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.

WHAT WERE THE ACTUAL NUMBERS?

Sales were actually pretty flat both nationally and regionally for 2016 (projected). According to NAR, 2016 has averaged 14,603 sales per day for the country. Prices are up 5.1% and inventory was down 10.1%; sales were up less than 1% at 0.8%. California projects 407,300 sales, down 0.4% over 2015's 408,800, and the median price of $503,900 up 6.2% over 2015. Sales of existing single-family homes, which make up 68% of the overall market will actually increase 1.4% in 2017 to 413,000 (forecast). If inventory creeps up, which it likely will, and new construction keeps on its torrid pace (more jobs added in OC than any other sector), sales next year could surprise us all in Orange County. Affordability remains the biggest challenge with that number dipping to just 22% for the median priced home by mid-23016, although other counties such as Riverside were considerably higher at 41% to 56% (San Bernardino). Inventory has actually thinned at 6,786 properties for sale as of September 22nd, down from 7,040 of two weeks earlier, but this is more likely a seasonal drop, happening every year as the school year returns. There are approximately 120 foreclosure/short sale properties on the market currently.

6 REASONS TO BUY THIS FALL AFTER SCHOOL STARTS

Ok, here we go, in no particular order... 1) Prices will continue to go up. Previously reported in this newsletter and confirmed with Keeping Current Matters National Real Estate Blog, NAR, Mortgage Bankers Association, Freddie Mac and Fannie Mae, are all projecting home sales will increase nationally 6% - 6.5%, and with scarcity of inventory that means pricing will rise as well. 2) Interest rates remain most compelling, particularly for the move up buyer. Why would you not sell now and buy more home for the money with that low rate? 3) Less competition - fewer buyers and fewer multiple offers. If ever you were to get a break on pricing and get something at fair market or slightly below, a motivated seller at the holidays, that is getting no offers, whose home is sitting on the market, is probably a move up buyers best bet. 4) Either way, you pay for where you live, so live where you want and move before the holidays. Everyone likes being settled at the holidays. 5) Flexibility on terms - If you do need a seller carry back or if you have a lower down payment, you are more likely to get accepted when you are the only offer. 6) Mover on with your life - constantly looking at property, looking online, spending you weekends going through open houses, starts to take a toll on you and your family. Sort of looking can keep you from committing to a home that is perfect for your needs.

IS THIS FINALLY THE YEAR (2017) THAT THE U.S. HOUSING MARKET MOVES INTO THE BUYER MARKET TERRITORY?

Maybe elsewhere in the country it is possible, but it is unlikely in the Southland.  A widely regarded economic index, the BH&J states, "Housing remains a sound investment."  It tracks 23 urban centers and So Cal remains strongly positioned.  This newsletter is meant to be informative only, you should always consult experts in any financial area, but hopefully it serves as food for thought about the powerful wealth building tool of real estate investment, as you purchase or sell your single largest asset...your home.