California Dream For All Becomes a Nightmare

The state of California launched a new program last month, the California Dream for All Shared Appreciation Loan. Sounds interesting? Well, don't bother, they ran out of money before the 1st loan even closed. What happened?

Before we get into that, let's, as always, start with the data.

Mortgage rates closed at 6.5%, about the same as it has trended most of this year.

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.

As you can see in the graph, even though the current inventory is slightly above the last 2 years, which were record lows, the number of new listings is trailing even the last 2 years,, so at this pace 2023 will break the record for all-time lowest inventory, COVID period or before or after. This graph from Redfin shows the numbers:

Locally, in Los Angeles, the market continues to be a seller's market, holding at a market action index of 41, the same as last month.

So, have housing prices crashed? Well, no, not in Los Angeles, and not nationally, but there is an uneven amount of pre-COVID to post-COVID prices. What has happened is one of the fastest changes in population in American history, which caused some cities to lose residents and their home prices have lagged, and others have gained, and have seen their prices rise and stay near the highs.

Take a look at a comparison of Miami and San Francisco. Miami is holding to 50% price increases from before the pandemic, while San Francisco is holding only a 22% increase after peaking at 36% increases early last year. 

Similar story when you compare Knoxville, TN and Boise, ID, although Bose's correction was later and more of a response to the overheated market from 2020 to 2022.

So, if the market is basically on a normal moderate pace of increase with little imminent risk of a massive crash, what makes the real estate news?

Well, Redfin attempts to create some news with their headline this week "Housing Market Update: Buyers Can’t Buy if Sellers Won’t Sell." Think for a second, buyers CAN'T buy if sellers won't sell? Cant? What if....they paid more for the home. The headline is both obviously misleading and Redfin's attempt to make Buyers into some sort of victim class, victimized by those mean sellers that won't sell their homes.

But this week's award for the most misleading news goes to the joint effort of the California Association of Realtors (CAR) and the California State government officials who together created the "California Dream for All Shared Appreciation Loan" as a tool to "build a pathway to homeownership for every Californian." Last month, the state, with CAR's full support, launched a $500 million program to help 1st-time homebuyers with a program that provided the downpayment for qualified buyers. 

Criticisms of past programs were that so few people could thread the needle between making enough money to afford a home and little enough to qualify. This time, the qualifications were opened up, and the result: they ran out of money before the 1st home closed escrow. All gone! Launched April 1, all funds gone by April 7. The politicians had not even finished patting themselves on the back for this program.

And the California Association of Realtors plays along, asking for more funding for this program. Because if only we tax residents more and then gave away more loans we could get a home for everybody.

So, let's think this through.

If every home in California is occupied (about 99% are), how many more state of California-funded loans will it take for EVERYONE to have a home?

Answer???

All this does is raise the competition for homes that 1st-time homebuyers want to buy as those without the loans are now competing with those lucky few that got loans, but no new homes are being built. So, if we don't build more homes, how will this create more homeownership? Hello?
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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 nationally probate experts.

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