incredible 23 meters and 17 meters respectively. For comparison Big Ben's hands are only 4.2 meters and 2.7 meters, At 35 times the size of Big Ben. The building now has the world's largest clock.

Zombie Foreclosures Remain Sparce Around U.S. in Fourth Quarter. ATTOM real estate Analytics released its fourth-quarter 2024 “Vacant Property and Zombie Foreclosure Report” showing that 1.4 million (1,355,909) residential properties in the United States are vacant. That figure represents 1.3 percent (or one in 77 homes), across the nation – virtually the same as in third quarter and up just slightly from a year ago. The report also reveals that 215,601 residential properties in the U.S. are in the process of foreclosure in the fourth quarter of this year, down 3.3 percent from the third quarter of 2024 and down 32.8 percent from the fourth quarter of 2023. Among those pre-foreclosure properties, about 7,100 sit vacant as zombie foreclosures (pre-foreclosure properties abandoned by owners) in the fourth quarter of 2024. That figure is slightly above the number in the prior quarter, but down 20.2 percent from a year ago. The latest count of zombie homes extends a long-term pattern of those properties representing only a tiny portion of the nation’s total housing stock, currently at just one of every 14,591 homes around the U.S. The ratio is virtually unchanged from one in 14,776 in the prior quarter, but well down from one in 11,412 in the fourth quarter of last year, marking one of the lowest levels in the past five years. Zombie foreclosures, which can attract vandals and spread neighborhood blight, continue to have little or no impact on most local housing markets. That phenomenon remains one of many enduring effects of a housing market boom around the nation now in its 13th year. The biggest percent decreases from the fourth quarter of 2023 to the fourth quarter of 2024 in states that had at least 50 zombie homes a year ago are in Connecticut (zombie properties down 87 percent, from 100 to 13), Iowa (down 76 percent, from 281 to 68), North Carolina (down 73 percent, from 195 to 53), New Mexico (down 72 percent, from 81 to 23) and Oklahoma (down 71 percent, from 197 to 58). The only annual increases among states that had at least 50 zombie foreclosures in the fourth quarter of 2024 have come in Kansas (zombie properties up 126 percent, from 35 to 79), Arizona (up 114 percent, from 28 to 60), Florida (up 65 percent, from 1,199 to 1,974), Texas (up 52 percent, from 126 to 191) and New Jersey (up 14 percent, from 188 to 215).

Mortgage Rates Rise For The Fourth Week In A Row. Mortgage rates rose for the fourth week in a row, as the market digests strength in our economy. The 30-year mortgage rate jumped to the highest level since early August, averaging 6.54% as of October 24, according to data released by Freddie Mac. It’s up 10 basis points from the previous week — one basis point is equal to one hundredth of a percentage point. Rates are still substantially lower than they were in the last year. A year ago, the 30-year was averaging at 7.79%. The average rate on the 15-year mortgage was 5.71%, up from 5.63% last week. The 15-year was at 7.03% a year ago. Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage. The 30-year mortgage rate is heading towards 7% once again, casting a chill on the housing market. Until the economic data signals a slowing economy which could lead to a policy interest rate cut by the Federal Reserve, rates are expected to stay elevated and even rise through the next few weeks. Home sales in the meantime are expected to take a hit as mortgage rates climb. Sales of previously-owned homes fell to the slowest pace in 14 years in September. New-home sales fared better that month, as builders are able to throw money at home buyers to make housing costs more affordable. “Mortgage rates could stay elevated if there are signs that prices are not cooling as fast as expected,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. But “the big picture is for mortgage rates to fall over the coming months, though in the short-term it is very likely for rates to move up and down,” she added. For consumers trying to decide whether to rent or buy, the former is the cheaper option in most of the 50 states in the U.S., according to an analysis by real-estate data firm CoreLogic.

Grate Cheese Robbery of 2024. Last week, London’s Metropolitan Police arrested a 63-year-old man on suspicion of handling stolen goods. In the end it may have just been too much cheddar to make a clean getaway. The old man was arrested after more than 24 tons of artisanal cheese from one of Britain’s most famous dairy companies was stolen, authorities said. He was taken to a south London police station, where he was questioned, and has since been released on bail pending further inquiries. The cheese, worth over $390,000, was taken from London cheese specialist Neal’s Yard Dairy on Oct. 21, the company said on Instagram. A fraudulent buyer posing as a wholesale distributor for a major French retailer nabbed the 950 wheels of cloth-wrapped artisanal cheddar. Every wheel of cheese had been delivered before it realized it had been scammed. Three cheeses from three different suppliers were stolen: Hafod Welsh organic cheddar, Westcombe cheddar and Pitchfork cheddar. Another cheesemaker, Trethowan Brothers, which supplied the Pitchfork cheddar, said Neal's Yard Dairy “fully (and swiftly) paid it,” despite the theft. "The way they have handled this horrible situation has only deepened our respect and admiration for them," Trethowan Brothers wrote on Instagram. "We are proud to supply them and call them our friends." Even British chef Jamie Oliver is spreading the word about the "grate cheese robbery." Oliver, who is known as "The Naked Chef" on TV, told his 10.5 million Instagram followers to be on the lookout for "lorry loads of very posh cheese." Oliver said that cheddar is the world’s most consumed cheese type and that a cheddar theft affects exports to 20 countries. He advised cheese enthusiasts to be wary of suspiciously large quantities of premium cheddar on the black market. In an update to the post's caption Wednesday, the company added: "On 30th October, we learned that the Metropolitan Police made an arrest in connection with the theft. We are grateful for the progress they have made, and we will continue to support their investigation in any way we can." "Remember, if the deal seems too gouda to be true, it probably is!" he said.

Buying Out-of-State Properties. If you’re into “buy and hold” strategies, then the smartest thing you can do right now is to buy out-of-state. After all, why buy one house in Los Angeles for $800,000 (with negative cash flow), when you can buy eight $100,000 houses in another state and enjoy positive cash flow. And why deal with landlord headaches when you can use “turnkey” companies to manage these properties. The marvelous thing about turnkey companies is that they do everything for you. The find and buy the house, renovate it at their cost, rent it to a qualified tenant, sell the house to you below market, manage the property for you, and then send you a check every month. Won’t you love receiving checks every month? This is the most exciting cash flow strategy ever! And the expert in this field is Kathy Fettke. President of Real Wealth Network and the author of “Retire Rich with Rentals.” If you recognize her, it is probably because she is a frequent guest on CNN, CNBC, Fox News, NPR, and CBS MarketWatch. Thursday night, November 14, 20246:30 to 9:30 pm. Free Admission. Iman Cultural Center, 3376 Motor Avenue, Culver City. Please RSVP at: www.LaRealEstateInvestors.com.

Vendors Expo Returns! Our world-famous "Vendors Expo" returns on Thursday night, November 14, 2024. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA. FREE Admission. Please RSVP at www.LARealEstateInvestors.com.

Fix & Flip Workshop. Our Fix & Flip Workshop will show you why real estate investing is fun and challenging, and the profits fantastic! Plus, compared to other investments, you receive your profits in months, not years (rentals). So why don’t more people do it? The answer is simple; people don’t know how to get started. They don’t know where to find the houses, or how to finance the purchase and rehab, or where to find the contractors, or what to rehab in the house, or how to flip the house quickly for maximum profit. Well, if this is your predicament, our upcoming LIVE In-person Workshop is for you! At our workshop you will learn everything you need to know to fix and flip houses. Our workshop is scheduled for Saturday, November 23, 2024, 9:00 am to 6:00 pm (and bonus session Sunday morning at an actual rehab). This workshop is hosted by the Los Angeles County Real Estate Investors Association and the Ventura County Real Estate Investors Association. In this intensive 8-hour workshop, you will learn the four facets of fix and flipping:

Shark Tank. Thursday night, December 12th. Welcome to “Shark Tank” where lenders compete to fund your loans. Yes, just like the TV show, you bring your projects, (purchase or refinance) and watch our four incredible mortgage brokers fight over who’s going to finance your deals. They won’t hold back - nor should you.

1. Brock wants your deal.

2. Blair wants your deal even more than Brock.

Monday Morning Quarterback

Lloyd Segal

President of Los Angeles County Real Estate Investors Association

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