U.S. home values fell a staggering 9.9 percent year-over-year in the second quarter, the largest drop in the past 12 years, according to Zillow.
The median home value is now at its lowest point since the fourth quarter of 2004, leaving nearly 30 percent of borrowers who purchased a home during the past five years underwater.
The highest rate of negative equity is among buyers who purchased a home in 2006, with nearly half (45 percent) upside down, largely because the median down payment was only 10 percent and prices were peaking.
Over the past year, roughly 25 percent of homes sold nationwide were at a loss and 15 percent of sales were foreclosures.
In some regions of hard-hit California, more than 60 percent of home sales were at a loss and foreclosures sales exceeded 50 percent.
The New York- Northern New Jersey-Long Island MSA had the lowest rate of foreclosure, with just 8.8 percent of home sold at a loss over the past year, and only three percent foreclosure sales.
“The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets,” said Dr. Stan Humphries, Zillow’s vice president of data and analytics.
“The high rates of negative equity are having a direct effect on home sales figures as we’ve seen considerable growth in foreclosure transactions and homes selling for a loss.”
While it may seem as if the sky is falling, 90 percent of markets covered by Zillow returned positive annualized appreciation over the past five years, and all markets improved over the past decade.
After much speculation and fear mongering, the FHFA finally announced this morning that the conforming loan limit for mortgages acquired by Fannie Mae and Freddie Mac would stay put at $417,000 in 2014.
There was some panic the FHFA would lower the loan limits now that we’re mostly out of the woods housing crisis-wise, but interested parties like the National Association of Realtors fought tooth and nail to keep the existing limits in place.
The $417,000 loan limit applies to one-unit properties in the contiguous United States, sans the “freak states,” otherwise known as Alaska and Hawaii.
In those states, along with Guam and the U.S. Virgin Islands, the conforming loan limit is 50% higher and will remain at $625,500.
There Are Two Loan Limits In Effect
Since 2008, there are actually two sets of mortgage loan limits, including the “general” and “high-cost.”
The general, or traditional conforming loan limit, hasn’t changed since 2006, before rising about fourfold since 1980.
Yes, it stood at just $93,750 back in 1980, and was even as low as $252,700 in the year 2000 before rising like crazy along with home prices.
However, the high-cost loan limit has gone on a wild ride thanks to all types of housing crisis legislation, including the Economic Stimulus Act of 2008 and the Housing and Economic Recovery Act of 2008 (HERA).
The high-costs limits were as high as $729,750 from mid-2008 until late 2011, but have since fallen to a maximum of $625,500, which is 50% higher than the general conforming limit.
What About a Loan Limit Increase?
Well, HERA requires that prior home price declines be “fully offset” before an increase can take place.
Yes, home prices have skyrocketed over the past year and change, but they aren’t quite back to where they were.
So until national home prices rise back to pre-crisis levels and beyond, don’t expect an increase to the conforming loan limit.
For the record, many states in our great nation don’t even have a need for the high-cost limits. It’s only relevant in places like California, Colorado, Florida, DC, and parts of the Northeast.
In fact, most metropolitan areas have general conforming loan limits that are too high based on their median home price.
And heck, mortgage rates on jumbo loans are cheaper than conforming loans nowadays, so why even fret?
2014 High-Cost Loan Limits Higher in 18 Counties
But wait, there’s more. The high-cost loan limits actually increased in several counties nationwide, though the FHFA didn’t bother to tell us which ones.
However, we’re fortunate enough to have Holden Lewis of Bankrate do the dirty work for us.
The following metros saw increases either because home prices increased in the areas, or thanks to new metropolitan area boundaries established by the Office of Management and Budget (OMB).
In other words, some counties joined existing metropolitan or “micropolitan” areas where median home values were higher. And they use the highest-cost county median home value to set the entire area.
Here are the lucky winners:
Garfield, Colorado – $625,500 limit, up from $417,000 Kalawao, Hawaii – $657,800 limit, up from $626,750 Maui, Hawaii – $657,800 limit, up from $626,750 Camas, Idaho – $625,500 limit, up from $417,000 Lincoln, Idaho – $625,500 limit, up from $417,000 Essex, Massachusetts – $470,350 limit, up from $465,750 Middlesex, Massachusetts – $470,350 limit, up from $465,750 Norfolk, Massachusetts – $470,350 limit, up from $465,750 Plymouth, Massachusetts – $470,350 limit, up from $465,750 Suffolk, Massachusetts – $470,350 limit, up from $465,750 Rockingham, New Hampshire – $470,350 limit, up from $465,750 Strafford, New Hampshire – $470,350 limit, up from $465,750 Dutchess, New York – $625,500 limit, up from $417,000 Orange, New York – $625,500 limit, up from $417,000 Gates, North Carolina – $458,850 limit, up from $417,000 Buckingham, Virginia – $437,000 limit, up from $417,000 Culpepper, Virginia – $625,500 limit, up from $417,000 Rappahannock, Virginia – $625,500 limit, up from $417,000
By the way, the FHFA noted that the new boundaries resulted in lower loan limits in certain areas, though I don’t know which those are, or if it’s even important.
It’s no secret that housing prices have been quickly climbing over the past decade — the median home value in the U.S. is higher than ever before, at almost $220,000, and some markets, like San Jose, Las Vegas and Atlanta, are reporting double-digit annual home value growth in the U.S. Markets .
But understanding what buyers can get for their money, and how homeowners’ investments have grown over time, can be tough — especially when the footprint of homes themselves haven’t changed much. To help with this, Zillow Research created a map, released today, that allows users to see just how much a dollar gets you in each market, and how this has changed over time.
For example, one dollar will buy you 1.07 square inches of the typical U.S. home, but ten years ago, one dollar bought you 1.23 square inches. Back in 1998, one dollar bought you 2.09 square inches. For reference, one square inch is about twice the size of a postage stamp, and a dollar bill itself is a little more than 13.25 square inches.
However, in the city of San Jose, where the typical home is worth almost 84 percent more than it was twenty years ago, one dollar will buy you just 0.20 square inches of a home. In 2008 it bought you 0.37 square inches, and back in 1998, one dollar bought you almost one full square inch.
Your dollar will go the furthest in Memphis, Tenn., buying more than 2.5 square inches of a home. Expect to get the smallest amount of space for your dollar in San Francisco, where one dollar will buy you just 0.14 square inches.
Fresno falls almost exactly in the middle of Memphis and San Francisco for the space you can get for one dollar, where it will buy you 0.97 square inches of a home.
“A dollar today isn’t what it used to be, particularly when it comes to real estate in light of the rapid pace of home-value appreciation that the American economy has witnessed over the past half-decade,” said Zillow senior economist Aaron Terrazas. “A dollar gets you about 20 times more space in an affordable market like Memphis than in a pricey place like San Francisco. Figuring out exactly how much space a dollar does – or doesn’t – buy you can be sobering, but enlightening. The space we live in is a tangible thing, with real value, and this shows how true that is.”
Home values across the country rose 8 percent over the past year, and Zillow is forecasting them to appreciate another 6.8 percent over the next 12 months. Over the past year, home values in the cities of Baltimore, San Jose, Las Vegas and Dallas appreciated the most.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
Home-value growth is slowing in almost two-thirds of the nation’s largest housing markets, according to the July Zillow Real Estate Market Report. Seattle, Tampa, Sacramento, Calif., and Portland reported the greatest slowdown in home value appreciation over the past year.
Seattle, which led the nation in home-value growth a year ago, is now the 12th fastest-appreciating housing market and reported the greatest slowdown over the past year. At this time last year, home values in Seattle were appreciating at more than 14 percent annually, but have now slowed to a 9 percent appreciation rate.
Home values across the U.S. rose 8 percent in the past year, 0.7 percentage points faster than the year before. While national home value growth hasn’t slowed yet, Zillow forecasts the annual appreciation rate to drop to 6.8 percent over the next 12 months. The median home value in the U.S. is $218,000, the highest value ever reported.
While home-value growth is slowing in the majority of the largest markets, the current annual appreciation rate is still higher than historical norms in all but four of the markets analyzed. In Tampa, where home-value growth has slowed significantly over the past year, home values rose over 10.5 percent in the past year, while the historic average rate of appreciation is just over 5 percent. The historic average annual rate of appreciation in the U.S. is 3.7 percent.
“The nation’s pricier markets are starting to feel an affordability squeeze as buyers begin to balk at the sustained, rapid rise in prices that have followed the strong job growth and high housing demand of the past half-decade,” said Zillow senior economist Aaron Terrazas. “But despite the slowdown, home values are still growing faster than their historic pace in almost all large markets, and it’s far too soon to call it a buyer’s market. And in many of the nation’s more affordable areas, aside from the pricey and exclusive San Francisco Bay Area, home value growth has perked up as buyers continue to seek good value for their money. But it’s clear that the winds that have boosted sellers over the past few years are ever-so-slightly starting to shift.”
The rental market is also showing signs of a slowdown. Median rent across the U.S. rose 0.5 percent over the past year to $1,440, down from 1.6 percent growth a year ago. Among the 35 largest housing markets, 21 reported slower rent appreciation in July compared to a year ago, with Seattle, Portland and Kansas City leading the slowdown.
Rental prices rose the most over the past year in Riverside, Calif., Sacramento and Las Vegas. Median rent in Riverside rose 4.6 percent since last July to $1,898. Median rent in Sacramento and Las Vegas rose 4.4 percent and 3.2 percent, respectively.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
Buyers’ monthly housing costs are growing rapidly as mortgage rates have risen significantly since the beginning of the year.
A recent Zillow analysis found that higher rates are responsible for about two-thirds of the increase in buyers’ monthly mortgage payments compared with what those costs would have been a year ago had home values remained constant at their current level.
Monthly mortgage payments for the typical home are 15.4 percent higher than they were in August 2017. The median home value is 6.5 percent higher over the past year. For someone buying the median U.S. home, their monthly mortgage payments are $118 higher, or $1,416 each year.
These higher mortgage payments reflect the combination of increased home values as well as the higher interest rates for buyers.
Since the beginning of the year, mortgage rates have climbed from the historic lows they were near for much of the past decade. The average mortgage rate at the beginning of the year was about 4 percent, and reached 4.9 percent in the last weeki. Incoming economic data increasingly point to a booming U.S. economy, and this strength is pushing rates higher. The Federal Reserve has raised the target federal funds rate three times so far this year, with as many as five more expected through the end of 2019. A one percentage point increase to the current rate translates to about $1,200 more per year in mortgage payments for the typical U.S. home at its current value, even if home prices stayed the sameii.
While mortgage rates have risen, home value appreciation has slowed somewhat, growing 6.5 percent annually in August after peaking at 8.2 percent in March 2018. These slower price gains may be seen as an advantage for buyers, but the rapid increase in mortgage rates work against the benefits of a slightly cooler market, as the mortgage payments themselves continue to climb.
“For most of the current economic expansion, mortgage rates have remained just off historic lows even as the American economy has accelerated,” said Zillow Senior Economist Aaron Terrazas. “We’re finally starting to see typical patterns asserting themselves in the housing market, and conditions are returning to more of what we would expect in a normal economy. Home buyers and sellers have become accustomed to low rates, and there will be a bit of an adjustment period as the market adapts. Looking ahead, the impact of higher rates may slow the pace of home value growth, particularly in the nation’s priciest markets. Buyers will face higher financing costs, but also could benefit from somewhat less frenetic competition.”
Buyers in San Jose, who also face the highest median home values, will see the biggest impact on their monthly mortgage costs from rising rates. Monthly mortgage payments on the typical home are $1,300 higher than they would have been a year ago, meaning buyers would be spending about $15,500 more every year – about 10 times larger than the nationwide increase.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
The already dizzying Los Angeles housing market is poised to reach new heights, as the latest data from Zillow suggest that the median home listed in the city will soon cost more than $1 million.
As of June 30, the figure was $975,333, more than a 30% increase from five years prior. Statewide, six other cities were even more expensive and had already crossed the million-dollar mark: San Jose, Santa Maria, Santa Cruz, Salinas and San Francisco.
In Santa Cruz and San Diego — the major markets with the largest increases — median listing prices were up more than 40% over the last five years. Inflation over the same period was 21%, according to the U.S. Bureau of Labor Statistics.
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“Even if it is an arbitrary number, it’s an astounding one,” Michael Lens, a professor of urban planning and public policy at UCLA, said of the million-dollar median.
“A signature way that generations have built wealth in this country is through the housing market,” he said, and the figure “puts in pretty sharp focus the barriers to entry in that housing market in building wealth and having a predictable and stable home over your head.”
The rising prices are not just a headache for those seeking to buy a home, either. “Rents and home prices are typically going to move in the same direction,” said Lens, noting that such prices are driven by same issues of “scarcity and high demand.”
“If it’s that lucrative to sell a home, you’re going to be less likely to rent out that home,” he said, “or you’re going to command a very high rent because your other opportunity is to sell something for a million dollars.”
For home buyers and renters alike, Lens said, the solution is the same: more housing.
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Although government programs exist to assist first-time home buyers, those programs are “not gonna help a nurse buy a million-dollar home,” he said.
In California, Zillow’s Home Value Index for June 2023 was $743,361, the second highest of any state. That was almost five times the estimated value of the median home in West Virginia, which had the lowest figure in the nation at $155,773.
The index “reflects the typical value for homes in the 35th to 65th percentile” in a given region, and is connected to but distinct from the actual price at which homes are listed.
By another measure — the median home listing price — California homes have increased by 36.3% to $777,000 in June, according to the Federal Reserve Bank of St. Louis. That up from $570,000 in June 2018.
The top 10 major metropolitan areas in America for median listing price in June were all in California, according to a Times analysis.
Only Hawaii, with a median home value of $837,324, had a figure higher than California’s.
Several Southern California cities are close behind L.A. and will likely soon see their median list prices top $1 million as well.
San Diego, Oxnard and San Luis Obispo are also over $900,000 and have each seen more than 30% growth in median home list price in the past five years.
Lens pinpointed several steps the state is taking to increase the housing stock, but said that it won’t be enough.
His proposed solutions included “getting rid of single-family zoning and upzoning those neighborhoods,” removing “onerous parking requirements” and scrapping rules on minimum setbacks and floor to area ratio.
Altogether, the state should fix “a lot of boring zoning things that together make the cost of building more housing more expensive or put blanket bans on certain housing types,” Lens said.
“We are not on a fast track to building the kind of housing necessary.”
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The top five states in the ranking have an average effective real-estate tax rate of 2.17%. The average annual tax rate in these states on a $244,900 home — the median home value in the country as of 2021, the year of the most recent available data — is $5,310.
Scroll through to see which states are in the top 22 and how they compare.
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The top five metropolitan areas in the ranking have an average five-year median home value appreciation of 48.49%. The average homeownership rate in these metros is 67.89%.
Scroll through to see which metros are in the top 20 and how they fared.
The American dream of homeownership is getting further out of reach for many Hoosiers.
As pandemic-era supply shortages began to return to normal, home prices fell, giving prospective homebuyers hope they could find something affordable. But those hopes were dashed for some who found they could not pay the high mortgage rates, which are currently more than double pandemic lows.
According to Paul Schwinghammer, former president of the Indiana Builders Association, markets will bounce back eventually. But when prices return to “normal,” many will still be unable to afford the investment that sustained previous generations.
“The days of a brand new home at $200,000 are probably very much in our rearview mirror,” Schwinghammer said.
As potential homeowners are pushed into becoming renters due to high mortgage rates, Schwinghammer said the thriving rental market is not the silver bullet to the housing market some think it is.
“That’s not the American dream,” he said.
Homeownership is increasingly expensive
Housing has become more expensive overall in the past several decades.
In 1950, Hoosiers made less — the median household income was $2,827, or about $30,000 in today’s dollars — now the median household income is $61,944. But housing prices have zoomed past that growth.
In 1950, the inflation-adjusted cost of the median home value was around $70,000. Today, the median listing price is $218,000, according to the state housing dashboard. In other words, the cost of housing has tripled, clearly outpacing wage growth in Indiana.
Paul Schwinghammer, former president of the Indiana Builders Association (Courtesy photo)
The cause of this gap is hotly debated. Some argue it is due to a decreased supply of housing — in Indiana, 16.8% of existing housing was built prior to 1940, and the percentage of homes built in the 2010s makes up the smallest slice of the housing pie at just 5.3%.
Experts point to the 2008 housing crash as a major factor in the building slowdown. After the crash, the membership of the Indiana Builders Association fell from 7,200 to 3,000, and the industry has been cautious ever since.
While building picked up pace in response to pandemic-driven demand, Indiana still has a 1.04% shortage of housing stock according to FreddieMac — the largest of all surrounding states.
Density, zoning and community opposition
At the most basic level, a housing unit cannot be cheaper than the raw cost to build it. During the pandemic, supply and demand saw timber, copper and other building materials spike in price, which was exacerbated by high labor costs. Schwinghammer argues this raw cost can be further increased by municipal regulations surrounding lot size, materials and aesthetics.
“That’s all well and good, except you’re ruling out homebuyers,” Schwinghammer said.
For affordability advocates, a relatively simple solution is increasing the amount of homes that can be built in an area by reducing lot size. This allows more homes to be built, increasing supply, all at a lower cost to builders, which are hopefully passed onto consumers.
But in practice, housing density is fiercely contested. Examples of density can range from apartment complexes to duplexes, which can be impossible if an area is zoned for single-family use. Other times, things like parking space requirements can thwart density attempts.
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But overwhelmingly, the biggest opposition to denser housing can come from neighbors and community members, whether it’s an apartment complex in Broad Ripple or a controversial zoning change to allow for multifamily housing in certain Bloomington neighborhoods. In fact, a survey of New York developers found that the majority of opposition to developments came from residents.
Ultimately, Indiana joins most of the country in having high rates of single-family detached housing, with the housing type making up 73.1% of all housing in Indiana, according to the state housing dashboard.
A shortage of affordable housing
While housing supply remains low in general, low-income Hoosiers are facing an even bigger gap when it comes to affordable housing supply. According to a Prosperity Indiana report, the state is 120,796 homes short of affordable and available rental homes, which means there are only 39 affordable units available for every 100 low-income renter households. The numbers show Indiana is performing worse than the regional average.
“Indiana is increasingly out of step with its Midwest peers when it comes to affordability and stability,” Andrew Bradley, policy director at Prosperity Indiana, said.
While commodity prices have dropped, mortgage rates have skyrocketed. (Photo by Spencer Platt/Getty Images)
One method of helping low-income renters is Section 8 housing, a federal program that allows income-qualifying individuals to pay subsidized rents. But the program often fails to meet the demand — in Indiana, people are often on waitlists for three to five years before they can get housing, and sometimes the waitlists themselves are closed. There are currently seven waitlists open on the Indiana Housing and Community Development Authority website, spanning only about a third of counties.
With state and federal assistance so hard to find, some municipalities have attempted to fill the gap in affordable housing through local regulations.
In Bloomington, where housing is the most expensive in the state, local officials attempted to implement inclusionary zoning in 2017. Inclusionary zoning is a type of policy that requires developers to include a certain percentage of affordable units in their projects instead of trying to individually negotiate more affordable units through incentives.
Andrew Bradley, of Prosperity Indiana (Courtesy photo)
That same year, the Indiana General Assembly banned municipalities from doing so, putting a direct halt to the city’s plans. Today, Indiana preempts municipalities from enacting four different types of equitable housing policies. In addition to inclusionary zoning, these include short term rentals, source of income nondiscrimination policies and rent regulation. Indiana is the only state in the country to prohibit all four policies.
Bradley said Indiana’s Housing Task Force is focusing too much on building new homes instead of sharing a focus on strengthening protections for tenants and improving current housing stock. He said this is partly due to a lack of representation of everyday Hoosiers on the task force.
He referenced Senate Bill 202, bipartisan legislation focused on tenant protections that was later stripped down to a study bill, as an example of the priorities of the legislature. The bill did not end up passing the House, and was not selected as a summer study topic.
“Suppliers of new housing have dominated the conversation at the Statehouse,” Bradley said.
Homebuyers suffer from high rates
Although commodity prices have decreased 10% across the board, Schwinghammer said, homebuyers are not seeing true relief due to high mortgage rates, which currently hover around 7%. Although mortgage rates have spiked as high as 16% in previous decades, the current rate is higher than pre-pandemic rates of around 4% and pandemic lows of 3%.
Part of this is due to the Federal Reserve’s sharp hikes in interest rates in order to combat inflation.
Ultimately, Schwinghammer said it would take 33% of the average person’s wage to begin homeownership — resulting in the highest debt to income ratio since 2007. Housing is effectively the least affordable it’s been in nearly two decades, he said.
As potential homebuyers are shut out of the market, builders have turned to the build-for-rent phenomenon sweeping the country in order to keep busy. BFR involves communities of single family rental homes that people can live in without making a purchase, allowing people to avoid interest rates.
Schwinghammer said BFR, which once took up 3% of the market, is now 15%.
As people struggle to afford new homes, pre-existing — and often cheaper — homes are selling less because homeowners don’t want to trade in their lower rates for the current 7% interest rate.
But the market is cyclical by nature, Schwinghammer said, and interest rates will likely be declining in a year.
“The natural ebbs and flows of the market will allow that to happen,” he said.
The Palos Verdes Peninsula — a land of rolling hills, jagged cliffs and sweeping views of the city and ocean — boasts some of the most beautiful terrain in Southern California.
It’s also long proven to be some of the most dangerous.
For hundreds of thousands of years, the peninsula has been plagued by an ancient landslide complex that slowly reshapes the topography. The earth lurches and warps, sometimes slowly, sometimes rapidly, destroying homes and infrastructure along the way.
The latest damage was dealt to Rolling Hills Estates, where a major ground shift led to 12 homes being evacuated after a fissure snaked its way through the neighborhood. Foundations cracked, walls collapsed and some homes were visibly leaning as the hillside upon which they were perched slowly descended into a canyon.
Land movement is a stubborn, if periodic reality for much of California, particularly the coastal hills of the South Bay and Orange County.
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Laguna Beach, Laguna Niguel and San Clemente have dealt with destructive slides. In the 1920s, a handful of homes in San Pedro slid into the ocean, creating what’s now known as the Sunken City. A mile south of Rolling Hills Estates, the city of Rancho Palos Verdes is hatching plans to avoid a similar fate.
“This remains an active situation,” said Rolling Hills Estates Mayor Britt Huff at a city council meeting on Tuesday, adding that due to a break in a sewer main, five additional houses were ordered to evacuate earlier that day.
At the meeting, the council declared a state of emergency in order to access broader resources from state and federal agencies.
“No one expected this. Landslides don’t really happen in this area,” said resident Lisa Zhang.
A landslide-prone peninsula
The peninsula’s bout with landslides is well-documented in the geological record, stretching back millenniums but coming to a head 67 years ago when an L.A. County road crew accidentally reactivated an ancient slide complex while building an extension of Crenshaw Boulevard in Rancho Palos Verdes.
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The crew dug up and shifted thousands of tons of dirt, throwing things off balance enough to send the land in the Portuguese Bend into a super-slow-motion descent and activating a landslide.
That’s just one ancient landslide complex. According to El Hachemi Bouali, assistant professor of geosciences at Nevada State University who co-authored a report on the Portuguese Bend landslide complex, there are areas all across the peninsula at similar risk.
Due to precipitation and geology, the hills are uniquely susceptible to movement. Layers of clay — bentonite and montmorillonite, to be specific — are found beneath the ground, interspersed between layers of bedrock. When water absorbs into the earth, it expands and lubricates the clay until it’s slippery enough for the land to ride downward with the force of gravity. Even thick layers of bedrock will slip.
Water infiltrating the earth is the most common cause of landslides, according to Brian Collins, a research civil engineer with the U.S. Geological Survey. In California, these types of landslides are typically triggered during a big rainy season.
But there is another factor at play. The Palos Verdes Peninsula — like Laguna Beach and San Clemente — is packed with people. Those people have sprinklers, gutters, irrigation systems and leaky pipes that all add water to the earth.
Inland, an area as hilly and craggy as the Palos Verdes Peninsula might not be expected to house roughly 65,000 people. But anywhere with a view of the ocean, with secluded canyons to hike and ride horses in, will always be attractive — especially right next to L.A.’s flat sprawl.
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What caused the slide?
There’s no official diagnosis on what caused the landslide. According to city officials, a geologist will study the site and draw a conclusion from there, reviewing both the history of the area and any recent changes to the land.
But geologists and structural experts have suggested a few likely culprits: land grading, rainfall or something as simple as a broken pipe.
The townhomes destroyed in the landslide were built in the 1970s, and according to Kyle Tourje, a structural assessor with Alpha Structural, much of the land was graded and reshaped to make room for buildable lots starting in the 1950s.
So even though lots might be relatively flat, if land was moved in order to make it flat, the soil might not be as compact as it should be. When soil is looser, it’s more susceptible to water.
Tourje said the record rainfall of winter and spring didn’t help, but he thinks the slide was likely caused by a concentrated water source such as a broken pipe or sewer drain.
“On a big graded tract like this, one line that feeds one sink of one single house can affect the soil,” he said. “Next month, your water bill is extremely high. Next thing you know, your house is at the bottom of the canyon.”
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Tourje works on landslide damage every week but only comes across slides of this magnitude a few times per year.
“This is a total loss. These homes will have to be completely demolished,” he said.
Bouali, on the other hand, says unless a smoking gun appears, such as a burst pipe or a resident’s $1,500 water bill for June, he’s leaning toward rainfall as the primary culprit.
“My guess is that there has been a slow decrease of the slope’s resisting forces due to infiltration of precipitation into the clay layers,” Bouali said, adding that even though the rain fell in the spring, it might take until July for the water to flow through the layers of clay.
He points to California’s Landslide Susceptibility map, which shows almost the entire peninsula as highly susceptible. Given the area’s geological makeup, as well as the roughly 20-degree downward slope upon which the homes were perched, the landslide didn’t necessarily come as a surprise.
Since the ‘70s, regulations have become stricter with limits on how steep builders can grade lots and requirements for more subsurface drainage systems and more compact soil.
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But those measures might not help if the slippery layer is 60 feet underneath all the grading and maybe several strata of bedrock, according to Tony Lee, a local geologist who has worked in the area for 30 years.
Lee said most of his clients come from other areas of the peninsula where slides are more prevalent, but he’s already received multiple calls from homeowners in Rolling Hills Estates wanting to get their properties checked.
The allure of living in a landslide zone
Common sense might suggest that the land is uninhabitable — that building homes on terrain prone to landslides will inevitably lead to disaster.
But California is a beautiful place, and Californians love looking at it. It’s the same reason that hillside homes are perched on stilts in a region that deals with devastating earthquakes. The same reason buyers flock to the fire-prone hills of Malibu or the Western Sierra or cram beach houses onto the sand as ocean levels rise.
“I’ll be here until I can’t be here anymore. I’ll slide away with the land,” said Claudia Gutierrez, a longtime resident of Portuguese Bend, an area about a mile southeast of the slide site that has been dealing with landslide issues of its own.
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If the Rolling Hills Estates landslide is the hare, moving quickly and aggressively, then the Portuguese Bend landslide is the tortoise, with the land slowly shifting roughly eight feet per year for the last 15 years.
It has caused chaos in the community, with houses sliding across property lines and roads warping into roller coasters. But according to Gutierrez, that hasn’t kept people away.
“We had homes in the middle of the active landslide zone that sold for more than $2 million last year,” she said. “I’m amazed.”
For newcomers, the peninsula offers not only great views but stellar schools, cool coastal weather, larger lots and a more relaxed, rural feel compared to the bustling cities surrounding it. And for longtime residents, even though they’d be able to sell their houses, the peninsula has become home — even if that home is slowly slipping out from under them.
According to local real estate agents, the landslides have never been a major concern to residents of Rolling Hills Estates.
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“People think this was an isolated incident,” said Mingli Wang, a longtime real estate agent in the area. “People believe their homes are safe. They don’t think it’ll happen to them.”
She noted that during home sales in the city, sellers disclose natural hazards such as the area being high-risk for fires or a dormant earthquake zone. But landslides are not part of the disclosure.
Wang is a resident herself, and she’s not concerned about the community’s safety going forward.
Steve Watts of Vista Sotheby’s International Realty said that landslides are never part of the conversation during a sale in the city.
“If your house is hanging off the edge of a cliff, they’ll sometimes get a soil report to check how deep the bedrock is. But it’s very minor,” he said.
Watts said the gated neighborhood where the homes slid into the canyon might see a slow market in the short-term, but sales will be back to normal before long.
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Zillow puts the median home value in Rolling Hills Estates at $1.918 million, nearly double the $1.067-million mark set in 2015. Many homes in the city face Torrance, missing many of the ocean views featured elsewhere on the peninsula, but still fetch prices north of $5 million. The cheapest single-family home currently on the market is offered at $1.8 million.
When Bouali, the geologist, leads classroom discussions about hazardous areas, the conversation inevitably leads to the question, “Why do people even live there?”
He said it often comes down to the cost of moving. And Southern California has an additional factor: most of the region deals with some sort of natural disaster risk, whether it’s a landslide, flood, wildfire or earthquake. Pick your poison.
That said, he added that he wouldn’t personally live on the peninsula.
