2019 CA Housing Uncertainty Creates Psychological Effect Clovis CA 93619
The summary of the 2019 California Association of Realtors economic forecast is that the 2019 CA housing uncertainty creates a psychological effect. This post is a summary of the information found in their 2019 forecast, with a few extra additives here and there. So everyone shouldn’t read the C.A.R. housing forecast (where most info from this post was derived) for 2019 and take it verbatim as if their home value will reflect exactly how this report forecasts the overall housing prices for the entire state of CA in 2019. But I thought it was good to consider, especially from a Realtor’s perspective so I can envision how 2019 may shake out from a business standpoint. But if you or anyone you know will be a buyer or seller in 2019, you may glean something written here.
Similarly in how 2018 transpired with a 3.2% decline in the number of existing single family home sales compared to 2017, 2019 will experience a 3.3% decline on top of the decline from 2018. As home prices are expected to simmer down next year yet still increase, combined with an expected rise in interest rates these factors may create affordability issues. So fewer and fewer people may be able to afford a home in this great state of California.
This may cause potential buyers to get cold feet and maybe try to wait the market out. In effect, some buyers may be sidelined from buying in 2019 with the hope that better deals may be on the horizon if they wait. Over the past two years, interest rates have gone up by an average of 60 basis points each year. In 2017 rates were 4.0%. In 2018 they were 4.7% and in 2019 they are predicted to be 5.2%.
“The surge in home prices over the past few years due to the housing supply shortage has finally taken a toll on the market,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “Despite an improvement in supply conditions, there is a high level of uncertainty about the direction of the market that is affecting home buying decisions. This psychological effect is creating a mismatch in price expectations between buyers and sellers and will limit price growth in the upcoming year.”
In 2018, home values rose 7.0%. The 2019 forecast is for values to rise only 3.1%. As a result of California’s affordability issues, homeowners fled their respective counties or even the state at rates as high as 21%-35% in 2018. This “outmigration” trend is expected to continue in 2019 due to the state’s housing affordability issues. Looking back to 2013, 36% of the population could afford a home. That figure has almost dropped every year since and in 2019 they expect only 25% of the population to be able to afford a home in CA. That is easy to believe since the median price of a home in 2019 in CA is expected to be $593,450.
All of these numbers may not seem relevant to you. But if you are a buyer or a seller of real estate in 2019, please consider some of the implications of this report. The chief economist referenced the psychological effect. That affect may be seen in the price negotiations before or during the escrow period. That affect may be felt during the request for repair negotiations. People are scared that they may get caught at the top of a bubble and so buyers may become more “cutthroat” in negotiations. Buyers may operate out of fear more than free market enterprise. You may not get that top dollar that you were expecting to get before you put your home on the market.
I certainly wouldn’t want to be a for sale by owner in this market. Due to the high prices of homes and expected rise of interest rates, buyers are scrutinizing the condition of homes and prices more than ever before. Back after the sub prime mortgage meltdown a decade ago, people were happy to get a fixer upper at discounted prices when compared to 2004-2006 pricing. But now that values are back up, buyers expect homes to be in good to great shape if they are going to expend the amounts of money needed to buy a home today.
Another side effect is that buyers are becoming skeptical of home prices and skeptical of the agreed contract price of the escrow that they are currently tied to. So escrows may become harder to close. It may become more difficult to get buyers and sellers to agree to terms in order to close escrow. In order to have a successful closed escrow, you need a good Realtor in your corner. Call me, Jason Nenadov, at 559-246-8991 to learn how I can help you navigate and close an escrow for you whether you are a buyer or a seller. To see which homes are actively for sale today in real time in Clovis CA. 93619, click here.
2019 CA Housing Uncertainty Creates Psychological Effect Clovis CA 93619
