2016 Predictions What’s In The Cards For Southern California Real Estate?
We remembered lessons learned from last year and discussed how we could apply them to the Southern California market this year. So the question is – what exactly does 2016 have in store for us in real estate?
We decided to poll our agents and get their expertise on just what they predict is coming to the SoCal real estate market. The experts are divided on some points but on others, nearly everyone is seeing eye to eye. Take a look at what we think is in the cards for Southern California real estate.
WHERE ARE MORTGAGE RATES HEADED?
87%: RATES ARE GOING UP
13%: NO CHANGE
If you follow our Weekly Mortgage Watch, then you know rates have remained level for the past few months, hanging out at historic lows under 4%. In December the Feds promised a “liftoff” of rates but luckily mortgage rates have still remained steady across the spectrum. The question is now, for how long?
David Mier, Assistant Manager of our Yorba Linda office, says “The Feds have indicated that they predict three separate 1/4% rate increase for 2016.”
Marcel Atallah, Temecula office manager, also predicts rates heading up. “They have too. [Rates] are artificially low and I believe we will see them bump up, but not too crazy, due to the election year.”
WHERE ARE HOME PRICES HEADED?
40%: PRICES ARE GOING UP
40%: PRICES ARE HEADED DOWN
20%: NO CHANGE
Our experts are split on whether or not home prices will rise or drop, and looking at the sold prices for 2015 tells a similar tale. According to the Trendgraphix report for Orange, Los Angeles, Riverside and San Bernardino Counties, both for sale listing prices and sold prices remained relatively steady throughout the past year.
Market metrics do show an increase in prices year over year which supports a prediction of rising prices. Also, rents are at an all time high and expected to rise which could mean real estate prices are headed in the same direction.
WILL AFFORDABILITY INCREASE OR DECREASE?
40%: DECREASE
34%: INCREASE
27%: NO CHANGE
There certainly has been an affordability shock recently for Generation Y. They’ve been accustomed to seeing very low rates and prices after the market crashed. Many may stick to renting in 2016 holding out for prices to go down.
However, supporting an increase in affordability are points about new loan programs and the fact that it could be time for sellers to get realistic. “Loan programs are starting to be a little more creative, and this could counter an increase in home prices,” says Mier.
WILL INVENTORY INCREASE OR DECREASE?
60%: Increase
20%: DECREASE
20%: NO CHANGE
Inventory has been historically low in Southern California for the past few years, creating a seller’s market. According to the Trendgraphix report below of Orange, Los Angles, Riverside and San Bernardino Counties, the market has remained between the 2 and 3-month range throughout 2014 and 2015.
According to Atallah, “There’s a good chance supply will be lower than last year due to the presidential election and the uncertainty of the next party in the White House. However, buyers who have been on the fence may come around due to the fear of the interest rate hike.”
WHERE WILL BUYERS START THEIR HOME SEARCH?
87%: ONLINE SEARCH PORTALS
6.5% SOCIAL MEDIA
6.5%: OPEN HOUSE
It’s no surprise that homebuyers are likely to start their home search online in 2016. But could this be the year that social media becomes a major portal for buyers? Could a Snapchat story be the first step toward homeownership? Only time will tell!
DO SELLERS STILL FEEL OPEN HOUSES ARE IMPORTANT?
80%: YES
20% NO
“I believe they are,” says Atallah, “And If an agent can explain that value [as well as the value] of using First Team tools to market the hell out of a home, then the seller will understand the value as well. However, if an agent is so happy just to get a listing that they let the seller dictate what actions they want performed, they stand to lose leverage.”
HOW TO HANDLE THE SOCAL MARKET THIS YEAR
ADVICE FOR BUYERS
Both Atallah and Mier advise buyers to get pre-approved for a home loan before house hunting. Getting pre-approved in advance and understanding all available loan programs is crucial. Know the comps and maybe even find an agent who can secure a pre-listed home.
Other important points for buyers to wrap their head around this year are that rates interest rates will more than likely increase along with prices and inventory could dip low as well. Once you know the facts, and accept them, you can move forward with a smart home buying plan. “Always look for the opportunity. Don’t buy into the fear, find a way,” says Atallah.
ADVICE FOR SELLERS
“Do not test the market, price your home based on current market conditions.” That’s the number one piece of advice for sellers according to Mier.
Thank you for reading. I hope you found this information useful.
Jeff Pittman, Realtor in Ladera Ranch – Orange County, California