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Big gains for home-sellers in Q2. How much in your area?

Californians who sold their homes in the second quarter netted large profits. Also, the end of federal COVID jobless benefits will have a huge impact on renters in the state, CalHFA helps record number of first-time buyers, and record-low rates are luring younger buyers — and saving all buyers and owners a ton of money.

California owners who sold their home during the second quarter enjoyed some hefty gains, the latest evidence that the market remains on track.

From San Diego to San Francisco, a large majority of home-sellers netted at least $123,000, with only Bakersfield- and Fresno-area sellers below that mark in the three-month period, according to ATTOM Data Solutions, All metro regions in the state were better than the nation’s record-setting profit of almost $76,000 during the second quarter.

But nowhere fared better than San Jose, where the average home-seller pocketed $550,000, a 5% increase compared to a year ago. Silicon Valley owners have enjoyed at least $400,000 in profits from selling their homes since second-quarter 2017, including a record $655,000 in second-quarter 2018. And $300,000-plus gains have been the average the past five years.

San Jose-Sunnyvale has obviously benefited from big tech companies in the region — such as Apple, Alphabet and Facebook — and their head-turning share performance during the past several years, generating a huge demand for homes. But San Jose-area owners are also staying longer in their homes, which helps greatly with building equity and generating huge profits when selling.

San Francisco-Oakland owners had the second-largest profit in the nation at $376,900, though it’s a slight 2% decline from the $385,000 a year ago. 

Average profit for home-sellers in California during the second quarter vs. a year ago
  • Bakersfield: $75,750, up 13%
  • Fresno: $90,000, up 13%
  • Los Angeles-Long Beach: $239,000, up 4%
  • Modesto: $115,000, down 1% 
  • Riverside-San Bernardino: $123,000, up 8%
  • Sacramento: $136,5000, up 9%
  • San Diego: $188,000, up 4%
  • San Francisco: $376,900, down 2%
  • San Jose: $550,250, up 5%
  • Stockton: $143,491, up 11%
  • Ventura-Thousand Oaks: $189,900, up 4%

Source: ATTOM Data Solutions 

If you’re looking for an area of concern — and there really isn’t one — Modesto’s very respectable $115,000 gain during the second quarter was an 8% decline compared to the first quarter, the second-largest percentage drop in the U.S. behind Pittsburgh. But the pandemic and the subsequent shutdown could have affected prices and sales during the third quarter, as noted by the California Association of Realtors.

‘Few indications … the virus would topple the market’

The average seller in the U.S. reported  an almost $76,000 gain during the second quarter, a healthy increase from the $66,500 profit in the first quarter — and the $65,250 a year ago, according to ATTOM Data. It’s another record in profit for home-sellers since the Great Recession.

“The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the coronavirus pandemic,” says Todd Teta, chief product officer at ATTOM Data. “Profit margins hit new records as prices kept climbing, with few indications that the impact of the virus would topple the market.”

That’s good news for owners, but disappointing for those looking to purchase.
Homeownership has long been a major generator of wealth, especially for those who can buy and sell — and purchase a more expensive home until they can sell, downsize and enjoy the income. (Learn more about the Taxpayer Relief Act of 1997 from Investopedia.)

With the end of federal jobless benefits, many Californians will spend more than 50% of their income on rent.

Now that Uncle Sam’s $600 jobless payments have ended, the real pain for renters begins

How much of a difference does an additional $600 per week make with out-of-work renters in California? Turns out, a lot.

As Congress debates the latest round of financial assistance for jobless Americans — including about 2.85 million Californians — many renters are worried about next month’s rent.

Currently, only about 3% of out-of-work Americans are considered severely housing burdened (paying at least 50% of income on rent), clear evidence that the $600 per week is working. But if the weekly check is cut to $200 per week, as pushed by GOP lawmakers, many renters will struggle financially and could lose their housing, according to a Zillow report. The drop in income would dramatically increase the percentage of those severely burdened by rent to 41%.

In California, the percentage of renters burdened by housing costs will more than triple in San Francisco to a 10 times increase in Sacramento with the much-smaller weekly unemployment payments, according to the report. The figures are based on state unemployment checks plus the federal government payments under the CARES Act.

With the elimination of eviction moratoriums in some cities and counties in the state, the number of those unable to pay the rent — and likely lose their housing — will increase without another extension of $600 per week benefits.

Housing burdened (spending 50% or more on rent) with the $600 per week payment — and without
  • San Diego: 11.1% vs. 48.7%
  • Los Angeles: 7.2% vs. 48.4%
  • Sacramento: 4.1% vs. 45.7%
  • San Francisco: 13.1% vs. 44.7%
  • Riverside: 3.6% vs. 43.4%

Source: Zillow

CalHFA posts another record year, helping 13,000 first-time home buyers

California Housing Finance Agency (CalHFA) helped a record 13,000 families become homeowners during the 2019-20 fiscal year, the second-consecutive record-breaking year — and about 2,000 more than a year ago.

CalHFA assists low- and moderate-income families buy homes, with down payment assistance and competitive mortgage rates. Down payments are often the biggest hurdle for first-time homebuyers.

The COVID pandemic is prompting more consumers to look into purchasing, says CalHFA Executive Director Tia Boatman Patterson, who was recently reappointed to her position of the state agency.

“The current COVID crisis facing our state and the nation has made a stable home even more important than ever for working families,” she says. “We are proud to be doing our part to keep those families safe and sheltered in the coming months, and experiencing the lifelong benefits of homeownership.”

Tia Boatman Patterson
Tia Boatman Patterson, Executive Director of CalHFA

CalHFA, a self-funded state agency, is an often-tapped but sometimes overlooked option for home-shoppers, especially with the phrase low- and moderate-income. Some would-be buyers don’t believe they would qualify for the loan programs.

But the income limits are rather generous, from household incomes of $139,000 in rural counties — such as Butte and Tulare counties — to $236,000 in the San Francisco Bay Area. For example, Kings County’s income limit is almost three times the annual household income of $49,750 — but only twice the household income of San Francisco County ($112,375).

CalHFA is more of an option in lower-priced regions, where annual household income is much closer to the median home price. Fresno County’s median home price was $314,000 in June — about three times more than the CalHFA income limit; Orange County’s median price of $870,000 is more than four times the CalHFA income limit of $203,000. 

You can learn more about CalHFA down payment and loan programs on its website.

Pandemic, record-low rates encourage younger residents to buy homes

First-time and younger buyers are opening the door to homeownership nationwide.

The nation’s homeownership rate increased to 67.9% during the second quarter — the highest rate since 2008, when the housing market peaked before the fall with the Great Recession. The 3.8 percentage-point gain from second-quarter 2019 is the largest on record, according to the U.S. Census.

However, as Redfin noted, Census eliminated all in-person data collection with the pandemic, which could have affected some of the figures. But. regardless, data — and comments from housing experts — are indicating more consumers are buying homes.

The homeownership rate for those under 35 years old increased from 36.4% to 40.6%, the second-largest jump in the six age categories. The homeownership rate of 35- to 44-year-olds led the way with a 4.9 percentage point increase to 64.3%.

The pandemic-prompted work-from-home movement has caused many employees, especially in higher-priced areas like the Bay Area, to look at more affordable regions, such as Sacramento and Reno. The homeownership rate nationwide has climbed 9.6% — this includes renters who move back home or in with friends — while the rate of those renting slid 7.2% compared to a year ago.

California’s homeownership rate has also started to recover, thanks to record-low mortgage rates during the past year. Almost 55% of residents are homeowners, about a percentage point better than three years ago, but far from the 60% rate in 2006, just a couple years before the housing market collapse and the start of the Great Recession.

Record-low rates generate hundreds of dollars in savings per month

Record-low mortgage rates are attracting buyers and homeowners looking to refinance and save hundreds of dollars every month.

The current long-term mortgage rate of 2.99% on July 30 is three-quarter points below a year ago — and a full point lower than July 2015, according to Freddie Mac. And a 1.5 percentage points lower than a decade ago.

For homebuyers with a 10% down payment on the median-priced home in California — $626,170 in June — the monthly mortgage payment would be about $2,375. How that compares to:

  • July 2019: $2,609
  • July 2015: $2,683
  • July 2010: $2,868

Record-low mortgage rates of today make for monthly savings of $500 compared to a decade ago.

Ron Trujillo

Longtime business journalist-turned-public relations executive who enjoys reporting on residential real estate in his spare time. He can be reached at ron@calhomenews.com.