It’s a good time to buy real estate.
That’s according to 22 percent of Californians responding to the latest C.A.R.-Google poll. In fact, that response has remained pretty steady over the past several years.
But 46 percent say it’s a good time to sell, a definite drop compared to 57 percent just two years ago.
The financial fundamentals remain solid. Nationally the GDP is at a steady 2 percent rate of growth. Consumer consumption is up 4.7 percent. The unemployment rate is at 3.7 percent – even lower in most of California
Yet while consumer confidence overall remains high in this 10th consecutive year of economic growth, it’s down a full 9 points from this time last year.
So what’s causing this change in mood?
Best guesses: trade wars, unrest in the Middle East, fears of recession, political uncertainty, mixed messages from the Federal Reserve, inconsistent policies from Washington, fears of a global slowdown, the need to fix the GSEs (FHA, Fannie Mae and Freddie Mac), frequent stock market peaks and corrections, uncertainty about Brexit.
Fortunately, most news related to California real estate – low interest rates, increasing numbers of folks migrating in and out of the area, millennials forming households, increases in how much buyers can borrow on homes through federally backed programs – points to a continuing strong market, although definitely not like in the go-go days of 2012-2018.
Statewide, sales dropped slightly in 2019, with the biggest drop being in the sector of homes priced under $400,000. That’s not because buyers don’t want entry-level housing; it’s because there is little of it available.
The next biggest slowdown is in homes priced $1 million to $2 million, while the most robust sector was in the middle -- $500,000 to $750,000.
"With interest rates expected to remain near three-year lows, buyers have more purchasing power than in years past, but they may be reluctant to get off the sidelines because of economic and market uncertainties," said Jared Martin, 2019 president of the California Association of Realtors.
"Additionally, an affordability crunch will cut into demand in some regions such as the Bay Area, where affordability is significantly below state and national levels. These factors together will subdue sales growth."
Prices rose by an estimated 4.1 percent in 2019.
Leslie Appleton-Young, chief economist for the C.A.R., had predicted price increases of 3-4 percent for the year, so we’re a little ahead of that.
For the coming year, she expects prices to go up only about 2.5 percent.
The California median home price is forecast to hit $607,900, up slightly from $593,200 by year’s end.
That’s good news for buyers and not bad news for sellers, most of whom have already seen their equity increase quite a bit.
Houses are taking a little longer to sell. Instead of a week to 10 days, the average is 23 days on market before sellers accepted a contract.
About 40 percent of sellers ended up reducing their asking price, usually by modest amounts – 4.3 percent on average.
The one big surprise in 2019 was that average interest rates for 30-year conventional home loans actually fell below 4 percent, when they had been expected to hit well over 5.5 percent.
The Fed has signaled it does not plan to tinker with reserve rates in the coming year. Reserve rates do not directly affect mortgage rates, but they move the needle in other areas that do impact home loans.
“Our economic outlook remains a favorable one despite global developments and ongoing risks,” Fed Chair Jerome Powell said in a recent press conference.
“As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy likely will remain appropriate.”
Interest rates this low could make 2020 a great year for buyers and sellers.
Best advice for sellers in this market: Price it right. Make it beautiful. Work with a professional Realtor who has an effective marketing strategy and a strong network of buyers and buyers’ agents.
Best advice for buyers: Work with a Realtor who has strong negotiating skills and knows the neighborhoods where you want to buy. Get pre-approved with a great loan officer who is well versed in the myriad of new financing options available.
While statewide statistics can be helpful for gaining insight into the market, each neighborhood is different and every home is unique.
If you are thinking about buying or selling in 2019, contact your local Realtor today for a free market analysis.
Cher Wollard is a Realtor with Berkshire Hathaway HomeServices Drysdale Properties in Livermore.