How to research the history of your Los Angeles home.

Discovering the history of your house can be an interesting and rewarding exercise.  Basic curiosity may cause you to wonder who may have built the house, and who lived there before you moved in.  What changes has the house undergone? Did anyone famous live there?  Many of these questions can be answered with an internet connection and a bit of time.

A few years back, I was renovating the master bedroom of my house to convert a small adjacent room into a walk-in closet.  The room had a door to the master already installed in the closets of both rooms.  When I discovered some of the original unpainted plaster in the added closets, I realized that there were major renovations done to the house not long after it was built.  So, I got online & investigated the history of my house and can share a few resources I used to find out about my house.

You can start your investigation at the LA County’s assessor office

https://portal.assessor.lacounty.gov

Here you can get some basic facts, like the year built and prior sales.

The next site I checked is the online records for the Los Angeles City Department of Building and Safety.

http://ladbsdoc.lacity.org/idispublic/

The building permits can be a wealth of information.  For my house, I was able to access the original building permit. It showed the owners name & address as well as the contractors name.  My house was built in 1921, and it was built as a 1.5 story, not the 2-story house that I live in now.  Over the years there have been a number of changes to the house that were documented in the permits applied for.  But nothing in the permits showed that the house was changed to a 2 story from a 1.5.

The next step was to look up the house in the Federal Census.  There are a couple of sites that provide census records.  The Los Angeles Public Library offers HeritageQuest online (you need a Los Angeles Public library card).

https://www.ancestryheritagequest.com/HQA

This site is easier to use to find a person but if you spend a bit of time reading the district descriptions, you can browse your district records and find your home address pretty fast. The 1940 Census is fully digitized and is easier to find your home.

https://1940census.archives.gov/getting-started/

Another resource you can access via the Los Angeles Public Library are reverse look up city directories.  https://rescarta.lapl.org/ResCarta-Web/jsp/RcWebBrowse.jsp These directories are much easier to find your address in but the number of directories online are relatively small compared to what the library has downtown.

Another great place to check is Movie Land Directory.

http://movielanddirectory.com/

It is an online resource that allows you to look up an address to see if anyone from the entertainment industry lived at an address. I recommend just entering your street name, then scrolling thru the results to find your address if it exists.

Once you have the names of the folks who owned or lived in the house, you can do some sleuthing in the genealogical sites like Ancestry and FamilySearch. I would love to have photos of my house from the past and by looking for descendants of the residents of my house online I had hoped to reach out to some of them to see if I could obtain copies of photos that included the house.  So far, no luck with that.

But I did learn quite a bit about the house, the most significant fact was that in the 1940 census the house was owned & lived in by a contractor & his wife.  He had three single adults living in the house as lodgers.  My guess is that he built out the upstairs to be a full 2 story home in order to be able to rent out rooms to tenants.

Another fact I found interesting is the number of permits issued to change the garage.  When the house was built, the garage was quite small, but eventually, it was widened and extended over the years as the cars kept getting bigger and bigger.  In this way, the physical structure of the home and its changes reflect the broader social history of LA.  Now, after almost 100 years, I am embarking on a project to convert my garage to an accessory dwelling unit, reflecting the current housing shortage and reduced reliance on cars that the city of Los Angeles is undergoing.

 

Why I am building a rental unit on my property

I bought my Los Feliz home over 20 years ago. I never imagined that I would live in my house for 20 years, much less that it would increase in value by 400%. But today, I find myself in a position where my personal net worth is primarily in the house I live in. The challenge I face at this point in my life is that I need to generate income for my retirement and for this asset class, there are just a few limited ways to achieve this. Having so much in real estate equity limits my choices as to how to leverage this portion of my wealth to improve my quality of life and make the most of the time I have left.

I could sell the house, pocket the profit (after the IRS taxes my profit above $500,000), and put the money in the stock market, buy a rental property, or other investments that could provide additional income or wealth growth. But I like living in my house and my neighborhood, and truthfully do not want all my money in the stock market or in even lower appreciating assets. Also, I would have to find a new place to live and could never find a place in Los Angeles that I could buy or rent at my current mortgage, taxes and insurance costs.

But thanks to a new state law that became effective January 1, 2017, I can build a rental unit on my property and earn a monthly income for as long as the rental market exists in Los Angeles. These rental units on a single-family residential property are called accessory dwelling units (ADU’s). They can be attached to your home, or detached and can replace your garage in certain areas.

My home is a corner lot, adjacent to a fairly busy street. My house faces east and fronting a more traditional quite residential street. My garage is at the rear of my lot facing south opening on the busy street. Although the location is not ideal for the quiet enjoyment of my backyard, it is absolutely perfect for an ADU. This location allows me a unique opportunity to give up the back quarter of my lot to an ADU without having the tenants actually enter the area of the property I use. For the last 10 years, the garage has been used almost exclusively for storage.

So I have the ability for this kind of investment, and the right location, but it also financially seems like a wise investment. Based on my budget, and my projected monthly rent, I believe the amount invested will be fully repaid in just over 6 years. The addition to my property will also likely increase the value of the property, maybe not as much as the full amount invested but it will certainly increase my equity. I have wanted to own rental property for a while and this is a relatively easy way to enter the rental business.

One final factor is also at play with this decision. I have been active and engaged with the housing crisis we are facing in Los Angeles. I have learned a lot about the factors that have contributed to the rising rents and have concluded that lack of supply is the single most significant factor in the development of this crisis. I have advocated for more housing supply in various ways, but by actually adding to the housing stock in LA, I am putting my money where my mouth is.

I have, no doubt, considered the cons. I will have to manage a rental property and have tenants living very close by. And with tenants comes the potential for significant problems; from late night calls about plumbing problems to the worst-case scenario of hostility and non-payment of rent. Also, I am building a small house from the ground up, and the potential for cost overruns and delays are high. Even under the best circumstances, I will not likely see any rental income until 2020. Also, this type of investment is not liquid. If for any reason I need the money I have tied up in real estate, it could take months and I may have to sell at price less than I would like.
But all the arguments against are outweighed by the benefits I believe I will gain from this course of action. So, stay tuned if you are interested in ADUs, I plan further updates as I travel along this journey.

Real Estate Market Statistics

Everyone has an opinion on the real estate market.  There is a surprising consensus on where the market is currently (it favors sellers) and less consensus on where it is going.

Every month I review the market stats for Los Angeles County and attempt to provide some guidance on how the market has changed from the prior month and prior year, both important benchmarks for determining if there is any change in the statistics that might be worth noting and may point to changes ahead in the market.   For the most part, the story has been the same; declining inventory (number of homes for sale), rising prices, and fast sales (low days on market).  But the last couple of months have seen changes in some of the data points that indicate some changes are underway that may slow price appreciation and result in a more balanced market between buyer and seller.

So I thought it might be a good time to review the statistical data points and explain them in greater depth.

When I review the market statistics I use a program provided by the Multiple Listing Service (MLS) called Infosparks. It is a tool that is easy to use and allows for a number of ways to parse the data points.  I first have to select an area to analyze.  For my monthly updates, I focus on Los Angeles County.  It is a fairly large area.  For example, there were over 16,000 homes for sale in June of 2018 in LA County, the City of Los Angeles shows only 2,600.  I choose the larger sample size to give a broader picture.  I also have to choose a property type.  Here I limit my analysis to single family homes and condos, eliminating Income property and leased property.

Homes for Sale:  This is the number of homes for sale on the market as of the last day of the month.  This is the Inventory of the real estate market.    Because there is not a lot of new construction in LA county, the number of homes for sale is directly related to people deciding (or being forced by circumstance) to sell their home.  This factor alone, the discretion of the seller to sell or not., means the number of homes for sale is driven both by broader economic trends as well as the individual decisions of thousands of people living in LA.

Like much of the real estate market, there is a seasonality to the number of homes for sale; there tends to be the highest number of homes for sale during the summer, and the lowest during the winter holidays.  That said there have been declines in the number of homes for sale, year over year for the past 4 years.  The peak inventory in 2014 hit in July with 25,000 homes for sale.  2017 saw a huge drop to a peak in July at 19,500.  In July of 2008, there were over 66,000 homes on the market.  Of course, the market was beginning to tank at that point and prices dropped precipitously as homes did not sell.  So keep that figure in mind.  Inventory would have to grow by 400% before we see the same dynamics at play that caused the market crash in housing prices in 2008.

Closed sales:  This is the number of homes sold during the calendar month.  For June 2018 there were almost 7,000 homes sold in LA County.  This represents almost half the inventory of homes for sale.  We are seeing sales lag a bit from 2017 but over the course of the last 10 years, the number of homes sold does not change all that much; July 2008 saw 6,200 homes sold, the peak was in August 2012 with 7,500 homes sold.  This fact supports the contention that the number of buyers in the market at any given time remains fairly constant, it’s the number of houses for sale that drives the most important data point: median price.  The more inventory in relation to the number of buyers, the lower prices will go.

Pending Sales:  This is the number of escrows that open during the month and ties closely with the number of sales.  For example, there were 6766 pending sales in May 2018 and 6,911 closed sales in June 2018.  This data point is a leading indicator that sales are increasing or declining.

 

Days on Market:  This is the median number of days a home is for sale before an offer is accepted and the house goes into escrow.  This is a very key data point as it shows that homes are selling quickly or slowly and thus if prices are rising or falling.  For the past five years, the number of days on market is lowest in the summer and has been peaking between 17 & 21 days.  Compare that to summer 2008 where the number of days on market was 50.  Again look to days on market to tell you if the market is changing to favor buyers.  Just like the number of homes for sale, days on market has a very long way to go before it reaches the time it took to sell a house during the height of the recession.

 

Month’s Supply of Inventory:  This is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. For example, if there are 600 homes on the market and 100 homes selling each month, there is a 6 month supply of homes for sale.  It is generally considered a Seller’s market if the Month’s supply number is below 6.  Currently, in LA County, the month’s supply is 3.2 indicating it is still a solid seller’s market.  The month’s supply in January 2008 was over 17 indicating a strong buyer’s market, and it dropped to a balanced level in 2010 and has been below 6 since January 2012.  However, this past June, the month’s supply shot up from the prior month to 3.2.  Look for this number to steadily rise in order to see a real change in the market.

 

Median Sales Price:  The difference between the Median Sales price and the average sales price is important.  The average sales price is all of the homes sold averaged out.  This can inflate the numbers, particularly if there are a handful of homes that sell in the high 8 figures.  The Median sales price is the sale price in the middle of the data set when you arrange all the sale prices from low to high. The median sale price, then, represents the figure at which half of the properties in the area sell at a higher price and the other half at a lower price.  In June the Median Sales price in LA County was $650,000.  The average was $942,000.  I prefer the median number as it seems more accurate in terms of what the market is telling us.  The median sales price has been climbing steadily since it bottomed out in January of 2012 at $302,000, up 115%.

 

There are a few other data points I look at; the number of new listings, the price per square foot and the percentage of last list price.  These data points can further refine the view of the market, especially the number of new listings.

These market specific data points tell the story of what is happening in the local real estate market.  But real estate is driven by broader economic trends, and those data points, like average wage growth, the rate of inflation, interest rates etc. are more broadly tracked and can give some guidance on where the analysts see the direction of the real estate market going.  But Like politics, all real estate is local.  In a city or county the size of LA, there are trends in the market that are quite different than the nation at large, and certain areas in LA also have vastly different real estate markets.  If you are thinking of buying or selling a property, it pays to understand the market.  And when you are ready to hire a real estate agent to represent you, ask them about the market data, if they can’t speak intelligently about market statistics, it is likely that they spend more time counting their commissions than trying to understand where the market is heading.

Will the New Tax Law Impact the Real Estate Market

Over the past few years, the real estate market in Los Angeles has been “good” for sellers; prices rise each year and houses sell fast. The market has not been so good for buyers because there are too few houses for sale and they have to pay more and often times are outbid on houses.

The question this condition inevitably brings up is will this market condition this change anytime soon.   This is especially being asked now that Congress has passed the “Tax Cuts and Jobs Act” with significant changes to deductions allowed related to real estate.

To refresh your memory, the new tax law changes some important deductions related to real estate.

First off the amount of the mortgage interest deduction has been reduced from a maximum of $1,000,0000 to $ 750,000.  Also, the property tax deduction has been capped at $10,000.  Both of these changes could reduce people’s incentives to own property as the tax benefits are no longer as strong.  Also, since the standard deduction has been increased, you may not itemize deductions at all, making both the mortgage interest deduction and property tax deduction less important.

Another impact this tax bill has on real estate is the impact it will have on mortgage interest rates.  Although we have been expecting to see interest rates increase as the economy grows, this tax bill is basically stimulus spending and we can expect to see the interest rate rise fast than otherwise.

So with fewer incentives for home buyers and higher interest rates on the horizon, will we see prices go down?  Not likely.

The problem in the market now is low inventory and that will continue to prop up prices, especially here in Southern California.  There is nothing in the tax bill that will incent sellers to sell.  In fact, it is likely to have just the opposite effect.  The cap on the mortgage interest deduction is grandfathered in, so if you currently have a mortgage over $750,000 the interest is fully deductible up to $1,000,000.  If you were to sell, and get a new mortgage, you would now only be able to deduct the interest on the first $750,000.

The impact of the federal tax bill will probably affect certain segments of the local real estate market greater than others.  For first time buyers and sellers of homes under $1,000,000, the California Association of Realtors (CAR) sees minimal impact.

The impact of the tax bill is more likely to dampen price appreciation on higher priced homes, both because these homes require higher mortgages and property taxes, but also because these homes are traditionally part of the trade up cycle we see in real estate.  As more people hold on to the homes they are in now, fewer buyers for more expensive homes will be available.  CAR expects homes priced in the $1,500,000 range to see a 4.4% reduction in price appreciation due to the Tax Bill.

So the key takeaway is that latest tax reform will have some adverse effect on the Los Angeles housing market and the degree of impact varies by price and location.  In general, the Tax Cut & Jobs Act will reduce overall price growth but only by about 1%.  The housing supply problem will be increased as the tax bill will force homeowners to delay trading up or down to their next home. Mortgage rates will likely raise a bit faster as the economy heats up.

So if you think now might be a good time to sell, or you just want to talk through your options, call LAAndyMay 213-713-0385

What $600,000 or less buys you in Los Angeles

In August, the median home sales price in Los Angeles County rose to $602,000.  This is up 7.5% from a year ago and above the peak of $600,000 in August 2007.  The median price has climbed every year since 2012 and it does not appear to be poised to go down anytime soon.  With low inventory and a growing economy, there is little expectation that a significant drop in prices will come anytime soon.

The median sales price means that half the properties sold are below $602,000 and a half are above.  With 7,400 properties sold in August, you can assume there are about 3,700 properties in Los Angeles County that sold below $602,000.  So this begs the question… Where are these more affordable houses?  The answer, to begin with, is not many can be found in the highly popular areas of Los Feliz, Silver Lake, Echo Park & the greater Northeast Los Angeles area.

A quick search shows 30 properties on the market for under $600,000; 11 condominiums and 19 single family residences.

There is one single family residence for sale under $600,000 in all of Silver Lake & Echo Park.  Listed at $475,000, this is a tiny house that appears to be a serious fixer-upper; only cash buyers are being sought.

echo park

There are no single family homes for sale in Los Feliz for under $600,000 but among the 4 condos for sale, there is one listed at $430,000, a steal for this desirable neighborhood.

los feliz

The largest single concentration of homes under $600,000 in the area is in Highland Park where you can find 2 condos, and 6 single family homes currently on the market under $600,000.  The single-family homes range in size from 737 square feet for a 1907 bungalow to a 2000 square foot fixer with tenants who will have to be bought out.  But you can get a fully renovated flip house for $550,000.

Highland Park

Both the Glassell Park & Eagle Rock neighborhoods have 4 single family homes on the market under the $600k, and both have at least one that is a very nice small home in addition to the cash only fixers you see regularly at this price point.

In Glassell Park, you can get a cute cabin in the city for only $555,000.

glassell Park

In Eagle Rock, you can get a 2 bedroom, 1 bath artist’s retreat for $600,000.

Eagle Rock

Home prices will continue to rise in Los Angeles for the foreseeable future, but there are still properties hitting the market every day that you can afford without being a tech entrepreneur or Hollywood show runner.  So if you have been thinking of getting off the rent rolls and into a house, reach out to me.  With the limited inventory at entry level prices, you need a dedicated agent who is motivated by helping people buy their first home. Call LA Andy May.

The Biggest Secret Real Estate Agents Will Not Tell You

Google real estate secrets and you will come up with a ton of results about what real estate agents don’t want you to know.  But talk with a number of real estate agents and you will inevitably come across a few who will offer to let you in on “the secrets of real estate”.  You should be wary when a real estate agent offers to share anything in confidence.

You will hear these “secrets” being shared with you for one reason only, to get you to act fast and work with the agent sharing.  If I have learned one thing above all others in this business, no one can offer a very compelling argument that a secret benefits either the buyer or seller of real estate.  But look below the surface and it’s pretty clear who benefits most from keeping secrets in real estate and that is the real estate agent proffering secrets.

You will hear of a few of the most open secrets in when talking about real estate with agents.  Agents tout their pocket listings, for example, giving the impression they have properties for sale that only they have access to.  Pocket listings are properties for sale that are not listed in the Multiple Listing Service and do not appear in the Apps most people use; Zillow, Trulia, Redfin, etc.  In a few instances, this practice may make sense.  It is certainly within the rights of a seller to withhold the property from the general market.  But the main benefit falls to the listing agent selling the property.  They will make double the commission representing both sides of the transaction.

Some folks will tell you that there are secret arrangements with a small group of agents in a particular area and that if you are buying or selling you should only work with these agents.  If you are a buyer, they claim that they can get your offer accepted over those represented by agents outside the select group.  Although this may happen occasionally, good agents that dominate an area select the best offer for their clients, not the one represented by their friends or co-workers.

When choosing an agent to sell your house, beware of the agent that says they can provide buyers others cannot, or tries to convince you that only they can sell your home for the highest price. They often refer to their own group of buyers as a key element to their ability to sell your house.  But their group of buyers is nowhere as large as the thousands who are out there looking in the market at any given time.

Another common secret you may hear is from an agent is the fact the seller is willing to take less than the asking price. All good listing agents will encourage buyers to make their best offer and occasionally encourage an offer lower than the asking price if the property has been on the make a while.  But to share specific information in regards to the seller’s willingness to accept less is contrary to the fiduciary duty the agent owes to the seller.

A good realtor will attempt to engage with you about your needs and how they can help you achieve your real estate goals.  They will ask questions and offer insight on various aspects of buying or selling a property as it relates to your needs.  Listen carefully and ask questions yourself.  If they are engaged and eager, they might be worth hiring.  If they spend more time touting their own success or trying to convince you they some kind of confidential information, be cautious.  If they seem too eager to share secrets then you know for sure they are just trying to sucker you…  The biggest secret Real Estate agents will not tell you? There are no secrets.

If you would like to talk with a trustworthy Realtor, reach out to me at

www.LAandymay.com

 

The Hot New Thing in Los Angeles Real Estate: Accessory Dwelling Units

They go by many names; Granny flat, Garage Conversation, Mother-in-Law Suite, Backyard Home.   All describe the same thing; Accessory Dwelling Units (ADUs) and they are suddenly the hot new thing in Los Angeles real estate.  Building a second unit on your single family property has become much easier as of January 1, 2017, when California State Legislature passed the Accessory Dwelling Unit Bill (SB 1069 & AB 2299).

The bill eased a number of regulations by reducing parking restrictions, reducing or eliminating water and sewage hookup fees, increasing the maximum allowed size, and requiring a ministerial approval of conversion of an existing ADU.  The city of LA has issued guidelines to inform homeowners what they can do.

Los Angeles has a long history of unpermitted additional units.  In fact, it is estimated 55% of the housing units added in LA County from 1981 to 2000 were unpermitted accessory dwelling units.  Affordable housing advocates are elated with the change in state law. From the increase numbers of permits being sought this year, it appears are homeowners are as well. By the end of February of this year, more than 50 applications to build ADUs were filed with the Los Angeles Department of Building and Safety. That’s more than the full year average for the last decade.

Generally speaking, ADUs can take one of three forms: Detached: Unit is separated from the primary structure, Attached: Unit is attached to the primary structure and Repurposed Existing: Space within a primary residence that is converted into an independent living unit.

So if you are a homeowner looking to leverage your property for income or if you are a first-time buyer and are struggling to afford the high cost of Los Angeles real estate, you now have new options.

For home Buyers looking to qualify for a home loan, lenders may be able to factor in the income from ADUs toward loan qualification.   This could allow you to afford more house than you would otherwise.  Work with a real estate agent to find homes that include a rentable unit on the property.  You will have to perform due diligence to confirm the rental unit is legal, and/or invest additional funds and time to make it legal. The Los Angeles City Council voted in May to approve a new law that makes it easier to get approval for existing units that were created without the city’s approval.

If you already own your home and want to invest in converting your garage into a rental unit you have three options for financing; Refinance your first mortgage and take cash out, get a second mortgage (HELOC), or renovation financing.  Although the costs can be significant, you are not buying the land so the rental income will pay off the investment much faster.

The costs can be significant, and you should plan on a lot of effort and investment of your time to hire architects, contractors and getting the necessary approvals from the city.  There are a number of vendors out there who will handle the entire project for you.

So whether you are a buyer or homeowner expect that Accessory Dwelling units will be something you will see more of in the coming months & years.

Contact me at

http://www.LAandymay.com