by Rick Turley, President of Coldwell Banker Residential Brokerage, San Francisco Bay Area
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 Chron. 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.
Visit www.RealtorLisaWu.com or Email to RealtorLisaWu@yahoo.com
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