Article Post

California ADU Updates

CALIFORNIA - Today, we bring you a groundbreaking development in ADU legislation: the signing of Assembly Bill 1033 by Governor Gavin Newsom. This transformative legislation is set to redefine how we approach ADUs in California, presenting opportunities for homeowners, developers, and investors alike. 
 
A Brief Journey through ADU Legislation
 
Traditionally, strict regulations posed challenges for homeowners interested in ADU projects. However, recent legislative changes since 2020 have sought to address the housing crisis by removing barriers and empowering property owners to explore the potential of ADUs.
 
A Flourishing ADU Movement
 
With these relaxed standards, homeowners across California have embraced the opportunity to integrate ADUs into their properties. This trend has not only enhanced property values but also created additional income streams for investors and developers.
 
AB 1033: Unlocking New Possibilities
 
Effective January 1, 2024, a significant opportunity will arise: the ability to sell one or more ADUs separately from the primary residence. AB 1033 amends Government Code section 65852.2, allowing property owners to convey real property interests through the creation of condominiums. Previously, such sales were restricted to specific organizations and under strict deed conditions. This amendment broadens the horizon for potential ADU owners.
 
In Closing: Embracing a New Era
 
Assembly Bill 1033 signifies a significant shift in ADU ownership, offering diverse opportunities for property owners, developers, and investors. This evolution is poised to influence the California real estate landscape in meaningful ways.
 
We encourage you to stay informed and explore the potential this legislation holds for your property. Our team is here to provide guidance and support as you navigate this new chapter in ADU ownership.

 REAL ESTATE - 56 California housing bills. In a significant move to address California's long-standing housing crisis, Governor Gavin Newsom has signed a comprehensive housing package consisting of 56 bills. These new laws are designed to simplify and expedite the construction of new housing, protect tenant rights, and promote housing affordability.

Key Highlights of the Housing Package:
 
Streamlining Housing Developments: The package includes measures that streamline the process for housing developments, making it more efficient and reducing barriers for builders.
 
Incentivizing Affordable Homes: The bills provide incentives and reduce obstacles for the development of affordable homes, helping to create more accessible housing options for Californians.
 
Utilizing Institutional Properties: Institutions such as colleges and religious organizations are now permitted to utilize portions of their property for housing development projects.
 
Accountability for Local Communities: The legislation upholds a state statute that holds local communities accountable for their fair share of housing, ensuring that every community contributes to addressing the housing crisis.
 
Since taking office, Governor Newsom, in collaboration with the Legislature, has made substantial investments of $30 billion in affordable housing production. Additionally, numerous reforms to the California Environmental Quality Act (CEQA) have been enacted into law.
 
A significant achievement has been the establishment of the Housing Accountability Unit at the California Department of Housing and Community Development. This unit monitors and ensures that cities and counties fulfill their legal obligations to plan and permit their fair share of housing. The result has been a 15-year high in housing starts in California.
 
Governor Newsom's Statement:
 
Governor Newsom emphasized the urgent need for increased housing production, stating, "It’s simple math – California needs to build more housing and ensure the housing we have is affordable."
 
SB 4 (Yes In God’s Backyard):
 
This bill allows religious and independent institutions of higher education to build housing development projects on their property "by right."

SB 423 (Extension of SB 35): Extends the sunset on SB 35, a law that requires local governments failing to meet state housing planning goals to streamline affordable housing projects.
 
This is a significant milestone in the ongoing efforts to tackle California's housing crisis. The new legislation is expected to have far-reaching effects on housing development and affordability in the state.

MORTGAGE - Mortgage Rate update: 
 
In recent times, prospective home buyers have found themselves facing the challenge of high mortgage rates, prompting many to wonder about the future of real estate investments. We bring you insightful projections from the Mortgage Bankers Association (MBA) that shed light on what lies ahead.
 
As of mid-October, mortgage rates have surpassed 7.5%. However, the MBA foresees a welcome relief on the horizon. According to their forecast, we can anticipate a decrease to 6.1% by the end of 2024. Furthermore, the 30-year mortgage rate is expected to drop to 5.5% by the close of 2025.
 
The driving force behind this decline will be a decelerating U.S. economy. Mike Fratantoni, Chief Economist and Senior Vice President at the MBA, emphasized this during the association's annual convention in Philadelphia. Not only is a recession predicted in the first half of 2024, but the MBA also anticipates an increase in unemployment and a slowdown in inflation—classic indicators of an ailing economy. Consequently, this will prompt a reduction in rates as the market foresees a pause in the Federal Reserve's interest rate hikes.
 
“The Fed’s hiking cycle is likely nearing an end, but while Fed officials have indicated that additional rate hikes might not be needed, rate cuts may not come as soon or proceed as rapidly as previously expected,” noted Fratantoni.
 
This shift could mean a 19% surge in origination volume for mortgage lenders in 2024, amounting to a substantial $1.95 trillion, compared to the anticipated $1.64 trillion this year. Purchase originations are also expected to climb by 11%.
 
While the pandemic years witnessed a boom in the mortgage industry, 2021 notably saw a record $4.4 trillion in mortgage originations. However, the tide turned when the Federal Reserve initiated interest rate hikes in mid-2022. Escalating rates led to a noticeable dip in home-buying activity, with homes becoming notably more expensive to acquire. As of August, the median principal and interest payment had risen to $2,170 compared to $1,284 in the same period of 2021, according to MBA data.
 
Fratantoni's statement on Sunday, asserting that the "Fed is done" with rate hikes, provides a glimmer of hope. As we approach the final two Fed meetings of the year, the MBA does not anticipate any rate hikes in November and suggests that December may see a similar stance, depending on economic data.
 
Nonetheless, lenders should brace for a period of adjustment in the coming months. Traditionally, this season tends to be a slower one for home sales, with an anticipated turnaround expected by the close of spring in 2024, as shared by Marina Walsh, Vice President of Industry Analysis at the MBA.
 
While home prices are projected to continue their ascent over the next three years, largely due to persistently tight inventory, the MBA offers assurance that millennials entering their prime home-buying years will help keep prices from experiencing a significant decline.
 
In summary, while challenges persist in the mortgage market, the horizon holds promise. As always, staying informed and seeking professional advice will be key to navigating this dynamic landscape.