Starting in 2017, what we’ll most likely see is a unique alignment of economic and market forces with jobs and wage growth, low oil prices, and low interest rates. With the California economy outperforming the rest of the nation, California’s housing market is in a better position than most other states. Those in the Beach Cities are in a better position than most other cities in the State. 2017 should bring a modest increase in pricing with a growth in sales activity. This equates to more money in consumer’s pockets and higher confidence in spending. The housing market will enter an expansion phase nationally and a wave of new construction will slowly replace the aging housing stock locally.
It is interesting to note as we look back on our market forecast for 2016, how our analysis ended up when compared against actual market performance for the year. Read our 2016 forecast and breakdown here.
The New Normal
As we move out of the housing recovery mode into a more stable period, many economists are referring to these market conditions as “the new normal”. Most likely, while we will still see prices increase, it will not be at the pace of the past 18 months but will be more moderated in the 4-5% range. Of course, considering the average price of homes in the South Bay, that still means some nice price gains. The economists are also predicting that prices will rise faster than overall incomes. So if you are thinking of buying, there’s really no reason to wait. 2017 Market Predictions: The Buyer Perspective
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 30 days’ supply on hand as we have previously at a few junctures.
According to The Conference Board, national consumer confidence is at a 9 year high with jobs in California growing faster than anywhere else in the nation, with reported job gains being the highest in the Southern California region. Sustained job growth within the tech and engineering firms in Silicon Beach, the Downtown financial district and the entertainment and sports industries will continue to attract buyers to the South Bay due to the quality of both lifestyle and education. In turn, the market stability we projected in early 2016 should continue the trend, thereby avoiding an unhealthy “bubble”.
In summary, 2017 should see the following:
∙ Pent up demand for inventory
∙ Increase in unit sales
∙ An almost overwhelming need for new construction
∙ Local industry growth leading demand
∙ Moderate, steady appreciation
∙ Lack of affordability in the average price points as a continued challenge
∙ Changing interest rates as an almost daily topic
∙ Economists keeping a close watch on global markets