Four things motivating local buyers to act in 2017
In addition to traditional market demand, there are several key market forces at play:
There is a wave of activity on the horizon in 2017.
The lack of inventory is holding back market volume, not pricing. For most of the past four years, any time a great home hit the market, there were multiple offers and typically several all cash offers. This made it impossible for buyers who need to sell their current home to be competitive. Due to the huge annual appreciation, many owners opted to delay their selling plans to be able to enjoy the appreciation. As the huge annual appreciation we have experienced over the last four years has been tamped down to a flicker from a flame, more and more owners will take this opportunity to liquidate real estate. This will allow a lot of move up buyers to get into the game. Buyers that need to sell their home to buy their next property will bring more inventory to the market which in turn will spur even more sales.
In the past 9 months, the market seems to have slowed down. While the average time on market dramatically increased, the amount of inventory actually shrank. It is the lack of quality listings that has really slowed the market.
My forecast for 2017 will be that as more listings come on the market, it will spur more buyers who need to sell their current home first, to list their homes for sale. This will create more inventory and more options for the move-up buyer. One of the byproducts of the new normal will be a rather healthy trend in inventory rebalancing. So while the MSI (or months’ supply of inventory), may still remain tilted towards sellers, it would be surprising to see less than 60 days’ supply on hand.
Many of the buyers who have been waiting out the election uncertainty will be motivated to make a move soon in order to take advantage of the still low interest rates before they start trending upwards. The FED’s publicly stated intention to increase rates will be buoyed by the strength of the stock market. As the stock market takes off, bond pricing will be affected.
A strengthening economy will lead to a buyer’s ability to take some profit out of the stock market and put that profit into investments that are better hedges against future inflation – such as real estate. This is especially true for the demographic in the South Bay. The economic factors that are drawing more and more companies into our Silicon Beach economy will give an overall boost to the area. This will lead to more cash being drawn into local real estate.
Should lower tax rates come into effect, more money will fall into the hands of the public. Overall, the local real estate market should continue to stabilize. The dramatic price increases have slowed, bringing ease to the fears of another housing bubble. This will continue to bring normalcy back to the market and will encourage consistent movement in real estate.