Favorable vs. Unfavorable Market Conditions

Favorable vs. Unfavorable Market Conditions

During March 2017, 39,900 new and resale home transactions closed escrow in California. This is 5% more homes sold than in 2016.

In 2016, there were 457,900 home sales in California. This is 1.5% more than the number of home sales that took place in 2015, but 40% below when sales volume peaked in 2005.

Throughout 2017, home sales volumes will continue to be weak, as the higher interest rates lessen homebuyer purchasing power. Home sales volumes are estimated to boost significantly in 2018.

Favorable vs. Unfavorable Market Conditions

Chart update 05/01/17

Mar 2017 Feb 2017 Mar 2016
Southern CA 22,000 14,900 38,000
Northern CA 17,800 12,700 17,600
CA Total 39,900 27,700 38,000

This chart shows the home sales volume of single family residences from month-to-month. This includes the sale of all residential resales and new homes in California.

 

Favorable market conditions now at work
Several favorable market factors currently support increasing sales volume:

  • A steady 3% annual increase in the number of new jobs;
  • A more reasonable (though still rising) price trend as we start 2016;
  • Slowly rising consumer confidence and spending; and
  • the recapitalization of the private mortgage insurers to eventually replace (or fully compete with) government guarantees of home mortgages.

 

Trends to be concerned about
However, many unfavorable market conditions restrain the rise of home sales volume:

  • the weakest homebuyer demographics in 15 years;
  • failed savings for a down paymentas high rents squeeze potential first-time homebuyers out of saving;
  • buyer borrowing power no longer enlarging the funds they can borrow as interest rates inevitably rise, reducing funding for purchase-assist financing and dampening property prices;
  • the public’s increasingly anti-business and pessimistic attitude about American economics, wealth inequality and national politics no matter the outcomes; and
  • tightened loan standards as lenders are forced to apply forgotten fundamentals of sound mortgage lending practices (20% down payment on non-FHA/private mortgage insured loans, lower income ratios, risk-free credit scores and full documentation of income, funds and collateral value).Home sales values will begin to pick up again in 2018, peaking 2019-2021. Reaching beyond its peak in 2007, employment and labor force participation will quickly improve.

 

Home sales values will begin to pick up again in 2018, peaking 2019-2021. Reaching beyond its peak in 2007, employment and labor force participation will quickly improve.

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