Home Ownership Predictions Rolling in For 2018
December brings Oscar predictions hand in hand with real estate market predictions. As with any prediction, the source is always to be considered. While Aunt Mildred has a lock on picking best Costume Design come Oscar time, she may not have all the facts when it comes to the real estate market.
Luckily, Realtors have access to a deluge of data to predict what we will see in the coming market year as well as analysts that can read the tea leaves.
Most notably and specific to California Homeowners is the economist team at the California Association of Realtors. With thousands of Realtor members statewide, they are often asked about another possible housing bubble. In response the produced the 15-page "B" Word report which just released.
- Statewide, housing prices are still 9% below the pre-recession peak
- Lack of inventory is eveident with 2.1 million California jobs added while only 450,000 new housing units were built.
- Interest rates still record low, even with the rate increase from early December 2017
- Loan standards are significantly tighter than pre-recession, borrows have more "skin in the game" now
- Stock market is at a near all-time high across all major indexes
- California State Government is running at a narrow budget surplus.
- Statewide, we will continue to see a rise in pricing, despite it outpacing income growth
- California will outpace the housing costs of the rest of the US
- Housing Affordability will continue to push people out of state
- Potential changes to the state and local tax (SALT) deductions could provoke even more out-migration
- Low mortgage rates will sustain current home values, dramatic changes in the Federal interest rate could affect over-valued areas like parts of Orange County and the Bay Area. Bungalow Heaven could be lumped into this category based on the above average PPSF that we currently see.
- Lack of inventory is what will keep values high, however, the worsening Housing Affordability Index has already been pushing people out of state while possible tax reform that would cut state and local tax (SALT) deductions could push even more out.
In conclusion, the home values are quite stable. Only a jolt from outside the housing market (alien invasion, Armageddon) or a mass out-migration from the state will shift prices dramatically down in 2018. One million outmigrants in a year are highly unlikely knowing that it took ten years for 830,000 people to move out of California.
Buyers hoping for a plummet in prices will need to realize that this is the new norm. Owners looking to sell will see significant returns and a fast sales process (given they have the right Realtor and price right).
For the full 14 page Bubble report from CAR, you can download it HERE.
Michael Robleto is a REALTOR® with Pasadena based Podley Properties. His analytical and open approach to sales has served his clients well in his twenty years of sales. Michael brings a modern data and technology driven approach to real estate while focusing on the historic architecture of Bungalow Heaven. For Sellers or Buyers Agent representation he can be contacted directly.