Four Reasons 2014 Could Be A Very Strong Year for Local Housing Market
Happy New Year! As we kick off 2014, it’s a good time to take a look
at what might be in store for the local housing market in the coming
year. While I don’t claim to have a crystal ball, I feel very optimistic
about the potential for a strong housing market in 2014.
The Wall Street Journal reported this week that home prices across the country – but especially in Silicon Valley and other parts of the Bay Area – have zoomed back to near record territory. Valuations jumped 25% or more in some communities over the past year, nearing or even exceeding their pre-recession highs. Prices in Palo Alto are nearly 40% above their 2007 peak, one of the largest gains in a recent survey.
So what do we do for an encore in 2014? I see four major reasons why the Bay Area’s housing market will continue to be strong in the coming year:
1. A robust local economy. The Bay Area economy is one of the strongest in the country. Silicon Valley, the Peninsula and San Francisco are the high-tech, Internet, VC and social media centers of the world. CNNMoney’s tech job forecast for 2014 is “Hot and Getting Hotter.” Tech job site Dice.com reports that 55% more employers — a record high — say they’re ready to hire a large numbers of techies, up from 42% in the second half of 2013. These well-paid knowledge workers will provide an even stronger, better-capitalized pool of buyers for our housing market in the coming year. Just noted in USA Today, the bay area’s fourth largest city, Fremont, has seen a return to a strong housing market, and is regarded as one of the best run cities in the country. http://usat.ly/1crnbWi From the Wine Country in Sonoma, south to Carmel and Pebble Beach, and across to Livermore, we are fortunate to have healthy, diverse, and prosperous cities and towns in our nine Bay Area counties.
2. Supply and demand. While the demand side of the equation was extremely strong last year with buyers out in force, the supply continued to be historically low. This resulted in prices getting bid up in multiple-offer situations and many would-be buyers walking away empty-handed. No one knows for sure what will happen to inventory in the coming year, but our agents are telling us more listings are expected in the coming weeks. I suspect homeowners are reading the same news stories we are and seeing that prices have been shooting higher, and they may finally be ready to cash in. Rising prices also change the dynamics for many homeowners who had been underwater in their mortgage as recently as six months or a year ago and weren’t in a position to sell. With prices jumping, many of these homeowners now have positive equity once again and have the option of selling and walking away with cash for the first time in years.
3. Interest rates. Interest rates remain historically low, but make no mistake about it: They are moving higher once again. Some economists are forecasting mortgage rates could rise a full percentage point before the year is over. This is a clear wakeup call for those buyers who have been on the sidelines waiting for the perfect time to get into the market. The time is right now before mortgage rates move higher. An increase of just one percentage point on a $500,000 mortgage adds $300 to a monthly payment or $3,600 a year. Buyers know that and will be rushing to beat the next rate hike.
4. Increasing costs of renting. As the Bay Area economy comes roaring back from recession, available apartments are drawing long lines of potential tenants and rents are spiraling higher, according to a recent story in the San Francisco Chronicle. “Rents in San Francisco are escalating at breakneck clips this year, largely driven by an influx of tech workers. Oakland and San Jose likewise are seeing steep run-ups,” the article notes. Median asking rents for San Francisco apartments listed on www.livelovely.com hit a record $3,398 in the third quarter, up 21 percent from 2012, according to the Chronicle. Such huge rent increases continue to make buying a home a better financial proposition. My sense is that buyer demand will only increase in the new year as renters see their personal economy improving with a better job market and higher salaries.
Three of the four above are particularly unique to our Bay Area. Few cities around the US have this same alignment of economic conditions. NAR is predicting growth in the 5+% range across the nation in 2014 and I feel that number is conservative for us. Every one of our offices expect a strong first quarter as some new inventory comes to the marketplace.
Below are market reports the San Francisco and SF Peninsula offices:
San Francisco – Although our Lakeside office manager says it has been holiday quiet over the past couple of weeks, there were opportunities for savvy buyers. One agent is in the process of helping his buyer negotiate a contract on a property that another buyer just decided not to buy. With everyone out of town or paying attention to the holidays, this will be an opportunity to acquire the property without multiple offers. It has also been a slow and quiet holiday week for our Lombard office, except for the sellers who wanted 2013 closings with their buyers , but unable to get loan docs out of vacationing bankers. Many buyers and sellers in the Market Street area are in full hibernation. Those rare sellers that ventured into the holiday market were rewarded with multiple offers (anywhere from 2 to 15 during this period). Our local manager is hoping for greater inventory in 2014.
SF Peninsula – It’s really just in holding pattern in the Burlingame area, gearing up for the early spring market. There are many fine listings being prepared right now, which bodes well for buyers who have been waiting for that special property. A few very smart buyers who have stayed on top of the market and waited patiently through many rounds of multiple offers were finally able to secure their home while the competition was focused on the holidays. Congrats to them and to the diligent agents who kept their eye on the market for the perfect property. It’s also been extremely quiet in the Menlo Park area, but agents are expecting buyers to re-enter the market soon to grab properties before prices go even higher in the new year. The same story is holding true in the Redwood City and San Carlos area – a quiet market and expectations for more listings in the weeks ahead.
Janice Lee
415-832-9151
International President's Elite
Top Producer, Realtor
JaniceFLee@gmail.com
www.JaniceLeeHomes.com
BRE #01720205
The Wall Street Journal reported this week that home prices across the country – but especially in Silicon Valley and other parts of the Bay Area – have zoomed back to near record territory. Valuations jumped 25% or more in some communities over the past year, nearing or even exceeding their pre-recession highs. Prices in Palo Alto are nearly 40% above their 2007 peak, one of the largest gains in a recent survey.
So what do we do for an encore in 2014? I see four major reasons why the Bay Area’s housing market will continue to be strong in the coming year:
1. A robust local economy. The Bay Area economy is one of the strongest in the country. Silicon Valley, the Peninsula and San Francisco are the high-tech, Internet, VC and social media centers of the world. CNNMoney’s tech job forecast for 2014 is “Hot and Getting Hotter.” Tech job site Dice.com reports that 55% more employers — a record high — say they’re ready to hire a large numbers of techies, up from 42% in the second half of 2013. These well-paid knowledge workers will provide an even stronger, better-capitalized pool of buyers for our housing market in the coming year. Just noted in USA Today, the bay area’s fourth largest city, Fremont, has seen a return to a strong housing market, and is regarded as one of the best run cities in the country. http://usat.ly/1crnbWi From the Wine Country in Sonoma, south to Carmel and Pebble Beach, and across to Livermore, we are fortunate to have healthy, diverse, and prosperous cities and towns in our nine Bay Area counties.
2. Supply and demand. While the demand side of the equation was extremely strong last year with buyers out in force, the supply continued to be historically low. This resulted in prices getting bid up in multiple-offer situations and many would-be buyers walking away empty-handed. No one knows for sure what will happen to inventory in the coming year, but our agents are telling us more listings are expected in the coming weeks. I suspect homeowners are reading the same news stories we are and seeing that prices have been shooting higher, and they may finally be ready to cash in. Rising prices also change the dynamics for many homeowners who had been underwater in their mortgage as recently as six months or a year ago and weren’t in a position to sell. With prices jumping, many of these homeowners now have positive equity once again and have the option of selling and walking away with cash for the first time in years.
3. Interest rates. Interest rates remain historically low, but make no mistake about it: They are moving higher once again. Some economists are forecasting mortgage rates could rise a full percentage point before the year is over. This is a clear wakeup call for those buyers who have been on the sidelines waiting for the perfect time to get into the market. The time is right now before mortgage rates move higher. An increase of just one percentage point on a $500,000 mortgage adds $300 to a monthly payment or $3,600 a year. Buyers know that and will be rushing to beat the next rate hike.
4. Increasing costs of renting. As the Bay Area economy comes roaring back from recession, available apartments are drawing long lines of potential tenants and rents are spiraling higher, according to a recent story in the San Francisco Chronicle. “Rents in San Francisco are escalating at breakneck clips this year, largely driven by an influx of tech workers. Oakland and San Jose likewise are seeing steep run-ups,” the article notes. Median asking rents for San Francisco apartments listed on www.livelovely.com hit a record $3,398 in the third quarter, up 21 percent from 2012, according to the Chronicle. Such huge rent increases continue to make buying a home a better financial proposition. My sense is that buyer demand will only increase in the new year as renters see their personal economy improving with a better job market and higher salaries.
Three of the four above are particularly unique to our Bay Area. Few cities around the US have this same alignment of economic conditions. NAR is predicting growth in the 5+% range across the nation in 2014 and I feel that number is conservative for us. Every one of our offices expect a strong first quarter as some new inventory comes to the marketplace.
Below are market reports the San Francisco and SF Peninsula offices:
San Francisco – Although our Lakeside office manager says it has been holiday quiet over the past couple of weeks, there were opportunities for savvy buyers. One agent is in the process of helping his buyer negotiate a contract on a property that another buyer just decided not to buy. With everyone out of town or paying attention to the holidays, this will be an opportunity to acquire the property without multiple offers. It has also been a slow and quiet holiday week for our Lombard office, except for the sellers who wanted 2013 closings with their buyers , but unable to get loan docs out of vacationing bankers. Many buyers and sellers in the Market Street area are in full hibernation. Those rare sellers that ventured into the holiday market were rewarded with multiple offers (anywhere from 2 to 15 during this period). Our local manager is hoping for greater inventory in 2014.
SF Peninsula – It’s really just in holding pattern in the Burlingame area, gearing up for the early spring market. There are many fine listings being prepared right now, which bodes well for buyers who have been waiting for that special property. A few very smart buyers who have stayed on top of the market and waited patiently through many rounds of multiple offers were finally able to secure their home while the competition was focused on the holidays. Congrats to them and to the diligent agents who kept their eye on the market for the perfect property. It’s also been extremely quiet in the Menlo Park area, but agents are expecting buyers to re-enter the market soon to grab properties before prices go even higher in the new year. The same story is holding true in the Redwood City and San Carlos area – a quiet market and expectations for more listings in the weeks ahead.
Janice Lee
415-832-9151
International President's Elite
Top Producer, Realtor
JaniceFLee@gmail.com
www.JaniceLeeHomes.com
BRE #01720205
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