In January I shared my state of the housing market in Los Angeles:
https://www.maschiorealestate.com/2018/01/02/2018-the-state-of-housing/
Here are my observations for the second half of 2018.
I‘m seeing some summer time pockets of softness in residential & income real estate in the beach communities of Santa Monica, Venice & Marina Del Rey. (High prices, low inventory, mortgage rates ticking up & federal & local uncertainty equals a pause).
Why?
UNCERTAINTY:
1. Long term economic cycles suggest we are due for a correction (if not a recession). But just because we are “due” for a correction, there still needs to be a catalyst for one. What are some of those catalysts? Trade Tariff policy changes or…
-November Election: The argument here is that if the Democrats take either or both chambers of Congress, the perceived pro-business Trump agenda will be derailed.
-The Mueller investigation. Much like the Clinton Impeachment proceedings consumed the final 2 years of the 2ndterm of Bill Clinton, it seems increasingly clear that the Mueller investigation will do the same with the current administration.
-Proposition 10 The Affordable Housing Act
This proposition will be voted on in November. It basically repeals the Costa Hawkins Rent Control Laws, thereafter allowing cities to establish (or rollback rent control to newly determine levels). Some alarmists suggest that (as tenants voluntarily vacate), those new base rent control will be based on 1978 rent control rates! (Not going to happen).
Here’s an LA Times link to summarize Costa Hawkins:
http://www.latimes.com/politics/la-pol-ca-rent-control-ballot-20180615-story.html
GOOD NEWS:
Last night (July 24th) the Santa Monica City Council voted 6-0 NOT TO PUT A SECOND PROPOSTION ON THE BALLOT in the November in the event that Costa Hawkins passed. They were advised by City Attorneys that the RENT CONTOL BOARD has the administration authority to establish base rent controls rates (based on November 1st2018 rents not 1978 base rent rates), in the event that Prop 10 is passed. The Santa Monica City Council is against rolling back rent control base rates to 1978 levels, and if they had to make a change, it would be to establish base rent control at November 1st, 2018 rates. (By the way, the Mayor of Santa Monica, Ted Winterer, is a real estate agent…)
Here is a link to the live stream of that city council session (July 24thsee Resolution 11):
http://santamonica.granicus.com/ViewPublisher.php?view_id=2
The Argument against repealing Costa Hawkins: THE ELLIS ACT:
In a worst-case scenario, if rents were “rolled back,” apartment complex landlords subject to rent control could simply “Ellis” their buildings. The Ellis Act is a state law that allows owners to remove residential properties from the rental market, and after tenant relocation fees and a 5 year waiting period, those properties can be renovate, demolished, sold to developers etc. This *could make the affordable housing crisis here in Los Angeles worse, not better…
Here’s an overview of the ELLIS ACT:
http://www.smdp.com/ellis-evictions/159671
MY SUMMARY:
1.Mortgage rates ticked up from 4%- ish to 4.5% in the last 6 months. (President Trump is beginning to speak out and trying to politicize FED policy to keep rates lower for longer.
2. The collective fear that “we are due” for a recession makes people pause when considering whether or not to buy or sell.
3. The Uncertainty of the November elections on both the Federal & Local level makes people hesitate as well.
4. Proposition 10 The Affordable Housing Act – confusion about the implications of it’s passage creates uncertainty about investing in income producing property, if rent control will place new restrictions on what you can charge tenants to rent.
WHAT IS ACTIONABLE HERE:
A pause in the market is an opportunities to aggressively negotiate and buy a place at a discount.(I’d rather buy Apple, Amazon or Google when it is on sale 5% below it’s high, than wait to buy once it announces it’s earnings and go on a run higher). In the long term quality stocks go higher.
The same is true for Real Estate in the quality A-List Beach Communities of Santa Monica, Venice & Marina Del Rey. If you find a great house, condo or income property here, over the long term (think 7-10 year time horizons) it will keep going up in value…there’s a finite amount of property near the beach, we are (somewhat) insulated from Nationwide Real Estate trends, affordable housing is a huge problem but implementing draconian rent control laws will not help, it will clearly exacerbate that problem and lastly, people don’t lose money investing in real estate this close to the Ocean.
Once we have clarity & certainty with regards to the November elections, (regardless of the outcomes), I believe residential & income real estate in Santa Monica, Venice & Marina Del Rey will continue it’s steady climb of price appreciation.
Take advantage of a pause, be clear about what you want and be ready to act.
...and those are my thoughts.
Robert Maschio
Bulldog Realtors
2909 Main Street
Santa Monica, CA 90405
(310) 460 -8324
robmaschio@yahoo.com
www.maschiorealestate.com
BRE # 02010887
Residential & Income Properties
Beach Communities of Santa Monica, Venice, Marina Del Rey
and the surrounding neighborhoods of Mar Vista & the Pacific Palisades.
