Impacts on California Housing and Real Estate

The 2015 California Association of REALTORS annual conference took place in Anaheim last week.  As always, the annual market forecast was given, and these are just some of the highlights from over 128 slides used in the presentation by the Association's Chief Economist:

• Millennials delaying “adulthood”: Getting married later or not at all; Student loans; dim job prospects.
• Homeownership rate for 18-34-year-olds still falling.
• Household formation is VERY slow.
• Baby boomers delaying “retirement” and staying put longer; they will love their loans when rates do rise.

     First time buyers:

·        Lack of a down-payment.

·        Lack of information about the home-buying process.

·        Average age of first time buyers is between 35 and 43 years.

·        Overall Market information:

·        In Los Angeles County, distressed sales are now 7.6% (August 2014) vs. 36% (August 2012), and figures are even lower in Orange County.

·        In 2007 and 2008, inventory was at 16 months, in August 2014 inventory supply is at 4 months.

·        California homeownership rate is lower than the U.S. rate, just above 50% vs. 65%.

·        Los Angeles metro region is one of 3 lowest housing affordability areas in the State, but the median California house payment and minimum qualifying income are still well below the peak market.

·        Decline in multiple offers.

·        Share of cash buyers is lowest since 2009.

·        Share of FHA buyers at 16% in 2014, but lowest figure since 2007.

·        One-third of the international buyers are from China, next are India and Canada.

·        Sales volume down and prices up (5%-14%) in all Southern California counties.

·        Millennial (ages 18-34) homeownership falling, and younger buyers continue to decline.

·        Three-quarters of millennials not married--this historically impacts household formation.

But, per a REALTOR survey of 18-34 year-old adults, "More than half (54 percent) gave homeownership an importance rating of “8” or higher on a scale of 1-10, with 1 being “not at all important” and 10 being “extremely important.”  The biggest advantages they see in homeownership are the freedom to do what they want with the property, privacy, and the satisfaction of ownership". And aren't those the reasons why people buy homes?

Last but not least is the projected picture for the coming year where the median home price on a statewide level will increase to $478,000; the housing affordability index will be at 27%, and sales volume will increase to a higher level than 2014.  

What do you think about where the market is headed?

2015 California Market Forecast