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Category Archive: ‘Forecasts’

More Predictable in 2018

Last year at this time we were in shock at the thought of what a Trump administration might mean for our real estate market – there was no telling what was going to happen!

It’s not a stretch to say that next year should be easier to predict!

Factors to consider for your 2018 predictions:

  1. Trump will name new leaders of the CFPB and the Fed, and both people should push for easier money.  I don’t think we’ll be seeing no-doc mortgages any time soon, but the new regimes could strive for more things like higher production of the low-down-payment Fannie/Freddie loans (not that the lower-end markets need much stimulus!).
  2. Goldman Sachs said yesterday that they expect the Fed to raise rates four times next year.  But the recent Fed moves haven’t resulted in a corresponding increase in mortgage rates – so we might get into the mid-4% range, which isn’t the end of the world.  The buyers – or sellers – can always buy down the rate if needed.
  3. The tax reform will get watered down and passed when no one is looking, and buyers will forget about it quickly because it’s so hard to calculate the actual impact. Rising rates are much easier to figure.
  4. The overall inventory of homes for sale probably won’t change much.  There might be occasional spurts of listings here and there, but there is still no place for seniors to go that’s better than where they are today.  We should have the same or slightly more estate sales, but no significant increase, and with the taxation so heavy on long-time owners, they and their families will just wait until they croak.
  5. More affluent people from higher-end markets who are thinking about retiring will see coastal San Diego as a terrific option.
  6. Our recent real estate boom since 2009 has caused sellers and agents to be extremely optimistic.  Yesterday an agent complained about getting ‘lowballed’ when she got an offer that was $25,000 under the bottom of their range a week before Thanksgiving.  It will take months – or years – before anyone notices, let alone reacts, to a major shift in buyer trends.
  7. We are numb to the news.  Mass killings are a regular event, sexual deviants are a dime a dozen, and it’s hard to imagine that Trump could say anything that would be a shock now.  The news might be what’s causing buyers to want to hurry up and hunker down!

Expect more of what we’ve had recently – low inventory, and higher prices.  But I do think we are way overdue for sales to decline – I already guessed 5% fewer NSDCC sales in 2018, and it could be worse.

Posted by on Nov 21, 2017 in Forecasts, Jim's Take on the Market, Market Conditions | 0 comments

NAR 2018 Forecast

The N.A.R. Annual Conference is wrapping up this weekend.  Yunnie revealed the N.A.R. Forecast for next year:

Existing-home sales will finish 2017 at a pace of 5.47 million, the best volume in 11 years, but only a scant 0.4 percent higher than last year’s 5.45 million, according to data from the National Association of Realtors (NAR). In 2018, NAR predicts existing-home sales will rise by 3.7 percent to 5.67 million.

NAR also forecast a 5.5 percent increase in the national median existing-home price for this year and next year. However, the trade group also noted that first-time buyers accounted for only 34 percent of sales over the past year, the fourth lowest level since NAR began tracking this date 36 years ago.

“The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent,” said NAR Chief Economist Lawrence Yun. “Despite improving confidence this year from renters that now is a good time to buy a home, the inability for them to do so is causing them to miss out on the significant wealth gains that homeowners have benefitted from through rising home values.”

Yun also forecast single-family housing starts to rise by 9.4 percent to 950,000 next year. New single-family home sales are likely to total 606,000 this year and rise to around 690,000 in 2018, Yun added, with an extra prediction that mortgage rates will gradually climb towards 4.50 percent by the end of 2018.

He did alright predicting sales for this year.  Last December, he forecast 5.5 million sales for 2017, and he says we’re on a pace for 5.47 million.  He also predicted that the median sales price would drop 4% too, but he didn’t include an update on how we’ll end up for 2017.  Our San Diego Case-Shiller Index should wind up about 8% higher year-over-year.

We also have our new president – nothing on twitter about her plans though:

After an exhaustive nationwide search for the new CEO of the N.A.R., it turns out, he was already in the building.  Bob was the right-hand man to his predecesor, Dale Stinton, a devout Zillow hater but who did nothing to challenge.  Bob promised to turn the association upside-down, and after three months of preparing for this moment, here’s what he came up with:

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Posted by on Nov 5, 2017 in Forecasts, Jim's Take on the Market, Realtor, Sales and Price Check | 1 comment

2018 Forecast

The 2018 forecast from the California Association of Realtors is out, and they are towing the company line as usual.  They expect the statewide sales to increase 1% and the California median sales price to rise 4.2% next year.

How is San Diego County doing this year?

Here are the detached-home sales and median price for the first nine months of the year in San Diego County:

SD County Detached-Home Sales, January through September

Year
Number of Sales
YoY Change
Median SP
YoY Change
2012
18,648
$375,000
2013
19,385
+4%
$450,804
+20%
2014
16,858
-13%
$497,250
+10%
2015
18,389
+9%
$527,000
+6%
2016
18,192
-1%
$555,000
+5%
2017
18,068
-1%
$600,000
+8%

My guess is for the San Diego County detached-home sales to drop 5% next year, and the median sales price to rise 5%.  The drop in sales to be on the high-end.

What’s your guess?

The C.A.R. 2018 Forecast:

Read More

Posted by on Oct 16, 2017 in Forecasts, Jim's Take on the Market | 14 comments

Housing Jitters

The economists like the housing market, but they are known to play it safe.

How about the consumers?

I’d prefer to survey the active home buyers and sellers in our area to get the best reading on our future.  But here are the sentiments of 1,079 American adults over the age of 18 who were surveyed last month:

Fifty-eight percent of homeowners say that they expect there will be a “housing bubble and a price correction” in the next two years – up 12 percentage points since April.

Looking across the country, residents in hot housing states are particularly jittery. The top five states where residents believe the market is approaching a “housing bubble” include:

  1. Washington (71 percent)
  2. New York (68 percent)
  3. Florida (63 percent)
  4. California (59 percent)
  5. Texas (58 percent)

While experts have long suggested living in a home for more than seven years could lower a homebuyer’s exposure to market fluctuations, only 37 percent of millennials in the survey plan to live in next home they buy for more than six years, making the so-called “rule of seven” less relevant to the next generation of serial homebuyers.

“Beyond the jitters, I see in our survey an increasingly informed nation of homebuyers, who understand the risk of the market,” said Melendez. “To those concerned about a price correction, or waiting to time the market, I recommend a proactive approach. Have an exit plan, then anytime you find a home you love is a good time to buy.”

Read full article here:

LINK

How do you feel?  Leave your thoughts in the comment section!

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Posted by on Aug 17, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying?, Thinking of Selling? | 7 comments

Economists: Appreciation to Continue

Home values continue to climb, passing $200,000 in June for the first time ever. A panel of more than 100 real estate economists and experts expect that trend will continue – while they say, on average, that there’s a 52 percent probability of the next recession starting by the end of 2019.

  • On average, real estate economists and experts say there’s a 52 percent probability of next recession starting by the end of 2019.
  • Most experts expect a geopolitical crisis will trigger the next recession, which a majority believe will have only a moderate impact on U.S. housing.
  • Home values will climb 5.08 percent by the end of 2017, the group said.

The probability jumps to 73 percent for a recession starting by the end of 2020, according to the Q3 2017 Zillow Home Price Expectations Survey (ZHPE), a quarterly survey sponsored by Zillow and conducted by Pulsenomics LLC. The latest survey was conducted in late July and early August.

Most of the panel’s experts (67) think a geopolitical crisis is likely to be a major trigger for the next recession. That would be a rare occurrence. Although the terrorist attacks of Sept. 11, 2001, prolonged a recession, most sustained downturns – including that one – have not started with a geopolitical crisis.

The panel ranked likely triggers as 1, 2 and 3 – and with that weighting, a geopolitical crisis also came out ahead, with a score of 138. It was higher than a score of 111 for monetary policy, 101 for a stock market correction and 55 for political gridlock as other possible recession triggers.

On average, the group expects the next recession to have only a moderate impact on U.S. housing. The group said San Francisco and Miami would be the most affected, followed by Los Angeles, New York, San Diego and Seattle.

https://www.zillow.com/research/experts-recession-late-2019-16334/

Posted by on Aug 17, 2017 in Forecasts, Jim's Take on the Market, Zillow | 0 comments

Four or Five More Years

An excerpt from this article:

http://www.latimes.com/business/la-fi-home-prices-20170725-story.html

Home prices have now been rising for more than five years, the result of a growing economy, rock-bottom mortgage rates and a shortage of homes on the market.  Economists said that absent a recession or a surge in mortgage rates, California home prices could keep climbing at 5% a year for the foreseeable future.

That’s faster than the long-term average of 3% nationwide, but it’s difficult to build housing in California and the economy is strong, said Richard Green, director of the USC Lusk Center for Real Estate.

“It could go on for another four or five years,” he said.

CoreLogic’s report showed that home prices in Southern California rose in every county last month compared to a year earlier, not just in Orange and Los Angeles counties.

In San Bernardino County, the median was up 12.3% to $320,000; in Riverside County, 7.5% to $357,000; in Ventura County, 2.7% to $565,000; and in San Diego County, 9.8% to $543,500. Across the region, sales rose 4.3%.

Chris Thornberg, founding partner of Beacon Economics, said he doesn’t expect a recession and thus doesn’t foresee a time when home prices stop rising.

“Candidly, the only thing that could upset the apple cart in California is if we build a whole bunch of housing and that’s as likely as an alien attack.”

Posted by on Jul 27, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Sales and Price Check | 0 comments

C.A.R. Economist is Positive

Leslie Appleton-Young, vice president and chief economist, California Association of REALTORS® (C.A.R.), recently delivered her annual “2017 Housing Market Perspectives” presentation to a group of local REALTOR® members.

“It may be a bumpy ride, but I believe there will be enough sales in San Diego County in 2017 for everyone to have a great year,” she said. “San Diego is outperforming the state and California is outperforming the nation. Although 2017 started with a bang with higher consumer confidence, there is still uncertainty and wildcards in such areas as trade, healthcare, immigration, federal funding and interest rates. An economic boost is good for housing in the short run, but some federal policies could exacerbate affordability problems.”

Under President Trump, proposals include an economic stimulus package and tax reform. Appleton-Young said the $550 billion planned in infrastructure investments over 10 years to rebuild highways, bridges, tunnels, airports, schools and hospitals will boost economic growth and create more jobs.

“At full employment, wages will start to rise and wage growth will typically be passed on to consumers, which means the potential for higher inflation,” she said. “Unemployment rates are near an eight-year low. More jobs will mean more housing demand and upward pressure on home prices. Affordability will remain an issue and we shouldn’t expect much in terms of new supply.”

Appleton-Young also said overhauling the current tax code will create more demand for housing at a time when supply already is tight. She said Mr. Trump has proposed reducing the top tax rates for individuals from 39.5 percent to 33 percent and for corporations from 35 percent to 15 percent, as well as eliminating tax brackets from seven to three. Additional planned tax reform measures include a child care deduction, eliminate federal estate and gift taxes and tax breaks to manufacturers for plant and equipment expansion.

“The mortgage interest deduction (MID) will remain intact, although a smaller MID incentive could threaten ownership,” Appleton-Young said. “The MID is good for people’s pocket books. Historically, people don’t save unless they have a home.”

In addition, reforms to Fannie Mae and Freddie Mac are likely under a Trump administration, said Appleton-Young. “Banks will loosen lending standards, increase mortgage options and lower the credit score requirements,” she said.

The Federal Reserve raised interest rates only once in 2016, Appleton-Young said, but rates could increase three or four times in 2017, pushing mortgage interest rates as high as 4.5 percent or 5 percent for a typical home loan. Historically, when mortgage rates increased, the percentage of California households able to afford to buy a home dropped from 34 percent in 2010 to 21 percent by the end of 2016, and monthly mortgage payments increased from $1,740 to $2,609 in the same time period.

Appleton-Young also offered a caution to REALTORS® about posting political statements on social media because some potential clients might reject a REALTOR® based on their political leanings. Good questions to ask before political-related posting: Do I have the correct facts? Does this need to be said? Why do I need to be the person to say this? Could I be misunderstood? What are my motives for saying this? Can this wait until tomorrow when I might be thinking in a clearer manner?

Prior to her group presentation, Appleton-Young met privately with a group of brokers who noted an ongoing trend in higher monthly rents for apartment living. A recent report shows San Diego has the fifth highest apartment rental rate in the state, with a typical one-bedroom unit going for $1,530 a month. The report by Apartment List, an online rental marketplace, found that local rents grew 0.1 percent in January, which is 1.9 percent higher than a year ago. San Diego is still lower than other rents in the state. Rents are highest in San Francisco, where a one-bedroom runs $3,420 a month, followed by San Jose at $2,110, Oakland at $2,000 and Los Angeles at $1,870. The U.S. renter population is about 44 million households or 37 percent of all households in the nation. Apartment List’s data is drawn monthly from millions of listings nationwide on its site.

Also in the brokers meeting, it was noted that U.S. News & World Report recently revealed its “Best Places to Live in the U.S. in 2017” list of top 25 metro areas that offer the best combination of jobs, desirability, cost of living, quality of life and more. San Diego is ranked #22. “What San Diego lacks in affordability, as one of the most expensive metro areas on the list, it makes up for desirability,” the magazine said. “San Diego’s beautiful beaches and laid-back vibe make many Americans wish they lived there.” The top 5 places were: Fayetteville, Ark. (#5); Washington, D.C. (#4); San Jose, Calif. (#3); Denver (#2); Austin, Tex. (#1).

Appleton-Young directs the activities of C.A.R.’s Member Information team. She oversees the analysis of housing market and brokerage industry trends, broker relations and membership development activities. She also is closely involved in the Association’s strategic planning efforts and is a well-known speaker in California’s real estate community. She earned a bachelor’s degree in economics from the University of California Berkeley and a master’s degree from the University of Pennsylvania. C.A.R. is a statewide trade organization with more than 180,000 members dedicated to the advancement of professionalism in real estate.

Posted by on Feb 12, 2017 in Forecasts, Jim's Take on the Market, Market Conditions | 2 comments

Trump and Local Real Estate

The inauguration is almost here – Trump will be your president on Friday!

How will he affect our local real estate market?

His detractors are aghast over his tweets, but Trump keeps them coming.  In spite of their bombastic nature, I think we are already numb to his tweets, or at least getting used to them being part of the landscape.

At this point, I don’t think the Trump Effect will have much, if any, impact on us – positive or negative.  If rates stay under 5% (today’s 30Y is 4.12%), buyers should shrug it off and keep buying.

I also think sellers and agents are getting smarter about price, which will help tremendously.  As you saw in the previous post, they might screw it up a bit once they hit the market, but eventually buyers and sellers should both be happy with a modest appreciation rate of 2% to 4% this year.

The #1 thing that should keep our market stable is the buyers’ focus on getting the right house for the long-term.  Before the 2007 downturn, buyers thought they could always sell for a gain, and, as a result, any house would work for the short-term.  But after our so-called ‘crisis’, we recognize prices can go down – but it only hurts if you sell.

Sales and prices may bounce around, but with the focus on the long-term as a foundation, our market should keep cooking.

Posted by on Jan 17, 2017 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal, Sales and Price Check | 6 comments

Renting vs. Buying

They may be using an algorithm or math formula to calculate the above, but there is more to the discussion.  The attractiveness of renting is different for everyone, regardless of income.

P.S. Rates have settled down nicely, and are at 4.10% today.

Read full article here:

http://www.forbes.com/sites/samanthasharf/2017/01/03/housing-outlook-2017-eight-predictions-from-the-experts/

Posted by on Jan 5, 2017 in Forecasts, Interest Rates/Loan Limits, Jim's Take on the Market | 0 comments

More Topics for 2017

Happy New Year!  Other topics:

Pre-Listing Inspections – If you are buying and selling around the coast, chances are that you’re dealing with an older house.  Not many have been updated and remodeled enough to deserve today’s record-high prices – and at this point, buyers are going to be very demanding.  As an industry, we need to insist on sellers getting a pre-listing inspection so they know what’s coming, for two reasons;  1) It gives them a chance to fix stuff in advance, and 2) buyers aren’t penalized for being the messenger.

It happens regularly that the first glimpse of the true condition of a home is from the buyer’s home inspection.  The long-time owners can’t help but be offended that their pride and joy has been so verbally abused, and they want revenge – they want to stick it to the buyers instead. But these might be the only buyers that will pay this price – let’s not kick them to the curb!

Auctions – I think we are a long way from auctions being the home-selling technique of choice. The current version of inputting an ultra-low opening bid onto the MLS as the list price is misleading – one buyer told me it was a worse teaser than the value-range pricing.  Plus, they might sell it before the auction, which isn’t an auction.

Are you going to auction the house, or not?

I want a yes or no answer – and so do the buyers.

The option to sell early is a way to soft-sell the package to a homeowner, and assure them that they won’t be giving the house away.  But it is a turnoff for buyers, because all they know is that they can’t buy it for the listed price (the opening-bid price) – so what is the real price?  We’ve seen three houses in Rancho Santa Fe be auctioned off with no reserve that closed for more than $10,000,000.  Surely we can have the guts to conduct a no-reserve auction on a more modest home – a pure auction is what’s best for sellers and buyers.

Dual Agency – We dodged a bullet with the Malibu case this year that went to the California Supreme Court, but it won’t be the end of the discussion.  The worst offenders are the listing agents who lowball their own seller – they should lower the price first, to see if there are any other buyers out there.

For-Sale Signs – This is supposed to be the year that realtor signs have the name of their brokerage be at least the same size as the agent’s name.  It probably doesn’t mean more transparency ahead, but I like the intent. Agents who want to appear as their own entity should go get their broker’s license and run a brokerage like everyone else – or make it clear that you haven’t, which is the point of this new regulation.

Mulch is the new Booties – The craze over wearing booties hasn’t waned, but is being supplemented by the desire to throw mulch everywhere. Recently, an agent didn’t want to show her listing because her mulch hadn’t gone in yet.  I don’t mind mulch or booties, but they don’t sell houses – people sell houses – so let’s not get too transfixed on the mulch or booties. P.S. I do mind the red mulch.

Sandicor – Hopefully the judge will decide to sell the San Diego MLS company, Sandicor, to the only realtor association that wants it – GSDAR.  Then agents can join either GSDAR or CRMLS or both. But CRMLS makes it easier for out-of-county agents to bring buyers here so our sellers can take advantage of them.

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Posted by on Jan 1, 2017 in Forecasts, Jim's Take on the Market | 2 comments