The C.A.R. Housing Market Forecast
The California Association of Realtors (C.A.R.) recently released its housing market forecast projections for 2018 and it expects a strong housing market with potential for modest growth. The positive forecast was based on an improving economy, solid job growth and the increasing the demand for housing. The housing market in Los Angeles County has been recovering in recent years and continues to progress positively as employment and incomes improve in 2017. The CAR report predicts there will be a modest gain in existing single-family home sales and that the average for 30-year, fixed mortgage interest rates will increase slightly, but low by historical standards. Yet pending home sales, often considered a sign of where a housing market is headed, dropped 2.6 percent in October compared to a year ago in California. Southern California experienced a decline of 7.3 percent in pending home sales this year.
The largest obstacles facing homebuyers in today’s market are home prices. The CAR says a shortage of affordable homes for sale, and the resulting competition, will continue to drive up prices, although at a slower pace. Sales are predicted to increase by 1 percent in 2018, down from the expected 1.3 percent increase this year. California’s population is expected to grow from an estimated 40 million people in 2018, up from 39.4 million in 2016, creating a need for more housing. At the same time, many in the younger generation are leaving California because they can’t afford to buy. “It’s starting to hamper the ability of tech companies leading the charge with job growth,” said Appleton-Young.
The CAR housing market forecast survey showed that available inventory is the next concern for brokers after rising prices. Homeowners aren’t selling their homes because they have little upward mobility. If they sold their homes, it would likely be a sideways move at best.
So even though sales are down, they’re outpacing the supply, which will likely continue to push prices higher. This means homeowners may continue to stay put, and renters will continue to be priced out of homeownership.
“Home sales relative to the number of new listings coming online each month to replenish that sold inventory—or market indicator of future price appreciation—suggests that there continues to be upward pressure on home prices through the fall,” CAR wrote in its report. “Home sales continue to outstrip new listings coming online to restock sold units.”
Despite all of the concerns, according to an article in Curbed Magazine, the Urban Land Institute predicts a “relatively smooth ride” for the real estate industry in their annual look ahead. At their annual meeting in Los Angeles, the organization shared a 2018 Emerging Trends in Real Estate report, a joint project between ULI and PricewaterhouseCoopers researchers. They compile more than 800 individual interviews and 1,600 surveys from a diverse array of real estate, economic, and development professionals to originate this report.
Although 2017 hasn’t been anything close to a smooth sailing, with the affordable-housing shortage, the consensus of real estate experts and analysts surveyed is that growth trends will continue. In fact, they believe that the housing shortage actually offers opportunities to whomever can figure it out. Mid-priced single-family homes that a cross-section of buyers can actually afford are virtually nonexistent. Even with many potential buyers, a number of economic factors make it nearly impossible for most to purchase a home, whether affordable mid-market homes or starter homes for young adults. There is also an entire generation of baby boomers trying to locate affordable housing options. Real estate professionals will need to overcome a number of challenges to capitalize on this huge market, one that survey participants said was one of the most promising residential sectors in 2018. Many boomers will want to sell their larger homes and downsize. However, these larger homes are lacking many of the desirable amenities, such as technology and proximity to their jobs, which the younger generation wants, so it’s not as simple as it may seem. The boomers may actually be competing with the younger generation for affordable housing in many cases.
“This year’s housing market can be told as a tale of two markets – the inventory constrained lower end and the upper end that’s non-inventory constrained,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “This trend is likely to continue into 2018 as active listings have declined across all price ranges for the past two years, but is most obvious at the lower end.”
The median home price is forecast to increase 4.2 percent to $561,000 in 2018, following a projected 7.2 percent increase in 2017 to $538,500. At the annual CAR Expo in San Diego, Appleton-Young stated that a “lack of homes for sale would keep home prices rising for the next three to five years, largely due to construction not keeping pace and some other factors,” according to an article in the San Diego Tribune. The affordability constraints stop the increases from rising higher because of the gap between income and home prices increases. “The slower income growth is really hampering the ability of first-time buyers to get into the market,” Appleton-Young said. However, according to the article, she also predicted statewide affordability would drop to 26 percent, down from 51 percent in 2012 when the recession was still having a significant effect. The association measures affordability by checking if the monthly housing payment does not exceed 30 percent of gross monthly income. With all of the challenges, prospective homeowners may at least be encouraged to know home sales that sold below the asking price inched up from 44 percent a year ago to 46 percent in October of this year, and the average price below the asking price jumped from 9 percent a year ago to 12.
A recent post in ft Journal provided more detail specifically on Los Angeles housing indicators. Although not likely to occur until 2019-2021, they foresee a complete recovery of approximately 110,000 annual home sales as demand for housing in Los Angeles County is buttressed by a Great Confluence of Baby Boomers and first-time buyers who are lured by further employment. They also predict that residential construction will increase dramatically. As for now, editors at the ft Journal state that “home sales volume depends on largely on homeowner and renter turnover – the number of people moving from their residence each year to relocate. Turnover rates are usually highest when jobs are abundant and wages are rising. The need for housing starts increase when confidence in the economy is high.” The number of homeowners relocating since the recession of 2008 has increased and LA homeowner turnover is relatively high today with one in 16 homes selling annually.
However, there is little turnover in the Santa Monica Ocean Avenue market. We specialize in this very special, unique stretch of ocean-fronting properties that is continually appreciating. This is a world-class market with a multitude of international buyers and sellers. While Ocean Avenue is the primary home for many, it is also home for many who own multiple homes throughout the world.
The obvious as well as the highly important nuances and subtleties within each building, its quality of construction, location, building amenities, building function, quality of finish materials, floor plans, quality and attentiveness to management and upkeep of building all weigh into the value of a building and more specifically a particular property.
Currently we have three properties for sale in this market:
El Tovar
This remodeled penthouse is a highly unique property, comprised of 3BD/3BA in approximately 2,700 SF. Exclusive amenity rich building.
Offered at $6,475,000
701 Ocean Avenue
This elegant ocean-facing unit comprised of 2BD/2.5BA in approximately 1,850 SF. Exclusive amenity rich building.
Offered at $2,500,000
The Pacifican
This sophisticated, remodeled ocean view Penthouse comprised of 2BD/2.5BA in
approximately 1,700 SF. Stunning direct ocean views.
Offered at $2,995,000
Please contact us for more 2018 market forecast information or to schedule a showing on an available property.
