How are elements in 2018 going to treat the San Fernando Valley (Los Angeles) housing market?
Real estate housing markets are local. Many factors affect housing prices more in one area/neighborhood than another. One constant is the economic reality of supply and demand, regardless of the product. High demand and low inventory equals appreciating prices. Low demand and high inventory equals deescalating prices. A balance between supply and demand equals stable prices.
The attached chart shows the present quantity of San Fernando Valley housing inventory at historic lows. That’s been the story for several years. That’s what’s been pushing property values higher, and creating multiple offer scenarios.
Inventory levels and purchase activity is always slower during December and the holidays, but taking the seasonal element out of the equation, inventory is below healthy levels.
We are at a point of transition. Many factors are coming into play that individually and collectively that can affect the housing market.
Regardless of the fundamental factors that will be conveyed in the media, we’ll ultimately see if there’s an effect on the market and pricing of housing in the inventory numbers. If the market slows down we’ll see an increase in inventory levels, on total quantity, and in the sales vs inventory ratios.
These are the various elements on my radar, that we’ll have to keep an eye on:
Inventory – An increase or decrease in total units (adjusted for seasonality), specific price ranges adding to inventory levels, sales vs inventory ratios
New Tax Laws – The new tax legislation was not friendly to California. Will there be a substantive effect on buyer’s motivation to purchase? An exodus of businesses, and high income earners because of the high state & local taxes in California? National Association of Realtors, California Association of Realtors see a negative impact and potential price drop. Probably, but it may have more of an effect on curtain price ranges than others.
Business/Economy – Will the local economy see enough of an economic boost from the new tax structure that it can override the negatives?
Mortgage Rates Higher/Affordability Levels – Mortgage interest rates will be going up squeezing affordability numbers. A combination of Fed Funds Rates going up, the liquidation of the Feds Balance Sheet created by Qualitative Easing, economic statistics, the dollar weakening vs other currencies, will all be pushing up rates.
Stay in Placers – New tax laws makes moving up to more expensive homes less viable. Higher property taxes will be limited on being written off on taxes. Will C.A.R. be successful on getting property tax portability on the ballot (a good thing)?
Loan Programs and Qualifying – Will the loss of refinances because of rates going up, and the new tax law make lenders more aggressive on easing underwriting guidelines to originate more purchase loans?
New construction/ Affordable housing – There are many new taxes in place (Linkage Fees, Prop JJJ, recording taxes, etc) to give the gov’t billions of dollars to construct new affordable housing. Can they get out of their own way to allow for an adequate quantity of units to be constructed to have a substantive effect on rents and inventory levels? Historically projects have a hard time getting approved because of bureaucracy, cost of units, more money going towards administration… The state has been pushing hard for local municipalities to meet the housing demands of their population growth.
None of the previous factors will have an immediate effect on the market. The stock market can have a huge percentage gain or loss in a matter of minutes. The real estate market is like a huge ship, and takes months to make a change. My future blogs will be tracking the elements changing the market. We’ll know way ahead of the media and the general population of any changes. By the time it hits the media, it’s obsolete information.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
BRE #00905793 NMLS #310358
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth