2015 housing market outlook
Realtors are optimistic about the upcoming spring market. Across the board, demand for homes outstrips availability, meaning sales are practically assured. (San Jose is pictured.)
It is for good reason that the National Association of Realtors keeps a close watch on home sales. Trends not only impact their membership, but also critically influence the overall state of the economy. While housing data from 2013 and the first half of 2014 was increasingly positive, the momentum toward the end of 2014 slowed across most of the country. According to a report from the California Association of Realtors (C.A.R.), the Bay Area market began 2015 still bearing the scars of 2014’s slowdown.
The report indicates that sales of single-family homes across the nine-county Bay Area dropped by 37.1 percent. That number is nearly 10 times the rate of decrease across the rest of the state, where sales were down by 3.9 percent.
In a statement that accompanied the report, C.A.R. President Chris Kutzkey attributed the slowdown to “low housing affordability.”
In spite of those statistics, Realtors remain confident in the market and feel increasingly optimistic about what 2015 has to bring, reports the National Association of Realtors (NAR). NAR sends a survey each month to over 50,000 real estate agents and releases the results in the form of The Realtors Confidence Index. The January report paints a picture of what Realtor’s expect in regard to home sales, prices, and market conditions.
Although agents in states adversely affected by harsh winter weather reported market slowdowns, others were more hopeful, with most optimistic about the upcoming spring market. Across the board, demand for homes outstrips availability, meaning sales are practically assured.
There may be reason for optimism. Ted Erickson, a mortgage broker with Clear Lending, says, “This year is much better so far than 2014.”
Erickson says that he uses the time it takes a buyer to get into escrow as his gauge for how well the market is doing. He also views the competition for homes as slightly softer. “Last year it was all-cash buyers eating up the market.”
In spite of a market that appears to be more open to noncash buyers, Jalayne Forrester, a Realtor with Keller Williams Realty in Los Gatos, understands the reality her buyers face. As with other pockets of the country, the challenge in the Bay Area is one of finding homes for those currently in the market to buy.
“Buyers are frustrated because the inventory is so slim. They are often making multiple offers at the same time.”
Asked what a buyer would do if two of those offers happened to be accepted, she paused. “I’ve never had that happen.”
Erickson is sometimes surprised by buyers who apply for a mortgage without having prepared. “I see people making $100,000 who have no savings. People just don’t save money and often don’t have even 3 to 5 percent down.”
Although down payment assistance programs do exist, Erickson points out that they are intended for those with low incomes. This fact creates a bit of a stumbling block given that Bay Area prices are among the highest in the country.
For a novice buyer the area can be a shock to the system. Everything – from the expectation of multiple offers to the fact that the price listed is frequently grossly lower than what the house will ultimately sell for – is enough to make buyers wonder if “their” house is out there. Forrester said that one current trend she has heard about occurs in some areas where an agent will list a property at an artificially low price and then expect to receive a winning offer of $300,000-$400,000 over list price.
Forrester views the current market as a coin with two distinct sides. She is confident that the homes she lists will sell, a fact that makes her sellers very happy. She also knows that low inventory means frustration for the buyers she has invested in. She also worries that in an effort to snag a property, some buyers are going too far.
“I feel a little nervous when I hear that so many people are making offers that are noncontingent in order to buy a home,” she said.
She has watched as nervous buyers forego the right to have a home inspected or the ability to pull out of a deal if the home does not appraise at asking price. “When there are multiple offers it is a tough situation.”
Fortunately for area buyers, Erickson finds that most appraisals in the region are “very close.” Whereas buyers in other parts of the country might have to sit on pins and needles waiting for their appraisals to come through, it is less of an issue in these parts.
Although the upcoming spring market normally means that more homes will be listed, Forrester suspects that the numbers will not be high enough to offset the sheer number of willing buyers. “Interest rates alone play a role,” she said. “People are saying to themselves, ‘Why am I paying rent when I could get a mortgage for a little more money?’”
While industry insiders remain hopeful, Erickson says that how optimistic or pessimistic a buyer appears to be depends upon the area in which they hope to purchase a home. “It can be brutal in some areas,” he admitted.
Forrester encourages her clients to stick with the house hunting process, sure that they will find the home “they were meant to have.” She says that her best piece of advice to buyers is, “Trust your instincts, and if you find the perfect home, don’t waste time playing games. Just give it your very best shot.”