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Realtors forecast California housing market to see modest gains in 2017

Original Source: JEFF COLLINS, ORANGE COUNTY REGISTER


California’s housing market will post modest gains next year amid tight supplies and the lowest housing affordability in six years, the California Association of Realtors forecast Thursday.

Sales of existing single-family homes – which make up about 68 percent of the overall market – are projected to rise 1.4 percent in 2017 to 413,000 transactions.

Next year’s small gain will follow a projected 2016 sales drop of 0.4 percent to 407,300 deals, the forecast said.

Meanwhile, the median house price – or price at the midpoint of all sales – is projected to rise 4.3 percent to $525,600. That’s the smallest percentage gain in six years.

By comparison, 2016 house prices are projected to be up 6.2 percent to $503,900 by the end of December.

“The net result will be California’s housing market posting a modest increase in 2017,” said Leslie Appleton-Young, the Realtor association’s chief economist. “The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”

Housing affordability will fall as price gains continue to outpace pay raises.

Just 29 percent California homebuyers will be able to afford a median-priced house next year, the association predicted. By comparison, more than half the buyers could afford the median-priced home in 2011-12.

In Southern California, house sales are projected to be virtually unchanged this year and next from 2015’s sales pace, the forecast said. Sales are projected to rise 0.4 percent this year and 0.7 percent next year.

The median house price in the region is projected to be up 5.4 percent by the end of 2016 and to rise 3.2 percent to $501,500 next year.

The state’s hottest housing market – the San Francisco Bay Area – will see larger price jumps amid falling sales as buyers flee to more affordable markets. The forecast projected sales declines of 6.4 percent and 5.6 percent in 2016 and 2017.

Bay Area prices, meanwhile, are forecast to increase by more than 6 percent both this year and next, rising to $833,600 in 2017.

Mortgage interest rates are forecast to rise next year, but not by much. The average rate for a 30-year fixed mortgage is expected to be 4 percent in 2017, compared to this years near-record low of 3.6 percent

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LA housing market a safe bet, despite rising prices, report says

Originally published by 89.3KPCC Business and Economy

possible FB cover shot Tanager House 2015

What may feel like a real estate bubble in Los Angeles — with all-cash offers and frenzied bidding wars — is actually the midpoint of a steady housing market recovery, analysts say.

The UCLA Anderson Forecast released Monday said L.A. is only three years into a rebound that started in 2012. Home prices have since climbed 27 percent. History suggests there will be four more years of price increases and home values will go up another 35 percent before there is any sort of correction.

The reason comes down to a fundamental imbalance: there’s lots of job growth, but because of strict building and environmental regulations, there will be very little increase in the housing supply.

“That means you will not expect to see housing more affordable during the next few years,” said Jerry ​Nickelsburg, a Senior Economist at UCLA’s Anderson Forecast. “In fact, just the opposite.”

While entering the market is tough, buying a home right now in Los Angeles isn’t as risky as the high prices make it feel, the report said.

“L.A.’s housing market, despite becoming more expensive and unaffordable, is not in a bubble.”  UCLA economist William Yu wrote. “The current rise in home prices seems to be driven by rising effective demand and limited supply, not by speculation. Therefore, the housing bubble burst we experienced several years ago is unlikely to haunt us this year or next, and the smart money will continue to invest here.”

That includes Chinese buyers, who have been bidding up Los Angeles houses in recent years.

Though the Chinese economy has recently slowed, Yu doesn’t expect the downturn there to impact prices here. Yu said China’s economic problems could actually raise home prices in Southern California as investors seek stability outside their country.

“With the dismal outlook and uncertainties in China, contrasted with the promising and stable outlook in the U.S., it is wise to reallocate money from China to the U.S.,” he wrote in the report. “Even with the negative wealth effect generated from China’s deflating real estate, tumbling stock markets, and 3 percent currency devaluation, wealthy Chinese individuals still have sufficient equity to make a move.”

Other industries, he said, like tourism and trade, could suffer.

It’s still a buyer’s market, call me for information on the areas you are interested in.

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2015 Home Sales Surge Leading Into Summer

Original Story Courtesy RE Insider

There’s no denying it; summer is upon us, and the weather isn’t the only thing heating up. As the days have been getting hotter, so has the real estate market, so much so that home sales are on pace for their best year since 2007. Now, agents and brokers everywhere are wondering if 2015 will turn out to be the best year for business in nearly a decade.

Real estate has gotten hot again. First-time buyers are streaming back into the market. Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast. Home sales are on pace for their best year since 2007.

Buyers are more confident about their own prospects. But many also appear ready to close sales quickly because of concerns of being potentially priced out of the market by rising mortgage rates and home values.

“What we’ve seen is that demand is off the charts in 2015 — and that is really boosting sales,” said Nela Richardson, chief economist at the brokerage Redfin. “Last year, buyers were dipping their toes in their water. Now, they’re diving in.”

The National Association of Realtors said Monday that sales of existing homes climbed 5.1 percent in May to a seasonally adjusted annual rate of 5.35 million – the third consecutive month of the sales rate exceeding 5 million homes.

Yet listings have failed to match the greater demand, fueling large price gains. Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.

With the continued surging market, many buyers want to close deals quickly to avoid being priced out of their desired market.
With the continued surging market, many buyers want to close deals quickly to avoid being priced out of their desired market.
1330 Londonderry Place is one such hot property expected to close quickly.

Several factors help to explain the surge:

  1. First, employers have hired 3.1 million additional workers in the past year as the unemployment rate has slid to 5.5 percent from 6.3 percent. This influx of additional paychecks has led more Americans to feel financially secure after weathering the most severe downturn — sparked by a housing bust — since the 1930s.
  2. Secondly, mortgage rates are affordably low but beginning to rise as the Federal Reserve prepares to a key interest rate for the first time in nearly a decade.
    Rising home prices have also added an extra sense of urgency among homebuyers.

  3. Lastly, the rising prices mean that more homeowners are starting to regain the equity lost in their homes during the downturn. The number of mortgage holders who owe more on their loans than their homes are worth has tumbled 19 percent in the past year to 5.1 million — or 10.2 percent of all mortgaged properties, according to real estate analytics firm CoreLogic.

Overall supplies still remain tight. But because more mortgage holders are recovering equity, more of them can afford to sell their home and use the proceeds to buy a new home, creating greater demand.

Have you noticed the recent bump in sales? Are there other factors driving the latest surge in business? We’d love to hear your thoughts!

You can read the full story on Yahoo News

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2015: Buy Now, Before the Fed’s Patience Ends

fed rate

By now you’ve probably heard that 2015 is expected to be a pretty good year for real estate. It’s a prediction that we chief economists are all fairly aligned on.

But what I can’t emphasize enough is why I’m so confident this is a defining year for the housing industry.

It comes down to three simple factors:

  1. Home sales will increase.
  2. Prices will increase.
  3. Mortgage rates will increase.

When combined, those three indicators point to an extremely strong real estate market. And potential home buyers should move fast if they want to spend less.

Buy before it’s too late

Buyers should act now––delayed purchases will only result in higher monthly mortgage payments as prices and rates rise. In fact, our forecast data show affordability may decline as much as 10% over the course of the year.

Plus, we won’t get another head fake on mortgage rates like we did in 2014. The economy is much stronger now, and the Federal Reserve continues to communicate loudly to the financial markets that it will raise the target for the federal funds rate this year.

Right now, the Fed is using the word “patient” to describe its approach to picking the time to raise the target rate.

However, when the Fed “loses patience,” rates will go up at least 20 to 40 basis points in anticipation of the target rate officially going up.

The last time the word “patient” disappeared from the Fed’s language, it raised the target two months later. And when “patient” disappeared from the Fed’s language, mortgage rates went up in anticipation of the official move.

So, buyers beware: The clock on these low mortgage rates may be ticking.

Job growth, global economy will boost housing

From a macro level, the economy and the housing market are in far better shape now than a year ago. We are creating jobs at a pace now that we haven’t seen in 15 years.

Friday’s initial report on fourth-quarter GDP came in at 2.6% growth. Underneath the number was mounting evidence that consumer spending is indeed strong and wage growth is finally accelerating.

Low prices at U.S. gas pumps have turbocharged consumer confidence and are enabling households to spend more and save more for big purchases—say, buying a home.

Besides global factors that bode well for buyers, the U.S. housing market is also in much healthier shape. Foreclosure inventories have fallen to nearly normal levels everywhere except for a few slow markets. As a result, distressed sales are no longer weighing on the market.

We’re back to a normal and upward trajectory for housing prices, and there’s little risk of prices declining because inventories are very low. I’m actually more worried about listings and new home construction not keeping up with the demand.

Market is primed for first-time buyers, sellers

I’ve said it before and I’ll say it again: 2015 is the year of the millennial when it comes to real estate. Millennials are at a critical demographic tipping point where their sheer numbers will naturally drive demand for more home sales. Most first-time buyers move into their first home when they’re between the ages of 25 to 34.

Sellers should also be encouraged—especially if they’re sitting in affordable homes waiting for a long-overdue upgrade. With recent clarification of mortgage standards, new low-down-payment programs, and lower FHA insurance premiums, access to credit should improve. That means those folks who’ve been sitting on equity in entry-level homes can finally upgrade to bigger homes and retirement homes.

What are the downsides?

There are some risks to keep in mind.

Supply must keep pace with demand, otherwise affordability declines more rapidly and would-be buyers can’t find the home of their dreams.

The U.S. economy could hiccup from global weakness.

Consumers could take the money they’re saving on gas and buy lottery tickets instead.

The probability of those risks completely reversing the recovery is slight, but it is strong enough to limit the potential. On the flip side, if the economy ends up growing more than expected and first-time buyers come roaring back, we could end up in an even stronger market. Here’s to a robust and strong 2015!

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Demand For Multifamily Housing Will Continue to Rise in 2014

Multifamily HousingStrong demand for apartments will increase over the next several years, said panelists during a press conference at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Las Vegas. And while multifamily construction continues to be strong, NAHB does expect the speed to decrease as sustainable levels are reached in 2015 or 2016.

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The Ultimate Guide to Moving

Moving to a new location can be one of the most stressful experiences and can take the fun and excitement of getting to your new place. But it doesn’t have to be if you make a good plan. This quick and easy checklist will help you track dozens of details on your upcoming move or relocation, including a 4-week calendar and pre-assigned priorities.

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Top Ten Things You Need to Know About the 3.8% Tax

Ever since health care reform was enacted into law more than two years ago, rumors have been circulating on the Internet and in e-mails that the law contains a 3.8 percent tax on real estate. The National Association of Realtors quickly released material to show that the tax doesn’t target real estate and will in fact affect very few home sales, because it’s a tax that will only affect households that realize a substantial gain on an asset sale, including on a home sale, once other factors are taken into account. Maybe 2 percent of home sellers will be affected.

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