HEADING INTO THE 4TH QUARTER 2016...WHAT TO THINK...WHO TO BELIEVE?

It is long understood by all that anyone can get any numbers to vouch for their economic prognostications of where they believe the real estate market will be heading in the foreseeable future, i.e. 2017. In researching how to best fairly depict the possible outlook, this column ran into conflicting numbers and opinions. So, as fairly as possible, that you might have the best information, as unbiased as possible, here goes...The OC Register had 2 articles, one day apart, with conflicting reports: 1) Headline #1 - WITH INVENTORY LOW, PENDING HOME SALES SLUMP IN AUGUST 2) Headline #2 - OC HOME PRICES UP AS SALES BOOM IN AUGUST. What was the primary difference in these headlines? Geographics. The first headline was reported with the National Association of Realtors (NAR) numbers for the country, and the second headline was for Orange County. Is this then good news? Appearances would proclaim more neutrality. There has been no doubt that strong job growth, low interest rates and low inventory have fuelled a recovering market for So Cal in general and Orange County specifically. End of summer has also always signaled the end of moving before the holiday season. Perhaps some last good deals drove it also. But more than speculation is the fact that more inventory entered the market and stayed longer. This can signify more realistic pricing and offer/counter offer scenarios. Home buying, in fact, soared 14.5% year over year to 3,633 transactions. This, according to CoreLogic, is the highest number of transactions for an August in 11 years. However, when one looks at pending sales, or contracts written, the number softens and takes us from a seller dominated market, in terms of inventory, and back towards a more neutral market. According to Leslie Appleton-Young, the longtime CAR economist (California Association of Realtors), home prices in California may be near their peak. Although 2016 is projected to have a 6.2% rise in the median home price, that is a far cry from the peak of 2013 which came in at 27.5%. Clearly this stabilization has been most necessary for the market, even though many then call it part of a sluggish recovery. This column disagrees that the housing recovery has been sluggish. Numbers aren't the only indicator. You must also track activity, inventory, and actual demand, which has been quite strong. More on the numbers will appear in the next section, but the slower gains, and modest increase in actual number of sales, (probably a better barometer than median price), would indicate a "slow squeeze than a big drop," according to Appleton-Young, barring a catastrophe, natural or manmade, or a seismic and fast rise in interest rates. Summing up, it would appear that 2017 will be about the same as 2016, with possibly slower sales and more inventory, which could trigger a price slowdown. However, a pricing slowdown could bring back buyers on the fence, so in other words, no crystal ball here.