January 20, 2016
In January through December of 2015, I made several predictions for the housing market in the coming year, and I am both pleased and disappointed that most of what I predicted did in fact come true. I was pleased in my predictions that the housing inventory for San Diego and the US would greatly increase thus creating a little bit of a lull in home prices. This was partly true and false. Although we did see an increase in inventory as the graph depicts below, what I didn’t account for was the lack of demand in the buyer market. The number of buyers in this market has decreased due to higher purchase prices initially. In other words, when a product or a house has a higher price than the market demands initially, the product will have less buyers in the beginning. Thus, prices somewhat stay higher and steady resulting in more sellers trying to yield the same results (more inventory). At the end of 2015, we saw this scenario unfold, thus less buyers with more buyers moving outside these higher price areas (Alpine, Jamul, Ramona, Escondido) OR not buying at all.
Eventually there will be too much inventory (sellers) and not enough buyers (demand), resulting in a plateau or decrease in median home prices. This is where 2016 has started. You should have noticed an increase in the number of listings you have received in your search portal. So my theory is already ringing true. Here is where you will start to benefit as a buyer in this market. As inventory increases over the next 90 days as the market has already shown, the days on market for a listing will increase, resulting in a plateau or decrease in certain zip codes.
With the FED recently raising the lending rate from 0% to .25%, the interest rates were not as heavily impacted as analysts predicted. This will take time which is good for a buyer in the next 90 to 120 days buying a home. As inventory becomes saturated or in abundance and rates still hovering at a historically low percentage, the market will shift to a buyer market. What this means to you are the following:
- Home prices will be higher negotiable (last 3 offers I’ve written have been accepted for $10 to $25k under asking price)
- Closing Costs credits for your home loan are paid by the seller (could be up to $10,000 as I just received for a buyer)
- Repairs or credits for repairs after we conduct a home inspection will be considered (able to provide a $15K roof credit for a buyer)
All of these perks can be obtained if you use a buyer’s agent only! Going to the listing agent or walking into an open house without being represented will not yield these results mainly due to the fact that the best interest of the seller is with the agent that is representing them initially. Therefore, a buyer will not be put in this position after this relationship has started with the seller. My whole theory on the next 90 – 120 days will fall heavily on the FED though. If they raise the lending rate another .25% to .50%, this may cause a sharp increase to the interest rate for a home loan. Even though the first rate hike did not, the market is extremely volatile now as one has seen in the past 3 weeks with news in China and price of oil. Just today is lowered 500 points!
Several analysts’ predictions are that this rate increase will happen and increase the mortgage rates in 2016 as depicted by the graph showing rates from 2017 to present day. This will ultimately result in less demand in the market for the first time home buyer resulting in prices to stay steady and slowly increase as we witnessed at the end of 2015.
In summary, my advice and predictions all point to purchasing real estate in the next 3 to 4 months. Interest rate hikes, increased rents all over San Diego County, lack of new construction, and plenty of inventory all point to purchasing existing build. With the incentives I can get in a buyer’s market, it may allow for a little of the hesitation to go away if little money is paid initially to get into the home.I wish you the best in 2016 and would welcome the opportunity to obtain your dream of owning a home in San Diego!