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Funding the Flips

Here is who is providing the floor to the residential real estate market:

Wall Street has made a mountain of money available to house flippers, and selling move-in-ready rehabs has rarely been easier. The challenge is finding beat-up and out-of-date properties that can be renovated and resold for a profit.

“Investors like me, we’re like ants on a sugar hill all fighting for the same projects,” said Ed Stock, who started fixing and flipping houses on New York’s Long Island after the 2008 mortgage meltdown. “It’s the greatest time to be in this market; it’s just hard to find the inventory.”

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San Diego Home Prices To Keep Rising

Hat tip to Rob Dawg for sending in the second forecast that is predicting our home prices will continue to rise:

While home price changes on the local level vary, July gains across all of the top 10 metros surpassed their 2020 levels. However, metro areas where affordability constraints are prevalent continue to persist as prices rise. For instance, in July, home prices in San Diego increased 23.7% year over year and are forecasted to increase an additional 9.1% over the next 12 months.

Full article here:

https://www.corelogic.com/intelligence/u-s-home-price-insights/

Inflation-Adjusted Home Prices

On one hand, it looks like the national Case-Shiller Index is up about 40% since the previous peak (above). 

But after adjusting for inflation, Bill shows how home prices are about the same as before:

https://calculatedrisk.substack.com/p/real-house-prices-price-to-rent-ratio

 

You could say that home prices have only been tracking inflation over the last 10-12 years.

Has the frenzy over the last 12 months just added the annual 2% to 3% increase to home pricing that we’ve always assumed over the last decade, but didn’t realize due to inflation? Could be!

Inventory Watch

The number of pendings has increased in each of the last four weeks, and by next week could exceed the number of active listings again.  The rest of the year should be exciting!

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Public Art Memorial

Last year, 16-year old Jack Munday was tragically killed in a car accident in Carlsbad.

Between June and August 2021, Carlsbad based artist Bryan Snyder worked with the Munday family to design and create a public art memorial bench for Jack Munday. The bench was installed on the shore of the Agua Hedionda Lagoon in Carlsbad, CA on August 7, 2021.


http://carlsbadcrawl.com/the-making-of-the-jack-munday-memorial-bench-in-carlsbad-by-bryan-snyder/

Forbearances

Another update on the forbearance exits. Nobody is going to get foreclosed in North San Diego County’s coastal region, mostly because of the ample equity position every homeowner has in place – but those positions could cause them to sell. Won’t the homeowners be spoiled from the 12+ months of free rent, and, once they recognize the alternatives (renting for ridiculous rates here or moving out of state), be more likely to work out a payment plan with their lender? Yes! But this would be a good time for a surge, if it happens!

Black Knight estimates that nearly 630,000 forbearance plans, more than one-third of those currently active, are slated for review this month. Of those, 400,000 will have reached the end of their 18 months of forbearance eligibility unless the maximum term is extended again.

The end of August saw a significant decline in forbearance numbers as servicers worked through the month’s crop of three-month reviews. Plans declined by 53,000 over the week ended August 31 with more than 23,000 from FHA or VA portfolios. The number of GSE (Fannie Mae and Freddie Mac) loans dropped by 20,000 and loans serviced for bank portfolios or private label securities (PLS) saw a 10,000 unit decline. The number of plans is down by 9 percent since the end of July.

Black Knight estimates that approximately 1.71 million borrowers remain in forbearance, 3.2 percent of the 53 million outstanding mortgages. Those loans have an unpaid balance of $331 billion. The total includes 514,000 GSE loans, 676,000 FHA and VA loans, and 520,000 portfolio/PLS loans. The loans remaining in forbearance represent 1.8 percent of the GSEs’ totals and 5.6 percent and 4.0 percent of FHA/VA and portfolio/PLS loans, respectively.

http://www.mortgagenewsdaily.com/09032021_black_knight_forbearances.asp

More One-Story Premium

Over the last six months in Encinitas:

There were 183 sales of two-story homes, and they averaged $744/sf.

The 98 sales of one-story homes averaged $952/sf, or a 28% premium!

Let’s also note the price discovery here.

The sellers and agent were smart to lower the price early and often to keep the urgency alive.  There was nothing wrong here that price wouldn’t fix, so they did three reductions in less than a month:

Carlsbad Low-Income Housing

Let’s also mention Carlsbad’s efforts to meet state requirements for low-income housing:

https://thecoastnews.com/carlsbad-city-council-approves-70-affordable-housing-units/

CARLSBAD — Affordable housing is a challenge for many cities as the housing crisis rages statewide.

But the Carlsbad City Council chipped away at its state-mandated affordable housing requirements by approving 70 units for very-low to low-income households during its Aug. 31 meeting.

Additionally, the council approved a $3.1 million loan as requested by Bridge Housing, which partnered with Summerhill Apartment Communities, to develop the Aviara Apartments.

The loan will allow Bridge Housing to cement its application for state and federal tax credits to help fund its affordable portion of the 329-unit project on Aviara Parkway just south of Palomar Airport Road, according to Mandy Mills, Carlsbad’s director of housing and homeless services.

The Aviara East Apartments, where the 70 units will reside east of Aviara Parkway and north of Laurel Tree Road, make up the bulk of the affordable units for the project

In total, 81 units, or 25% of the total project, will be affordable units, Mills added.

The cost for the entire project, which rests on lots east and west of Aviara Parkway, is estimated at $30.9 million, Mills said.

“The project started the process in 2017 (with design and environmental reviews) before the Planning Commission approved it in December 2020,” Mills said. “Bridge will submit tax credit and bond allocation requests next month … and construction is expected to start in summer 2022.”

Rent will run between $600 and $1,700 depending on area median income (AMI) of each resident. Mills said seven units each are allocated for 30% and 50% of AMI and 55 residences for 60%.

Summerhill will manage the market-rate units, while Bridge Housing will operate the affordable units, she explained.

Jeff Williams, of Bridge Housing, said his company has two other developments the company manages in Carlsbad.

Bridge Housing owns the 334-unit Villa Loma project and 92 units at Poinsettia Station Apartments.

Bridge Housing intends to secure tax-exempt bonds and tax credit equity to finance the majority of the project’s cost to improve its competitiveness for bond and tax credit financing, according to the staff report.

Per the estimates, state and federal tax credits would account for $15.3 million along with a permanent loan of $7 million for the bulk of the funding.

The $3.1 million, though, will come from the Housing Trust Fund, which has a current balance of $13.6 million.

“Our mission is to provide housing, services and opportunities for residents of all income levels,” Williams said. “We do that by building on our record.”

The average cost per unit, though, is about $442,000, while city staff cited a Terner Center Report of the cost-per-unit for affordable units in the state is at $480,000, an increase of nearly $70,000 since 2008.

Another benefit of the 81 units is pushing the city closer toward its required affordable housing allotment under the Regional Housing Needs Assessment.

The RHNA numbers set by the county is 3,873 units for Carlsbad and more than 2,000 must meet very low to low-income residences.

This RHNA cycle runs from 2021 through 2029.

https://thecoastnews.com/carlsbad-city-council-approves-70-affordable-housing-units/

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