Government has “big task” to solve affordable housing crisis, famous real estate expert says
The luxury real estate market in Los Angeles continues to grow even as more buyers flock to other states to subsidize their income and expenses.
With a huge shortage of available home inventory – whether affordable or luxury – more and more buyers are turning to social media to research their real estate leads. In an ultra-competitive market, buyers don’t want to get involved in bidding wars and often pay above the asking price to push their home purchases into receivership.
Fox Business met a renowned real estate broker Mauricio Umansky, who also appears in âMillion Dollar Listing: Los Angeles,â for his take on current market trends and how he thinks the country can address its affordable housing crisis given the breakneck pace at which the world evolved.
For the head of Los Angeles-headquartered brokerage The Agency, Umansky believes the government has a big job to do as it develops and implements mitigation strategies.
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Fox business: Do you think the trend of spending above asking price on a home is something we’ll continue to see this year and into 2023-24 and beyond?
Mauricio Umansky: Well, I really think that’s a trend we’re going to see, certainly in 2022 and 2023. The world is moving too fast these days. Back in the days when we were having these conversations, I think we would be making four or five, six year predictions. I think today, making predictions with the speed at which the world is changing, trying to make predictions that go beyond two years is just difficult, and it’s starting to become almost like prophecies that kind of start. become bulls – t, if you will. The world is moving too fast. It changes too quickly.
We live in a different world, right? The cycles are different. I think we have to understand this to adapt to a new world. You still have very low stocks, and you still have a lot of people who want to make changes and move in their lives. We still have low interest rates, we certainly expect interest rates to start to rise. I think the government should be careful about increasing them.
Fox business: Do you think we will see a sharp increase in mortgage interest rates for the foreseeable future?
Oumanski: There is currently a very fine line between inflation and affordability. And I think the government has a difficult task ahead of them. I think affordability from an interest rate perspective can handle some hikes, but I’m not sure they can handle big hikes. And yet, you still have to control costs, inflation, and shortage of inventory, and talk about shortage of supplies – lack of jobs.
The absence of all of this slows down construction, which therefore slows down supply, and demand is not going to slow down. So, I predict that we will continue to see prices rise and the demand for housing will be strong.
The idea of ââdigital shopping, I believe, will continue. Whether you call it social media or strictly search the web, whether it’s a Zillow or The Agency website or my website or whatever. I think this is going to be a trend that you are going to continue to see. And especially in California, where the contract really protects the buyer from their due diligence so that you can afford to put something on deposit, put it under contract, and then come and see it without having any money at risk. There are other states where you can’t do this which are a bit more complicated.
I certainly think the prices and the demand will be there until the government raises mortgage rates too much.
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Fox business: Regarding the lack of inventory, as you mentioned, is it common in the luxury real estate market to buy land and then build your house to your specifications, dreams and imagination? over a buyer saying, “I want something that is turnkey and ready to move in now?”
Oumanski: No, I think turnkey is always something luxury buyers are looking for. They don’t have the time, they don’t want to get involved in the planning and the design and everything that is going on. You know, a lot of these people have lives to live, businesses to run, things to do, and they want immediate satisfaction, and they want to move into something that they love and love now rather than jump into it. construction. The difference also where you start to see this trend that you are talking about, which is the purchase of land and buildings, usually manifests itself when the price of a house is much more expensive than the purchase of land and buildings.
With the high construction costs right now, with the labor difficulties, with the supply difficulties – I mean, right now I have customers who are waiting months to get their Viking devices or their refrigerator and it slows down their construction a lot. And when you see this downturn, you keep in mind that your interest payments to the bank and your cost of money don’t stop.
The only thing that stops is the construction, but your spending continues and then all the headaches that come with it. So building is not yet for ultra-luxury where you buy extraordinary land and you have the capacity to wait and you have the capacity to take the time. There is definitely a trend in this because you see ultra-high net worth, ultra-luxury individuals really doubling their investments in land and wanting to own land. But this is their third house, their fourth house. There is no pressure to prepare the house and move in. It is an investment in life.
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Fox business: It seems that in the last few years – and certainly in the last few months – many rental properties or apartment buildings and condominiums under construction are owned by companies, which usually drives up tenant prices. Is this a trend that you think can be rectified or regulated in any way so that it continues to provide people with affordable housing?
Oumanski: This is a problem we face in the United States, and a lot of it has to do with, again, that there is a housing shortage and there is a housing shortage. Housing related rentals – not just housing in terms of purchase, but there is a dearth of available properties.
As the people seek to solve the problem of the shortage of supplies, they have to buy land which is cost inflated, and then they have to build a building with apartments which cost lumber, cement and labor. work and each device is inflated. is more expensive. You can’t pencil in affordable housing or affordable rentals with these high costs.
So you’re going to have a real problem creating affordable prices in the rental world for business people, entrepreneurs, developers, if they can’t do something in pencil. You know, it’s a very simple formula. It cost me $ 100, I have to rent it for $ 102. It’s that simple, okay. It can’t cost me $ 100, and I rent it $ 95. This is the recipe for going bankrupt.
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Fox business: It’s all about math – in the end, it must work.
Oumanski: At the end of the day, it’s all about the math. So unless the government really gets involved in subsidizing these developers in order to solve the housing crisis, the problem is that the government, the world and the economy are very divided. You’ve got everyone saying, “Tax the rich, tax the developers, tax the businessmen” – well, you can do that, but these people who do the business and build the apartment buildings can’t give an apartment that you can afford. So it’s a Catch-22 situation.