BHAUS EIGHT April 2022 Newsletter

Hello community,

Happy April! Spring is in full bloom with blue skies, sunshine, and warm weather, although we’ve had some cold fronts here and there. The beaches are looking crowded, air travel is up (apparently busier than pre-pandemic levels), and the poppy fields in the Antelope Valley are in full bloom!

This is a great time to go whale watching, or take a long hike along the meandering scenic trails throughout the Palos Verdes Peninsula.

This month we have great information below regarding the strong SouthBay real estate market, economy and mortgage news, as well as a “info chat” on 1031 Exchanges for our investor community.

SouthBay Real Estate.

Overall March 2022 saw average home prices increase versus last year, days on market decrease, and again we continue to see an increase of new listings versus the previous month, a trend that we believe is here to stay throughout the Spring/Summer selling seasons.

In March, we saw a 10% (+$116K) price increase across all property types in the SouthBay versus last year, and a 5% increase (+$55K) versus last month. Days on Market dropped by 40% (-10 days) vs last year and 21% drop versus last month, pointing to an active market with continuing housing demand. The best news is that across many cities in the SouthBay the trend of an increase in new listings coming on the market continues, easing the supply/demand dynamic we’ve had for some time.

Looking ahead, the market will remain very active during this Spring selling season, with an increase in listings and qualified buyers, despite the expected continuation of a hike in mortgage rates in the coming months.

Home Stats by City.

Below are the snapshots of average home prices, # Sold listings, DOM, # New listings by city, inclusive of all types of properties (ie: Single Family Residences, condos, townhomes) compared to March of last year.

Economy & Mortgage News.

The great news is that unemployment rates continue at a near record low, however we have seen a big hike in inflation, which the Feds are expected to combat by increasing rates. According to C.A.R., the increasing inflation saw the fastest price growth coming from rent, medical care, gas prices, and food.

The Feds activity affects the mortgage industry, and we see mortgage rates continuing to climb. The average 30-year fixed-rate mortgage was at 4.72% in the last couple of weeks, reaching the highest levels since December 2018.

Even with rates hiking, real estate activity remains at an all-time high. According to a survey by Realtor.com, two-thirds of homeowners who plan to sell in 2022 are expected to list their homes by August, easing up the supply/demand dynamic we’ve experienced. Buyers who’ve been waiting to purchase are expected to continue their search, even with the rates hike and moderate price increases.

The ever increasing inflation and hike in mortgage rates makes the case for homeowners who have been thinking of selling, this is the time to do so. Prices and demand are still strong, and Spring and Summer are the best times to get the highest offer for their property.

Investor Corner.

For our investor community, we’d like to discuss 1031 Exchanges for those interested in rental properties.

A 1031 Exchange is part of the IRS Code of 1986 allowing taxpayers to sell investment real estate property, and use the proceeds to purchase a “replacement” new investment real estate property, thereby deferring the capital gains taxes of the sale. The exchange has strict rules and timelines an investor must adhere to for the exchange to be allowed.

A 1031 Exchange is a way to carry an investors’ capital gains, without having to pay taxes every time they divest investment property. It is important to note, this exchange is only allowed on investment property, not on primary residences or 2nd homes (unless these homes are rented out).

For an investor to qualify for the Deferred Exchange, he/she must enter into a valid exchange agreement with a 3rd party (“Qualified Intermediary”), who places the funds from the sale of the relinquished property into an escrow account until the new investment property is purchased.

Investors need to make sure they are hiring a professional “qualified intermediary” who acts in compliance with the regulations, otherwise if there are discrepancies, their exchange could be jeopardized, and the investor will not be allowed the exchange, therefore taxes on the capital gains will be due at time of sale.

The investor has to identify (in writing) the replacement property on or before midnight of the 45th day following the day on which the relinquished property sold. The escrow of the replacement property must close by or before midnight on the 180th day following the day on which the relinquished property sold. Timelines are exact, and they are not extended for holidays or weekends.

The other principals in escrow have to agree to cooperate with the exchange, at no additional cost to them.

The replacement property follows the normal course of an escrow, with additional forms provided by the Qualified Intermediary during escrow.

For full details of how a 1031 Exchange works, please don’t hesitate to contact us directly.

To subscribe to our weekly emails of investor opportunities and our digital newsletter, please email Sonia directly at Sonia@bhauseight.com

From BHAUS to yours.