California Housing Market – SLOW DOWN?

October housing numbers are out! The question on everyone’s mind is will there be a housing market crash

The U.S. housing market remains robust, with strong activity reported across both rental and residential housing fronts. Single-family rent prices are increasing rapidly, as demand for single-family housing and inventory constraints forces some buyers to rent, increasing competition and pushing rents up across the nation. Meanwhile, sales of new construction single-family homes recently hit a six-month high, rising 14% to a seasonally adjusted rate of 800,000, according to the latest data from the U.S. Department of Housing and Urban Development

California home sales remain solid in October as prices level off and low rates continue to provide support to the housing market.

Nationally, home prices increased 18% year over year in September.

*** No states posted an annual decline in home prices. *** The states with  the highest increases year-over-year were Idaho (30.1%) and Arizona (29.6%).

The Median Sales Price in North County San Diego was up 20.5%to $933,625 for Detached homes –creeping toward that predicted Million dollar mark, and 22.2%to $617,000 for Attached homes.

Days on Market decreased 29.2 percent for Detached homes and 22.7 percent for Attached homes. Supply decreased 52.6 percent for Detached homes and 57.1 percent for Attached homes.

For San Diego county median home price is up 15.4% to  $750,000, days on market is down 22.7% to 17days and  closed sales are down 15.8%

The real question is will this housing boom continue through 2022? According to even as the market has seen some softening so far, price hikes and bidding wars are still ongoing across the U.S. And the industry consensus is that whatever cooling comes next year, it will slow—but not stop—the continuing rise in home prices.

However, that assessment isn’t shared by the Mortgage Bankers Association, an industry trade group based in Washington, D.C., which recently published its 2022 forecast. While the Mortgage Bankers Association foresees the median price of existing homes posting a 15.3% year-over-year gain to $362,000 in the first quarter of 2022, it sees prices beginning to fall as the year progresses. The group expects the median price of existing homes to end 2022 at $352,000. That would represent a 2.5% year-over-year drop in home prices.

The Mortgage Bankers Association forecast is still something of an outlier. So let’s look at the folks at Zillow, Fannie Mae and corelogic

Zillow Research is predicting 13.6% growth in U.S. home prices over the coming 12 months. Meanwhile, Fannie Mae is predicting 7.9%, and CoreLogic has the number at 1.9%.

In the eyes of Fannie Mae, the housing market is set to return to a normal-ish level of price appreciation. Fannie Mae also expects mortgage rates to climb next year, with the average 30-year fixed rate rising from 3.1% to 3.4%. But the downward pressure on prices from rising rates, the government-sponsored enterprise says, won’t be enough to actually pull prices down.

not everyone sees the frenzy continuing: CoreLogic, a real estate data firm, is far more bearish—forecasting just 2.2% home price growth over the coming 12 months. For perspective, over the most recent 12-month window the S&P CoreLogic Case-Shiller Home Price Index has shot up a record 19.7%. So if prices were to rise only 2.2% over the next year, it would mark a serious cooling from recent conditions. With that level of price appreciation—coupled with some pay raises and smart financial decisions—homebuyers might actually catch up a bit.

Federal Reserve Governor Michelle Bowman on Monday flagged a range of economic and financial stability risks posed by the housing market, particularly noting that rising demand and a slow pace of construction are putting upward pressure on prices.

“The supply of new homes has been held back by shortages of materials, labor, and developed lots,” Bowman said in remarks prepared for delivery to a Women in Housing and Finance gathering. “I anticipate that these housing supply issues are unlikely to reverse materially in the short term, which suggests that we are likely to see higher inflation from housing for a while.”

Discover what kind of loans and grants are available for first time home buyers.

One thing that is broadly understood but always bears repeating is that the housing market in the US looks very different now than it did the last time it blew up. Yes, stimulus has helped household balance sheets a lot and, yes, very low interest rates help. But all the same, mortgage borrower credit scores are much better, and mortgage delinquency rates are parked near historical lows. Mortgage debt service as a percentage of disposable income is also near all-time lows. Adjustable-rate mortgages account for just 4 per cent of new mortgages at present, half the number of a decade ago, according to ICE Mortgage Technology (in 2005, perhaps a quarter of mortgages were adjustable rate). If we are headed for a leverage-driven housing market bust up, the leverage is not in the same places it was in 2008

One bright hope is the California Association of realtors statement forecasting a cooling trend in the housing market next year, with sales of existing single-family homes dropping and the pace of price hikes slowing.

CAR predicts 416,800 existing single-family homes will be sold in 2022 — 5 percent less than the projected number for this year.

The report, released last week, also forecasts that the state’s median home price will rise by 5 percent next year, to $834,400. That would be a welcome downshift, according to the trade group. It expects this year to finish with a 20 percent jump in the statewide median price, to $793,100.

Dave Walsh, CAR’s president, said in a release, “A slight decline next year from the torrid sales pace of the past year and a half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low level of homes available for sale,”

Overall, I know everyone is waiting for a crash in the housing market, either because it seems unsustainable or because they are hoping to buy a home.  What I’m seeing here is no real indication of a crah happening, at least not in the first quarter of 2022.  What I hope to see is a “normalizing” of the current market to a more sustainable and healthy market.

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