2014 Market Forecast - As usual…some good news and some bad news. Check it out @ http://t.co/vXtcbQ9BnH
— John Wise (@1wisedad) December 23, 2013For current homeowners, the good news that is coming out of the projections from CAR is that we will continue to see gains in the Median home price. The are projecting an increase 5.9% from $408,600 to $432,800. But, the bad news is that they are projecting a drop in the overall number of sales by 2.6%. This means that we will continue to see fewer sellers and inventory at lower levels. To be honest, I am a little surprised their projections are so rosy on the increases in Median Value. The primary driver of this will be the lower inventory levels because the rest of their projections, quite honestly and a little gloomy. In California, they are projected Job Growth of only 1.9%. This is LOWER than Job Growth projected for the end of 2013 at 2.2%. That's awful news. And, I'm not sure how, but they are also projecting a drop in the Unemployment Rate from 9% to 8.3%. With a projection of a drop in the Job Growth numbers, their Unemployment Rate drop seems aggressive. The other scary factor for Buyers is the projection of 30 year mortgage rates jumping from 4.1% to 5.3%. When you combine the increase in mortgage rates with a projected jump in Median Value, our affordability factor is going to get to a place that will be less healthy than it already is. This will eliminate many buyers from the pool and will result in a decline on the demand side. Again, based on these projections, I am surprised they are projecting any gains on Median Value.
The part that is the most important for the real estate markets to sustain the gains we have seen in 2013, we need to have better Job Growth numbers. The gains that we have seen in the stock market this year with the Dow (as of last Friday) being up by almost 25%, this means that both the consumer and the public companies are and will be feeling much better about finally starting to spend some of the cash and value they have been accumulating over the last few years as they have been hoarding cash. The declines we have seen in interest rates have helped millions of homeowners get into a more comfortable position from a disposable income standpoint, but the reductions in rates are also another reason why the number of sales has been so low. If you are sitting on a house with a 3.5% 15 or 30 year mortgage rate, to move to a bigger house, to a house that is worth more with a house that will have a higher mortgage rate, you will have to be making significantly more money or have a much larger down payment. And, if you are thinking about downsizing, that higher values combined with higher rates might stop you from making that change. In order to see continued gains on the housing front, we will have to continue to see a healthy stock market and a healthier job market in order to offset the increases they are projecting in mortgage rates. It just might take a year for everyone to adjust to the new levels of rates before the market finds its new pattern of stable growth again.
If you own real estate today, I think the chances are pretty good, given our still low levels of inventory, that you will see increases in your house value. I also think that given the low levels of inventory that it will also remain a good time to sell real estate. When inventory levels are low and demand is healthy, it puts Sellers in more control.
If you don't own real estate today and you need to or want to buy a home, my advice to you would be to act sooner rather than later. Hire a Realtor…like me…who is going to work hard on your behalf to find a home that fits your needs.
Call me today if you are thinking about selling or buying this coming year so we can sit down and review a strategy for all your real estate needs.
Merry Christmas and Happy Holidays!
John Wise
818-391-4131
jwise@2cidirect.com
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