The Real Estate News Misinformation Continues

Not only does our education do NOTHING to teach high school students how to make money and build wealth, but the real estate industry continues the process with misinformation that makes the political news seem incredibly accurate. From telling us to move to the wrong places to now telling us to skip breakfast, almost EVERYTHING in the news is 180 degrees wrong.

So, how is the housing market?

Well, as always, let's start with the data.

Mortgage rates: mortgage rates jumped up this week to the high for the year and almost back to the highs experienced in November, closing at 6.82%.

While that does not mean rates are GOING up, it does mean that rates have risen about 0.5% in the last few weeks and will take some of the positive energy out of the market.

Inventory: nationally, housing stock continues at record lows for periods other than during the Pandemic, and has declined to match the rates of 2021. As I have repeatedly said, as long as inventory is low prices cannot go down much.

Locally, in Los Angeles, the market continues to be a seller's market, holding at a market action index of 40, slightly more of a seller's market rating than last month's 39.

Locally, media prices continue to increase, price per square foot continues to increase, and inventory remains at historic low levels.

One of the keys, as you analyze national data, is that markets vary across markets. Stories about crashing prices and excess builder inventory are accurate in the boom towns of Phoenix and Austin, but not across all markets. Here is a graph from Fortune showing the variance of both increases over the past few years as well as the recent corrections of part of it by market segment.

Another reason housing prices cannot go down much during a period of inflation is the cost to build homes rises, making the current housing stock more valuable. If you have to pay more for lumber and concrete and windows and labor, then homes already built can become more valuable.  Here is a graph from "For Construction Pros" showing the rise in prices over the past few years, and they expect an increase in costs in 2023 of 3.7% which would make current homes more valuable by about that much as well.

In the category of bad information, this week Fannie Mae enters the contest with their contribution "What to Do When Your Home Appraisal Is Below Your Asking Price."

This might have been a great article 3 years ago when home prices were racing up faster than appraisers could document, but this article seems entirely useless when home values are flat or correcting and appraisers should have no trouble appraising a property at the same price as the sales price, and if not, there is some problem.

But this week, the raspberry for the worst real estate-related stories goes to the Wall Street Journal, which takes the top 2 awards for bad advice.

The 1st is not really real estate related, but more financial: To Save Money, Maybe You Should Skip Breakfast.

So, if instead of eating, you skip breakfast, does that mean you just delay spending money for a few hours one day? Is breakfast inherently more expensive than other meals? The article is behind a paywall, so only those dumb enough to pay the Wall Street Journal will get the benefit of the full article. The reviews I read merely documented how much each of the components of the traditional American breakfast has gone up, like eggs, bacon, bread, and juice, but, really, those foods could otherwise be eaten at other times of the day, or one can substitute foods at any meal. Clearly, this is just nonsense.

The other article is an admission that all the push to move homeowners closer to mass transit as the systems in California are failing financially. Throughout Los Angeles, as the Metro has expanded, real estate near the new train stations boomed pre-COVID. Yet, the combination of a new downgrade of preference for multi-family residences and a distaste for mass transit has caused that trend to reverse. While on paper it looked good, in practice Californians are not looking to ride on mass transit, with the train usage in Los Angeles, for example, that were dropping pre-COVID continuing to drop. The city of Los Angeles is attempting to ruin major boulevards like Venice Boulevard by removing one of the lanes of traffic to make traffic so bad to force drivers into buses, but that effort is failing so bad even the Wall Street Journal is documenting it.
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents national probate experts.

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