Economists disagree on what’s ahead for Southern California real estate
Posted in Market Trends and Projections | By Blair Newman and Dave Emerson |
Are some economists still practicing "voo doo?"
(11/4/2009, by Dave Emerson) With prices and interest rates both down, 2009 has been an excellent year for buyers. In fact, over the past several months multiple competing offers have been the rule on properly priced and staged entry level listings—sometimes as many as 15 competing offers!
That, in turn, has been good for sellers, as we’ve seen homes selling quickly and prices moving up again, although nowhere near the insane peaks we saw several years ago. Rates are still near lows that haven’t been seen since 1958!
I just completed a review of California economists’ projections for the future, and there’s quite a range:
- Our California Realtors’ Chief Economist, Leslie Appleton-Young is predicting a 3.3% average statewide home price increase for 2010, with distsressed properties still driving the market.
- UCLA, however, is predicting So Cal price increases in the double digits for 2010, returning to their 2004 peak between 2012 and 2017, depending on the county, with OC lagging behind.
- Cal State Fullerton says local prices will actually drop 2% through next summer, then finish flat or slightly up.
- Veros, an automated valuation system says O.C. homes will be up 2% from 9/1/2009 to 9/1/2010.
- First American Title’s CoreLogic Division, on the other hand, expects Orange County homes to go up 9.5% from 8/1/2009 to 8/1/2010 and Los Angeles County prices to rise 6.3% during the same period, the biggest gain in CoreLogis’s projections for the nation’s ten largest cites.
- CorLogic’s numbers also indicate that Orange County August 2009 prices were down about 7.5% from August 2008.
The list goes on. Bottom line: Most economists are cautiously optimistic about next year, but nobody really knows what’s next.
A “double dip” recession may still be in the cards, but eventually interest rates will start moving up and stay up. There are way too many variables, from the ongoing incompetence in Sacramento, Washington, and Wall Street to the chaos in the Middle East and Korea, to name a few.
Our projection? After a winter slowdown that’s milder than normal we’re expecting prices to resume their slow upward movement early next year, at least through spring.
Sales activity will hopefully also remain strong, and interest rates will begin increasing for good sometime in 2010. Rates are still near lows that haven’t been seen since 1958, and probably won’t be seen again in my lifetime.
What to do? Simple: What works for your personal situation.
What we wrote here 2 years ago in “What to do when nobody knows what’s next” still applies today:
The key is to base your decision making primarily on what you know, not on speculation about market trends. Market timing is nice, but it’s highly speculative and subject to surprises from the Feds, politicians, consumers, other nations, and even terrorist attacks. Instead of trying to precisely time the market, figure out what you really want or need and brainstorm options, work, & wait until you find an acceptable solution.
As my mortgage broker once told me when I was trying to time the interest rate market in locking a loan, “if the loan works at the current rate, go ahead & take it. ” In other words, don’t gamble by passing up something that works.
As my mother used to say, “A bird in the hand is worth 2 in the bush.”
I’ve been telling buyers all year that this November and December may present the best buying opportunity for decades. With Congress on the verge of extending the first time buyer’s tax credit and adding a credit for other buyers as well, that’s more true now than ever.
Still, no buyer should expect to be able to flip their purchase in a few years based on appreciation, unless they really now what they’re doing. The old rule of thumb is back: Don’t expect to make any money on appreciation (after the costs of buying and selling are deducted) unless you’ll be living there five years. If you can do it in less then that, consider yourself lucky (or blessed).
Likewise, sellers who want to move out or move up and can accomplish close to what they want today, shouldn’t hesitate. When interest rates are back to 9% or more, it’s going to be a lot harder. That could come sooner than you expect.
If you can make it work, do it now, because tomorrow is still a closed book. All we really have is today.
If you’d like specific input on your situation, or have questions or observations, use the comment box below & we’ll get back to you. Better yet, other readers might have something to add as well. Please keep the language family friendly. If you prefer to keep your question confidential, use the “contact us” link at the top left of this page. We’re always happy to put our 30+ years of Southern California real estate experience to work for you!
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