10/25/2013

What Will Homes Cost in California for 2014?



2014 CA Outlook Chart
Every year about this time, the California Association of REALTORS holds its annual conference, this year at the Long Beach Convention Center. It also marks the time at which the housing predictions for the next year are made.  As with most predictions, it's not etched in real estate concrete, but may be a good indicator based on the current year.

At the right is the nitty-gritty slide (no. 114 out of 127) which is arrived at in the presentation by CAR's chief economist after her complete review of the entire state and it's housing market indicators.  So where are we possibly, for next year?  Possibly a 6% increase in the median price of a single family home, far less than the current 2013 increase of 28%. 

What are factors impacting buyers and sellers? Interest rates--they have been going up. Lending guidelines--they have been changing and more is to come on January 1, 2014.  Disposable income for 2014 may increase, the CA unemployment rate may decrease to under 9%, while population growth may remain steady.  Distressed sales have increased with more standard sales in the majority in many areas (80% of sales).  A further complication has been the short inventory supply due to little new construction in several years (and never reaching the level last seen in 1988), and many sellers being underwater, with 1-2 months inventory in many areas including some parts of Long Beach.  The 6 months supply of inventory norm has not been seen in a very long time, a situation that has generated multiple offers (highest in last 15 years) with cash buyers coming out the winner in an average of 30% in California--as the median price increases, cash buyers have slowed in 2013, however.

Income Needed As Rates Rise
While many sellers may breathe easier as equity comes back into their market value, both buyers and sellers will have to deal with rising interest rates, and the results of current governmental agency discussions about loan qualifications.  Did you know that recently a proposal was put on the table that only people with 30% down payment could get the best interest rates?  This type of strain has made FHA the loan choice of over 60% of California buyers, increasing the reliance on government lending instead of an independent market place.

Sellers are now coming to a better time and place to sell, but unrealistic prices must be curbed--cash buyers do sometimes obtain appraisals to make sure they're not overpaying.  Buyers must be more prepared than ever to search out financing in advance, save money for down payment, reduce debt, and take care of their credit scores if they really really want to buy (what's so fun about paying $2500/month in rent with no tax deduction?)

For more information, go to www.juliahuntsman.com if you want to request a no obligation summary of what your home is worth!

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