WHAT WE HAVE KNOWN FOR A LONG TIME IS OFFICIAL...WE HAVE A HOUSING SHORTAGE

It’s all been confirmed with a Sunday headline in the OC Register entitled, “Too many paychecks for not enough housing.” Southern California, and Orange County in particular, will be short around 100,000 housing units by 2025, according to some housing forecasters. What does that mean today? Inventory is officially at its lowest ever, causing buyers to offer over list price, waive appraisal contingencies, and up down payments. Experts predict another 4% appreciation this year, with possibly no end in sight as job hiring remains strong, especially in hospitality and health care. OC Register columnist Jonathan Lansner points out in a recent article that in many parts of the country, a family can expect to buy a home around 3 times their annual incomes. But in heavily demanded areas of major metropolis’ you can expect closer to 6-8 times your annual income, depending on how lofty your ambitions are for your ideal home and neighborhood. It may not all be glum news however...many Baby Boomers will perhaps jump into this amazing seller’s market, to sell the family homestead and move closer to grand kids or resort cities with ideal climates. Perhaps Boomers who originally didn’t plan on moving may change their mind with housing appreciation they cannot resist that makes a dream home possible in another location. Also expect these boomers to help out their Millennial grandchildren, that may not be able to buy any other way. The windfall of profit from the family homestead may make some Boomers a little more generous, which would

WHAT WERE THE ACTUAL NUMBERS?

The complete month of December saw a total of 3,048 homes sold including new homes, condos, and single-family resale. This was down 5.6% for reasons discussed above, lack of inventory. Resale single-family led the way with 1,653 sales, followed by condos with 737 and new homes were 658. Resale prices rose 5.6% year over year compared with last December.

Condos had the biggest jump, typically reflecting the tight inventory and rising prices, they were up 10.3%. New homes rose the least with 3.1%. The medial price is $698,000, also up from a year ago. Average housing payment sailed up to $3,232.58 from $2,986.21. That is not all appreciation however, as interest rates did have 3 hikes last year, to officially leave the 3% range.

BANK APPRAISALS GAP NARROWS TO LOWEST IN 2 YEARS

One of the challenges of a rapidly rising market is the sometime disparity between what houses sell for and what the bank is willing to say it’s worth for the purposes of making that home loan. Many times there is a gap between them, as banks are anxious not to have homeowners get upside down, if there were a downturn in the market. The appraisers are constantly trying to balance demand/supply with true economic reality. And frequently, that line is quite blurred by market pressures. However, right now, the gap is less than 1%, indicating a solid market and true values for home prices. That home price should reflect everything from current market factors, to population, both potential gains and losses, jobs and hiring and incomes, and other driving forces such as interest rates. Southern California is proving some true endurance in the current housing market with no bubble in sight. Borrowers continue to be properly vetted, appraisers are doing their job, and down payments remain strong with conventional loans being predominant, with stated loans no longer available and FHA and VA not the dominating factors they once were.

MILLENIALS DESIRE TO BUY QUITE IN LINE WITH THEIR PERSONALITY

There are many conversations around Millennials and whether they truly have the generational personality to become a home buying generation. If you look at the following 5 reasons to buy, it is actually quite in line with what is important to the generation who wants meaning and freedom in their lives. 1) Have control over living space. No one telling them what to do in their property or limiting their sense of expression. 2) Privacy and security– Having a definite space to return to at night. 3) Live in a nicer home. Bottom line: Thanks to their parents and grandparents, Gen X and Boomers, Millennials like nice things. 4) Engaged in the community. This is very important to Millennials as is the sense that they live in a neighborhood, not just a house or apartment. 5) Flexibility in future decisions...such as moving when they want to and not when a landlord tells them to, and the freedom that equity will bring them to move elsewhere, even out of state.