As we say goodbye to Obama and say hi to Trump, a lot of people have been asking me how I think the real estate market is going to go in 2017. The answer is: I think it’s going to go up!
But I’m not sure how. There are 3 things I am going to keep an eye on:
- Interest rates. They went up immediately after Trump’s election, and are predicted to go up for the rest of next year. Not only has the economy just started to be where the Fed feels comfortable raising rates, Trump’s policies are seen as inflationary, and one of the Fed’s mandates is to control inflation. Now, I will say that when the Fed raised interest rates last year, mortgage rates dropped to some of the lowest levels ever seen. I don’t think that will happen this time. I think interest rates will have to go up. My concern is that as interest rates go up, affordability goes down, and so demand goes down.
- Inventory. Inventory is low and is predicted to remain low in the foreseeable future, especially near the city. Good jobs are attracting people, and people need housing. And there simply is not enough.
- Inflation. Inflation causes all commodities to go up in value, so I expect that real estate will follow suit. Unfortunately, that means that everything else will go up in price as well– gas, food, and if you have savings, you can watch that dwindle to nothing.
So overall, I think 2017 is going to be a good year for real estate! 2019, 2020, however…
Hi all, the fact that I am home writing instead of showing property today just strengthens my opinion that the market is slowing– finally! We have been at a non-stop sprint since the spring 2012, and it’s nice to feel the market drop down to…normal. Inventories are up, and price negotiation is possible.
What’s causing this? The drop off seemed to me rather abrupt this year, like someone pulled the emergency brake on a train. Here’s a couple of thoughts of why that might be:
- It’s the time of year. Conventional wisdom is that real estate traditionally gets a little slower at this time of year. Kids are in school, and the holidays are right around the corner. Notably, this did not occur last year, where last winter saw a huge run-up in prices due to non-existent inventories.
- The government shutdown. People don’t like uncertainty, and some buyers may be taking a wait-and-see attitude. Then there’s a fact that some government workers are just not being paid. Fortunately, I think our local area is not as directly affected by federal cuts as other areas of the country.
- Interest rates are up. There was a significant rate increase in the early summer this year– interest rates went from the mid-3% to mid-4% range on news from the Fed that they were considering discontinuing “quantitative easing.” This caused potential buyers’ payments to rise enough that they couldn’t afford to complete their purchases. So if you could afford a $600k house in May, you could only afford a $550k house in August. Deals in my office fell out immediately over affordability issues, but strangely, people re-adjusted and climbed right back on the bandwagon. In September, the Fed said nothing about phasing out QE, and interest rates went down again. But it didn’t seem to spur the buyer to buy, as I would have expected.
- Football season. And maybe the Dodgers being in the playoffs. I held open houses at one of my listings the past couple weekends, and because of the great price, I expected to be absolutely overrun. I got good turnouts, but not what I expected. Even the streets seemed empty!
What do you think?
Posted in Uncategorized
Tagged affordablity, burbank, homebuyers, house buyers, interest rates, Los Angeles, North Hollywood, October 2013, quantitative easing, real estate market, sherman oaks, southern california, studio city, toluca lake, valley village
There’s something really strange happening in LA– it has become impossible to find anywhere to live! I get calls daily about rentals. “I want a 1 bedroom in Studio City, close to the Trader Joe’s, with a balcony.” I don’t usually do rentals, but sometimes I like to point people in the right direction. “What’s your budget?” I’ll ask. “$1500 max.” I always shake my head and dread what I have to tell them– it is nearly impossible to find something for this price in this area. Let me qualify that– it’s impossible to find anything that isn’t HORRIBLE. Old carpets, stinky rooms, dilapidated buildings, in the 6400 block or higher– HORRIBLE.
The average price for a ROOM in a house is $700. It might include utilities. If you’re a young person making even $12 or $15 an hour, you are spending half your income on housing. And I don’t think they are making that much.
The bad news is that, with higher rents, landlords can afford to make improvements to apartments that are rundown or outdated. Why is that bad news? Because they charge even more, and the cycle continues.
I’m not a big fan of rent control or low income housing. But I have to wonder what kind of effect these high rents have on the future of Los Angeles. I love this city and want to see artists and actors and directors and musicians come here to make their fortune. It’ll be hard to do if the only affordable housing is in Downey.
It’s hard to believe I haven’t written a post in 2 years! In that time, I left Prudential in Los Feliz to work at Keller Williams in Studio City, then just recently returned to Prudential in Studio City earlier this year.
The last time I made a post, there was a 3 bedroom/2 bath home in a good pocket of North Hollywood that sold for $260k. That house is probably worth over $400k. I had a client who bought a little rental in Lake Balboa at the very low point of the market — January 2012, and DOUBLED her investment.
Those days are past, unfortunately, so the question is– are we going to keep on going, or is this all just another bubble? I posted a similar graph earlier this year because I couldn’t believe how quickly the market increased. But it kept going. How long will it go? Not a rheotorical question! Somebody tell me!
I apologize for making light of a serious situation, I just like the term “sentinel chicken.” Anyway, West Nile is back this year in our area, so please take care to rid your yards of standing water, and avoid the ‘squitos as much as possible. Here is a link to an article with the latest findings, a link to the CDC website about what it is and its symptoms, and a 2008 LA Times article that chronicles the epidemic that year and in 2004.
Curbed LA reports work is being done for a Trader Joe’s expansion! I wonder what natural goodies they’ll be stocking there… Read the blurb by clicking here.
The Los Angeles Department of Water and Power (LADWP) will be constructing the City Trunk Line South Unit 5 Project. The project consists of 6,600 feet (1.25 miles) of 60 inch diameter welded steel water pipe that will improve the water quality and reliability in the San Fernando Valley area, as well as other surrounding communities serve by the City of Los Angeles. The construction of the entire trunk lineas shown on the attached map will be completed by approximately 2015.
LADWP will begin construction on Coldwater Canyon Ave between Dickens St and Van Noord Ave. Construction work in this work zone will start approximately the week of May 23, 2011 and will be completed by the end of December 2011. Construction work will occur Monday through Friday from 7:00 a.m. to 5:00 p.m. with the possibility of occasional work on Saturdays.
One traffic lane will remain open in each direction north and southbound on Coldwater Canyon Ave. Halkirk Street on the east side of Coldwater Canyon Ave will be closed to thru traffic.
If you need any further information in regards to this project at this time, please contact the Construction Engineer, Mr. John Hinton, at (213) 367-1189. After the start of construction, if you have any construction related issues, please contact the Construction Superintendent, Mr. Robert Smith, at (213) 798-5704.
12711 Ventura Boulevard, Suite 100
Studio City, CA. 91604