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Eric Zunkley is a licensed real estate agent operating in Los Angeles, California. 

Eric Zunkley Real Estate Blog

 

 

Real Estate Rollercoaster in South LA

Eric Zunkley

I've became familiar with South Los Angeles: Mid City, West Adams, Liemert Park, View Park, Ladera Heights, Baldwin Hills, and Windsor Hills. around 12 years ago when I started traveling to Liemert Park for holiday gatherings.

In the coming years there will be an increase in jobs and housing in the Culver City area. With this growth I anticipate there will higher price appreciation in the areas I mentioned above.

I feel in love with Baldwin Hills for the views, and the abundance of mid century homes. This was one of the properties that really caught my eye.

Still from Taco Bell’s “Web of Fries” commercial.

Still from Taco Bell’s “Web of Fries” commercial.

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I remember driving by this home (featured in a Taco Bell commercial) 4109 Don Luis Drive and immediately saw the potential. The whole area is full of homes that have beautiful design. Link to an old article featuring the property, Baldwin Hills restoration embraces its midcentury roots

Here are some of what I am reading and listening too.

Take Two on KPCC - Unemployment is Hitting LA's Black Neighborhoods Hard

Unemployment has swept Los Angeles as a result of the coronavirus pandemic, leaving 20.3% of workers in L.A. County out of a job. But joblessness has climbed much higher in parts of L.A. with large Black populations.

Unemployment in LA County is 20.3%, as low as 10.6% in Hermosa Beach and as high as 32% in View Park / Windsor Hills.

CIM to buy Baldwin Hills Crenshaw Plaza

“CIM Group joins a growing chorus of developers who see potential in converting former mall spaces into offices. Hudson Pacific Properties and Macerich are turning almost all of the former Westside Pavilion into offices and early last year leased the entirety of that space to Google.”

CIM Group backs out of mall buy after community backlash

Developer CIM Group backed out of plans to buy the iconic Baldwin Hills Crenshaw Plaza shopping center following pressure from Black community leaders who argued the purchase represented gentrification and was a threat to South Los Angeles and its economic interests.

The Essential Guide to L.A.’s Post-Pandemic Real Estate Roller Coaster

Amazon’s impending occupation of Culver City—Jeff Bezos’s behemoth will soon expand beyond 700,000 square feet of office space there—is just one of many tech giants moving into the area. Together with Apple, TikTok, and HBO, more than 7,000 new employees are scheduled to work in the incorporated city of 39,000 in the next two years. “That’s a remarkable amount of new jobs with remarkable companies,” says Eric Willett, a research director at CBRE. “[Neighboring] West Adams has a unique confluence of factors: a combination of cultural attractions, access to tech and creative talent as well as infrastructure. We don’t see underlying risk factors there, only huge potential for growth,” he says. Massive developments like Cumulus, which features a 31-floor high-rise and a seven-story building, will add 1,210 rental units this fall, while an additional 400 from a variety of projects are in the pipeline, says Willett. Many of the people moving into these new properties will be coming from Culver City, says Lina Lee, associate vice president of development at CIM. “These are people whose apartment has changed hands or whose rent has gone up dramatically.” But they won’t be heading to just West Adams. Leimert Park, View Park, Ladera Heights, Baldwin Hills, and Windsor Hills have all seen double-digit annual price jumps in the past three years. “There is nowhere else to go to the west, and there are hills to the north. The migration we’re going to see is to the southeast of Culver City,” says Lee. “Four years ago you could get a small three-bedroom home in West Adams for half a million dollars. Now it’s more like $850,000 or higher. That’s a year-over-year increase that far exceeds the rest of Los Angeles during the same period.

Buyer’s are starting to notice the area.

Tami Pardee says landlocked Westsiders in Venice and Marina del Rey are seeking higher ground in Baldwin Hills. “You can get space and land for a lot less money there,” she says. “There are homes from $700,000 to $1.5 million, some of which have amazing city views.” Edel Legaspi and her husband, Christopher Courts, paid less than a million for their 1,600-square-foot midcentury ranch in Baldwin Hills three years ago. “At that point we were priced out of Culver City,” says Legaspi. “It was this great surprise to discover this neighborhood. It’s quiet, with great walks, and our house has great city views. We can see the Hollywood Sign and sometimes the Griffith Observatory.” The higher streets, known as the Dons, have become a hotbed of activity: “Since we moved in, two houses next door and one across the street have been purchased by developers and flipped.

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A brief look at child care and education in Los Angeles.

Eric Zunkley

Since becoming a father, I started thinking more about education and daycare options. I grew up in the suburbs of Cleveland in the 90's. In that location, at that time, you went to your district school. Websites like Great Schools, Zillow, and readily accessible proficiency scores did not exist to compare schools at the frequency they are today. Today in Los Angeles, that is no longer the situation. There are a variety of options for parents to choose from and the stakes are high. I attempted to take a brief dive into some of the options available for education and childcare within LA Unified. Every time I try to finish this post new information keeps pulling me back. This will likely be updated in the future as I learn more.

Let’s try to understand Education in Los Angeles!

 
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Just Starting Out

Infant Toddler Care

  • 0-24 Months.

Preschool

  • Starting between the ages of 2 ½ and 3.

  • Prices for full-time preschool can vary widely but generally $1,200 - $2,000 a month.

  • If you only need partial preschool or a split week some places offer 3 and 4 day weeks and half-days. 3 days of full day care are $1,065 a month at Pinwheel Preschool.

  • The cheapest option for preschool is to join a cooperative program, you volunteer time and have a reduced cost.

  • There are public options available, California State Preschool Program Part-Day, but eligibility is restricted by your income. Go to Early Childhood Education Division to learn more about public options in LAUSD.

Nanny

  • Nanny’s or babysitters are roughly $20 an hour.

Primary Education Years

Transitional Kindergarten (TK) & Expanded TK

“Transitional Kindergarten, or TK, is year one of a two-year Kindergarten program.  TK provides an early childhood education program that builds a bridge between preschool years and traditional Kindergarten. With increasing academic demands and structure in Kindergarten, some parents are aware that their child may not be ready for the traditional Kindergarten program.  In addition, beginning in the 2015-2016 school year, a Transitional Kindergarten Expansion Program (TK-Ex) for younger children will be offered at selected schools.” - LAUSD Transitional Kindergarten and Expanded TK

ETK / TK / K Age Requirements

  • Transitional Kinder Expansion Program (ETK) - ETK is designed for students who turn 5 years old between December 3, 2020 and June 30, 2021. Limited availability, offered at selected schools.

    • The goal of ETK is to provide a quality preschool experience for low income children. Family residency within the school boundary is a priority. After all neighborhood children have been offered enrollment, students may enroll students outside of the school boundaries. A one year, no extension, ETK permit will be made available to facilitate this process.

    • For more details about ETK, visit the ETK Resource page on the LAUSD website.

  • Transitional Kindergarten (TK) – TK is designed for students who turn 5 years old between September 2 and December 2, 2020. Transitional Kindergarten is available in all LAUSD elementary schools.

  • Kindergarten - Child is required to be 5 years old on or before September 1, 2020 for the 2020-21 school year. Kindergarten is available at all LAUSD elementary schools.

  • First Grade - Students entering first grade are required to be age 6 by September 1, 2020. 

Public Schools

If you want to choose a public school your path of least resistance is choose the school in your district of residence. Check the LAUSD Resident School Identifier to search for schools based on an address. Public schools in Los Angeles that have higher test scores often have more expensive homes associated with that address. Most schools do not publish their attendance boundaries and neither does LAUSD (I have asked.) If you want to attend a school outside of your district have a couple options. Your first option to attend a public school outside of your district is to apply for an inter-district transfer. This requires your school of residence to release you and the requesting school to accept you, one does not guarantee the other. Your second option is to apply during open-enrollment. Open Enrollment is a state-mandated policy allowing students K-12 to transfer to any school in the Los Angeles Unified School District (LAUSD) that have identified available seats for the subsequent school year.

It’s worth considering how you will gauge if your child will be successful at a particular school. The most accessible and quantifiable way to estimate if your child will be successful is to look at proficiency scores of other students. This is an imperfect measurement and often masks other social and economic issues. Testing gives you a snapshot but does not measure growth over time. You should tour the school, meet the principle, and learn about the PTA for the prospective school.

If you are considering moving for school and want to be in an area with a higher rated public school. You can view the potential additional housing costs as the alternative for paying for a private school. For example, Saint James on average is $28,343 per year or $2,362 per month from K-6th grades. That is the equivalent of financing a loan of $544,000 at 3.25% for 30 years.

 “We think of public education as being free, and we think of the main divide in education between public and private schools,” Jonathan Rothwell of the Brookings Institution was quoted as saying at the website for the National Association of Realtors. “But it turns out that it’s actually very expensive to enroll your children in a high-scoring public school.” What is the Connection Between Home Values and School Performance?

Charter Schools

Independent charter schools offer an alternative to the school in your district of residence. They also offer the potential to find a unique education that matches the needs of the student. There are two types of charters: fully independent or district affiliated. District-affiliated have closer ties to the district and give preference to children in the school’s district map. Both must have their board-approved charter proposal, and both are held to a high level of accountability. Affiliated charters are likely in more expensive areas and there aren’t many of them.

“Of the 53 affiliated charter schools in LA Unified there are three high schools, five middle schools and the rest are elementary schools. Of the nearly 650,000 LA Unified students, 41,555, or about 6 percent, attend affiliated charters. That’s compared to 107,000 enrolled at 221 independent charters, which are publicly funded and independently operated public schools.” - Affiliated charters: A successful model on its way out?

If you’re interested in learning more about affiliated charter schools I suggest reading the article linked above. The following graphs are pulled from that article.

 
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Magnet Program

Like charter schools magnets are an option outside of your district of residence.  LAUSD Magnet schools offer theme-based instruction with high quality teachers that will meet the needs of your child. From the LAUSD Magnet’s website, “The LAUSD Magnet Program is a court-ordered voluntary integration opportunity available to all students in grades K-12 who live within the boundaries of LAUSD. The purpose is to provide an integrated educational and personal experience which prepares them to function in a diverse society, and helps to eliminate, reduce or prevent long-standing patterns of racial isolation. Magnet School openings are determined by the need to maintain a racially balanced enrollment and by available space. Only gifted, high ability, highly gifted Magnets require specific eligibility criteria.”

Private Schools

Offer the student and parents an opportunity to find a culture match. The most obvious drawback to private schools is that they often come with a price tag. Here are two private schools I’ve looked at,
Center for Early Education, and Saint James.

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Don't wait for home prices to drop

Eric Zunkley

The main takeaway from this Corelogic report is that inventory declines are providing a floor for home prices. Growth in April slowed to 4.7% year over year, down from 5% in March. In other words don’t wait for home prices to drop if you are planning a move. Read the full report below shared from Corelogic - May 22, 2020.

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist

Fewer luxury for-sale listings driving down median home price growth

Understanding the impact of the current pandemic on home prices over the coming years is an important question, yet one that may be difficult to answer until the length of the current pandemic is better understood.

In the year leading up to the COVID-19 outbreak, home price growth has remained solid averaging over 3.5% nationally. According to the latest CoreLogic Home Price Index (HPI®) Report, home prices nationally even started heating up in March with the national index showing a 4.5% increase compared to March 2019.  

Nevertheless, as President Trump declared a national emergency on March 13, and most of the states issued public health orders to Shelter-in-Place (SIP), home buying activity, along with most other economic activities, came to a standstill. On March 19th, public health officials in Los Angeles – which quickly became one of the nation’s epicenters of COVID-19, issued an order, “Safer at Home”, which prohibited group events and gatherings, required social distancing measures and closed certain businesses. Under the initial order, real estate services were deemed “non-essential”. However, the order was revised April 1 to include real estate as an “essential” service. Nevertheless, even after the revision, open houses were prohibited and buyers resorted to virtual tours. Statewide, similar orders went into effect on the same date.

In the analysis below, we take a look at some of the impacts of the coronavirus on the Los Angeles County housing market using the data from the multiple-listing services (MLSs). But first, similar to the national HPI index, Figure 1 illustrates Los Angeles HPI leading up to the pandemic which showed home price growth accelerating in March, recording a 5% year-over-year increase. The acceleration in home price growth began in the third quarter of 2019 after a 16-month period of slowing growth in the region.  

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Figure 2 takes a look at recent weekly data and illustrates year-over-year change in median prices of homes sold and homes that entered into pending status, i.e. a contingent offer was signed on the home. Pending sales, which are generally signed about 30 to 45 days before a closing, are a leading indicator for closed sales and hence a preview into possible price changes ahead. Prices of homes sold appear to have remained on average around the 5% growth rate since the beginning of the year. As suggested by the HPI, home price growth accelerated at the end of 2019 and reached almost 8% at the beginning of the year before moderating to an average of 5%. Even in recent weeks, home prices maintained about a 4% annual increase.   

In contrast, median price growth of homes that entered into a pending status starting mid-March have started slowing and show some year-over-year declines in the week ending May 2nd. As a result, the leading indicator value of the pending price trend suggests that prices on sold listings will show some slowing for April. According to Corelogic Pending HPI index for Los Angeles, home price growth in April is expected to slow down to a 4.7% year-over-year increase, from a 5% increase seen in March (see Figure 1).

Nevertheless, since the data in Figure 2 captures median home prices which are subject to varying mix of sales, declining pending prices may reflect more lower priced homes going in contract compared to last year. It may also reflect higher bargaining power that buyers now have as competition for homes has waned down.

Figure 2 also illustrates another housing market indicator - the share of homes that sold below the asking price, and according to latest weeks’ data, the share has picked up from about 37% at the beginning of the pandemic to 50%. And while the increase accounts for closings that were contracted prior to the pandemic or at the beginning of the SIP orders, it may reflect some negotiations that occurred as a result of the pandemic. Last time the share of homes selling below the asking price increased to 50% was in late 2018 to early 2019 when Los Angeles and many other housing markets in California hit a speed bump.

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Looking forward, Figure 3 illustrates another price trend worth noting – a year-over-year change in median price of new listings – which suggests that the price growth of newly listed homes has slowed considerably from 8% in mid-March to a slight decline at the end of April. Since again these are changes in median prices, the decline may reflect changing composition of the new for-sale inventory. And, as Figure 4 suggests, availability of higher priced inventory in Los Angeles has declined on a faster rate than lower priced inventory. However, these inventory declines in general are providing a floor for home prices. In other words, the relative strength of home prices is supported by very, very limited for-sale inventory.

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Taken together, estimating the impact of the current crisis on the housing market is still a moving target with many moving parts. There are certainly consumers who are forced to make some decisions about their homes, though there are also many others who are waiting for some level of normalization. Most recent market dynamics are not necessarily an indication of what’s to come particularly given the momentum gained in the housing market prior to COVID-19.

According to CoreLogic mortgage purchase application data, millennials were the most active buyers in the market prior to COVID-19 with application rates 20% to 30% higher compared to the first two months of last year (Figure 5). Even through March, the mortgage application rate among millennials exceeded that of last March, up 2%, while the other cohorts saw a notable decline in applications in March. Continued demand from millennial buyers is a positive sign that home sales will bounce back when the economy returns to a “new normal”.

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Should you refinance?

Eric Zunkley

Pasted from Investopedia.
Refinancing break even calculator from Zillow.

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: to obtain a lower interest rate; to shorten the term of their mortgage; to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa; to tap into home equity to raise funds to deal with a financial emergency, finance a large purchase, or consolidate debt.

Since refinancing can cost between 2% and 5% of a loan's principal and—as with an original mortgage—requires an appraisal, title search, and application fees, it's important for a homeowner to determine whether refinancing is a wise financial decision.

Refinancing to Secure a Lower Interest Rate

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

KEY TAKEAWAYS

  • Getting a mortgage with a lower interest rate is one of the best reasons to refinance.

  • When interest rates drop, consider refinancing to shorten the term of your mortgage and pay significantly less in interest payments.

  • Switching to a fixed-rate mortgage—or to an adjustable-rate one—can make sense depending on the rates and how long you plan to remain in your current home.

  • Tapping equity or consolidating debt can be good reasons to refinance—or doing so can sometimes make the debt trap worse.

Reducing your interest rate not only helps you save money, but it also increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment. For example, a 30-year fixed-rate mortgage with an interest rate of 5.5% on a $100,000 home has a principal and interest payment of $568. That same loan at 4.1% reduces your payment to $483. 

Refinancing to Shorten the Loan's Term

When interest rates fall, homeowners sometimes have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a significantly shorter term. For a 30-year fixed-rate mortgage on a $100,000 home, refinancing from 9% to 5.5% can cut the term in half to 15 years with only a slight change in the monthly payment from $804.62 to $817.08. However, if your'e already at 5.5% for 30 years ($568), getting, a 3.5% mortgage for 15 years would raise your payment to $715. So do the math and see what works.

Refinancing to Convert to an Adjustable-Rate or Fixed-Rate Mortgage

While ARMs often start out offering lower rates than fixed-rate mortgages, periodic adjustments can result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate and eliminates concern over future interest rate hikes.

Conversely, converting from a fixed-rate loan to an ARM—which often has a lower monthly payment than a fixed-term mortgage—can be a sound financial strategy if interest rates are falling, especially for homeowners who do not play to stay in their homes for more than a few years. These homeowners can reduce their loan's interest rate and monthly payment, but they will not have to worry about how higher rates go 30 years in the future.

If rates continue to fall, the periodic rate adjustments on an ARM result in decreasing rates and smaller monthly mortgage payments eliminating the need to refinance every time rates drop. With mortgage interest rates rising, on the other hand, this would be an unwise strategy.

Refinancing to Tap Equity or Consolidate Debt

While the previously mentioned reasons to refinance are all financially sound, mortgage refinancing can be a slippery slope to never-ending debt.

Homeowners often access the equity in their homes to cover major expenses, such as the costs of home remodeling or a child's college education. These homeowners may justify the refinancing by the fact that remodeling adds value to the home or that the interest rate on the mortgage loan is less than the rate on money borrowed from another source.

Another justification is that the interest on mortgages is tax deductible. While these arguments may be true, increasing the number of years that you owe on your mortgage is rarely a smart financial decision nor is spending a dollar on interest to get a 30-cent tax deduction. Also note that since the Tax Cut and Jobs Act went into effect, the size of the loan on which you can deduct interest has dropped from $1 million to $750,000 if you bought your house after Dec. 15, 2017.

Many homeowners refinance to consolidate their debt. At face value, replacing high-interest debt with a low-interest mortgage is a good idea. Unfortunately, refinancing does not bring automatic financial prudence. Take this step only if you are convinced you can resist the temptation to spend once the refinancing relieves you from debt. 

It takes years to recoup the 3% to 6% of principal that refinancing costs, so don't do it unless you plan to stay in your current home for more than a few years.

Be aware that a large percentage of people who once generated high-interest debt on credit cards, cars, and other purchases will simply do it again after the mortgage refinancing gives them the available credit to do so. This creates an instant quadruple loss composed of wasted fees on the refinancing, lost equity in the house, additional years of increased interest payments on the new mortgage, and the return of high-interest debt once the credit cards are maxed out again—the possible result is an endless perpetuation of the debt cycle and eventual bankruptcy.

Another reason to refinance can be a serious financial emergency. If that is the case, carefully research all your options for raising funds before you take this step. If you do a cash-out refinance, you may be charged a higher interest rate on the new mortgage than for a rate-and-term refinance, in which you don't take out money.

The Bottom Line

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used carefully, it can also be a valuable tool for bringing debt under control. Before you refinance, take a careful look at your financial situation and ask yourself: How long do I plan to continue living in the house? How much money will I save by refinancing?

The Tax Cut and Jobs Act has changed the size of the loan from which you can deduct interest: it has dropped from $1 million to $750,000 if you bought your house after Dec. 15, 2017.

Again, keep in mind that refinancing costs 2% to 5% of the loan's principal. It takes years to recoup that cost with the savings generated by a lower interest rate or a shorter term. So, if you are not planning to stay in the home for more than a few years, the cost of refinancing may negate any of the potential savings. It also pays to remember that a savvy homeowner is always looking for ways to reduce debt, build equity, save money, and eliminate their mortgage payment. Taking cash out of your equity when you refinance does not help to achieve any of those goals.

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