The general consensus among housing analysts and economists is that the Bay Area real estate market will slow down in 2017. Many forecasts and predictions have been issued to this effect. The “slowdown” in this context refers to both home-price appreciation and overall market activity. In most Bay Area cities, home prices are expected to rise more slowly in 2017 than they did in 2016.
Similar housing market forecasts have been issued for the state of California as a whole. In September of 2016, the California Association of Realtors (CAR) published its statewide forecast for 2017. In it, the group said home prices could rise more slowly in the months ahead.
“The net result will be California’s housing market posting a modest increase in 2017,” said Leslie Appleton-Young, CAR’s chief economist. “The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”
Analysts expect home prices in the Bay Area to rise more slowly over the next 12 months, compared to the last year.
The more conservative Bay Area home price forecasts for 2017 are, in a sense, good news. They suggest that the housing market is slowing down to a more sustainable level of growth, which is a positive trend for long-term stability.
When home prices rise too quickly, outpacing wage growth and other economic metrics, we get into “bubble” situations. We know from history that bubbles are bad for the housing market, and for the economy as a whole.
Some Bay Area housing market forecasts for 2017 are predicting a slowdown in price growth over the coming months. But, from an economic perspective, this can be viewed in a positive light. A cooling trend in the housing market would give wage growth a chance to catch up, and should help normalize a market that has been overheated in the past. In the long term, sustainable growth is far better than booms and busts.
A cooling trend in the Bay Area real estate market could also help ease some of the affordability issues that have been reported recently.
The California Association of Realtors (CAR) also reports that supply is tightest in the Bay Area, when compared to the state as a whole and other regions like Southern California and Central Valley. This should come as no surprise to local real estate agents and home buyers. In some Bay Area cities, housing supply is seriously constrained right now, forcing buyers to compete fiercely for a limited number of homes.
Normally, this kind of supply-and-demand imbalance would drive home prices north — and it has. But house values seem to be reaching a sort of peak right now, due to affordability issues. So it’s possible that we will see smaller price gains in 2017, even for those housing markets with limited supply.
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Market update source: https://www.bpfund.com/bay-area-housing-forecast-2017/
Real Estate Market Update
(posted June 2016)
Written & Published by Justin Bundy, J.Rockcliff Realtors
I just wanted to give you all a quick overview of what I've been seeing in the Bay Area real estate market recently. After a bad real estate market from 2007-2011 we saw everything shift drastically in 2012 back to a strong sellers market. All of the pent up buyer demand and low inventory of homes for sale, mixed with historically low interest rates, fueled a comeback for a multiple offer seller’s market. Home prices have increased year after year since 2012 which has helped to stabilize the market. The foreclosure and short sale markets decreased drastically due to home prices rebounding. Boomerang buyers, traditional buyers, first time buyers and investors have flooded the real estate market over the last 4 years.
So where is the real estate market going from here?
Well real estate has always been a bit cyclical (typically 5-7 year cycles). Many wonder if a bubble burst will happen again, but I don't foresee it as bursting, but more of moderating towards a "new normal" market. Buyer demand is starting to curb back slightly since much of the previous pent up buyer demand has purchased homes over the last few years. However, the low inventory of homes for sale currently will continue to drive pricing this year but at a slower pace.
Other factors are also contributing to the real estate market curbing back slightly. The recent uncertainty in the financial markets, the drama of a presidential election year and a possible tech industry bubble burst may be contribute to the real estate market tapering back and balancing out. I do feel that it is important for the real estate market to balance out (for a bit) so that it doesn't over inflate and potentially cause another bubble burst. We all saw what happened last time that occurred and I think you would all prefer a stable healthy real estate market instead in the near future.
If you need real estate assistance, or know someone who does, please do not hesitate to contact me. I'm also a great resource for contractor recommendations should you need one.