The forecast for America’s most prosperous state in 2019/2020 is still very bright. As the world’s 6th largest economy, California is thriving even though its housing market has slowed of recent. The trend is that it’s coming back in 2019.
If you check out the Los Angeles housing market, San Francisco housing market, Oakland housing market, and San Jose housing market, you’ll see how home prices and rental prices have resulted in migration. Will the push inland solve the issue, or will more move to Phoenix, Austin and Las Vegas?
Will on the fence buyers flush with cash be ready to buy or will they keep renting?
What confounds many California housing prediction experts, property managers and Realtors is whether politics, trade and economics will ease with bullish forecasts. If so, flat prices will begin to rise once more dragging up rental prices.
What’s Happening and What May Happen in California
This epic report on the state of California’s housing market explores what’s happening. You’ll find some eye-opening insight, stats, videos, and opinions about housing in the booming Golden State economy. Please share this material all you like.
California’s economy grew 4.7% in the 12 months ended in February compared to the national rate of 2.8%. It could grow at a 2.55% pace in the next six months — faster than the national 1.59 – report from Mercury News.
The specter of the Fed raising rates is spooking many including Millennials and speculators but it looks like the Fed has turned dovish. With interest rates fears gone, and new trade deals with China, all the negatives could disappear. That would mean fast rising prices for the whole state.
We’re in Pasadena, at the Convention Centre tomorrow for the Income Property Management Expo! Come on out and meet us March 12, 2019! We’re looking forward to answering your questions and discussing the latest trends in managing income properties.
Keep Your Eye on the Economy
California’s housing market is the focus of many worrying US and foreign property investors. Owners in California might be panicking based on price discounts offered. In California, buyers have been sitting on the sidelines, waiting for home prices to slide a little. And for these next few months, they get their wish.
The economic trend for the US is upward even while global economies are declining. Can any political party knock this train off the rails? As more production comes back to the US due to import tariffs and trade rules, it suggests we’re in for wage growth and more housing demand from a huge group of Millennial-aged buyers who are forming families and expecting to live in homes.
Lots of concern for home sales however, this graphic via FRED shows resale stats doing well. Sales continue right into last month. As housing prices fall in January, sales are expected to pick up from hungry cash rich buyers.
Price growth has been pronounced the last few years and that makes adjustments along the way very likely. Zillow suggests prices will grow a further 5.7% over the next 12 months. CAR expects the average home price to increase 3.1% to $593,450 in 2019, following a projected 7% over 2018 to $575,800.
It suggests that housing sales are still being suppressed right across the country. A re-ignited housing market could add immeasurably to the economy. New home related accessory sales such as furniture, appliances, etc could add to GDP (American made) in 2019 and 2020.
A Healthier California Market
Zillow gives California an improved 9.6 out of 10 rating and a revised forecast of 7.6% price growth prediction for the next year.
“We’re seeing interest and money shift away from the overheated markets into less expensive secondary markets…Even if we see some markets overheat and demand softens slightly, that doesn’t mean prices will go down” — Javier Vivas, director of economic research at realtor.com.
Latest Market Update
Greater Los Angeles home prices fell .8% in November to $512,000, down about $10k on average MTM, yet LA homes are still up $11,500 YoY. Bay Area home prices dropped 5.6% or $53,800 MTM, but are still up from last year. Marin County, Sonoma, San Mateo, and San Francisco saw the biggest price drops (Car.org stats).
Listings in California rose 17.2% from last year. Sales rose to 399,600 in August. Price reductions happened on 42.5% of listings.
Sales in Los Angeles dropped 14% while prices rose 9.9% MTM. Sales were down 8% in San Bernardino yet prices here rose 3.6% or just under $10k on average.
Sacramento was a bright spot with sales up 1.4% and average price up $5000. Monterey too saw its prices rise $10,000 or 1.6% over Octobers.
Prices dropped 8,500 in San Diego to $626,000, down 1.5% since last year. In Orange County, home prices dropped $15,000 to a new average of $795,000.
Up in San Francisco, prices dropped 147500 to a new average of $1,442,500. That’s 9.8% lower than October. Obviously a point of concern for owners looking to sell. Prices in Santa Clara dropped 3.1% to $1,250,000.
Zillow’s predictions are strong. They forecast San Jose Prices to rise 19.25 over the next 12 months. Even if you don’t believe the Zesstimate, it is a positive sign for the market in California. Sometimes, we have to keep our eye on the long term prognosis.
Is This the Beginning of a Buyers Market?
Given the economy and the US outlook, even high rising interest rates may not slow down this juggernaut. Sure sales are down of late to their lowest in many years which suggests a short period in favor of buyers. It’s likely due to the cancellation of free trade and the transition back to US manufacturing and business. If US GDP production ramps up again in 2019, that will pull prices back up.
The shortage of housing and new construction units means prices still prevail in California for 2019.
Lower Priced Home Market Falls
The uncertainty is hitting the lower end of the market. And mortgage lending tightening seems to be suppressing sales of properties below $299k. Sales dropped 22% for homes less than $199k in value (how many homes are left in this price range?).
California Home Prices
Los Angeles County and Marin County saw the most significant price declines last month with drops of 10% and 19% respectively. That is a sizable reduction, however many smart investment advisors are advising to buy on the drops. There’s too much to buoy the market back up.
American confidence is very strong and home equity is reaching its highest levels. Fewer underwater mortgages exist so a potential collapse is even less likely.
Home sales have plummeted in these counties:
- Del Norte down 3.6% with prices down 17%
- Lassen down 40% with prices down 24.3%
- Plumas sales down 45%
- Tehama sales down 38%
- Mono sales down 47% with prices down 21% (prices down 81% YoY)
It might be wise to dig into these particular markets to discover why they’re so sensitive to recent political, lending and economic events.