Everyone is aware of the huge increases in housing prices over the past 3 years. There have been several factors at play here:
1. Deeply depressed housing prices as a result of the crash of 2008 and a slow economic recovery
2. Increasingly stringent lending requirements and a reduction in loan limits for FHA loans
3. Government regulation and efforts by Congress to streamline Fannie Mae and Freddie Mac
4. Private Equity investors and Overseas investors seizing upon attractive rental revenue opportunity
5. Reduction in REOs, Foreclosures, Short Sales, and other distressed sales bargains
6. Fear and apprehension by Homeowners about taking on more risk in moving-up market
7. Slow growth in new Home Construction as Builders cautiously await consumer demand
8. The Federal Reserve keeping interest rates extremely low and pumping liquidity through QE
This has led to a severe shortage of inventory of all categories of homes in all price segments of the market in all geographies. This is especially severe in large Metros such as the San Francisco Bay Area, where Google, Facebook, Netflix, and other social media companies have produced several Multimillionaires eager to invest in upscale Villas and Estates. Consequently house prices have risen nationwide by over 14 % Year-over-Year with some areas exhibiting 25% increases. Days on Market statistics have dropped to less than 30 days with multiple offers over List price almost routine. Also investors both domestic and International, have raised the number of All-Cash transactions to greater than 40%.
So what's likely to happen in the next 18 months for the rest of 2014 and 2015. Here is my forecast:
1. The pump priming by the Fed will end with the tapering efforts already started, resulting in rising interest rates to 5.5 % for 30 year fixed.
2. A flood of Mortgage applications as buyers scramble to beat interest rate increases.
3. The Economy will finally begin to fire on all cylinders with unemployment rates dipping below 6% nationwide and down to 3% in large metros such as San Francisco and the Bay Area.
4. House prices and Rental rates will again begin to edge upwards by double-digits Year-on-Year as Sellers gain confidence in the Housing recovery and move to upgrade their housing needs.
5. The relative proportions of housing types will change with the aging Baby Boomer generation down-sizing to Urban centers within walking distance of shops, restaurants, recreation facilities and away from the Suburban Mac Mansions.
Stay tuned to further updates and forecasts of trends by specific geographies and housing categories.
1. Deeply depressed housing prices as a result of the crash of 2008 and a slow economic recovery
2. Increasingly stringent lending requirements and a reduction in loan limits for FHA loans
3. Government regulation and efforts by Congress to streamline Fannie Mae and Freddie Mac
4. Private Equity investors and Overseas investors seizing upon attractive rental revenue opportunity
5. Reduction in REOs, Foreclosures, Short Sales, and other distressed sales bargains
6. Fear and apprehension by Homeowners about taking on more risk in moving-up market
7. Slow growth in new Home Construction as Builders cautiously await consumer demand
8. The Federal Reserve keeping interest rates extremely low and pumping liquidity through QE
This has led to a severe shortage of inventory of all categories of homes in all price segments of the market in all geographies. This is especially severe in large Metros such as the San Francisco Bay Area, where Google, Facebook, Netflix, and other social media companies have produced several Multimillionaires eager to invest in upscale Villas and Estates. Consequently house prices have risen nationwide by over 14 % Year-over-Year with some areas exhibiting 25% increases. Days on Market statistics have dropped to less than 30 days with multiple offers over List price almost routine. Also investors both domestic and International, have raised the number of All-Cash transactions to greater than 40%.
So what's likely to happen in the next 18 months for the rest of 2014 and 2015. Here is my forecast:
1. The pump priming by the Fed will end with the tapering efforts already started, resulting in rising interest rates to 5.5 % for 30 year fixed.
2. A flood of Mortgage applications as buyers scramble to beat interest rate increases.
3. The Economy will finally begin to fire on all cylinders with unemployment rates dipping below 6% nationwide and down to 3% in large metros such as San Francisco and the Bay Area.
4. House prices and Rental rates will again begin to edge upwards by double-digits Year-on-Year as Sellers gain confidence in the Housing recovery and move to upgrade their housing needs.
5. The relative proportions of housing types will change with the aging Baby Boomer generation down-sizing to Urban centers within walking distance of shops, restaurants, recreation facilities and away from the Suburban Mac Mansions.
Stay tuned to further updates and forecasts of trends by specific geographies and housing categories.
