LOW INVENTORY were the buzz words coming out of 2015 and heading into 2016 which was a big factor in the continued appreciation of home prices. Inventory still remains low throughout the marketplace as distressed property sales such as Bank Owned homes and Short Sales have dried up.
Banks still have very strict lending regulations, so I don’t expect to see a major spike in defaults, thus keeping overall inventory low.
LOW INTEREST RATES continued throughout the 2016 year and only recently did we see rates start to rise. Short-term interest rates increased this year around the same time they did in 2015, so there was no major surprise it was going to happen. In December 2015 we were beginning to see rates start to spike above 4%. I even took a home loan out myself in December of 2015 at 4.125% (I later refinanced later in the year). They then bottomed out around August/September of 2016 to about 3.35%. The current interest rate sits at about 4.375%.
We’re still talking about low interest rates here. We’ve been so accustomed to seeing a 3 in front of the rate, but we’ve seen higher within the last 3 years and more than double within the past decade. Banks this year will start to see their Refi business dry up and put an added focus on home purchases. Will refocusing to new home purchases cause some banks to ease their regulations? Even if rates climb towards 5%, it’s still historically low in comparison and shouldn’t change buyer demand much. It will change first-time home buyer’s affordability, but even in 2016 we were at a 50-year low for first-time home buyer purchases.
ELECTION YEAR had many homeowners worried about the certainty of the Real Estate marketplace. We were approached by several homeowners looking to sell and then rent for the next couple of years simply because of the lack of economic certainty. The question, ‘Are we in a bubble?’ was asked more this year than in a long time. So it felt like in mid-2016 we were due for a major slowdown between fears of election year, fear of a bubble, and the normal Holiday slowdown.
Did Orange County see a correction or slowdown? According to Orange County Association of Realtors ‘Fast Stats,’ there was actually a 4.2% increase in Median Sales Price year over year for November. With all things considered, it was a very healthy end of the year. Job reports continue to look strong, early Holiday spending results look good, Wall Street is trying really hard to hit a new record level at 20,000 (Dow), and overall consensus looks positive.
2016 MARKET STATS (per Trulia.com Market Trends)
Huntington Beach Median Home Sale Price – Up $44k or about 7%
Huntington Beach Median Rental Price – Up 14%
South Orange County Median Home Sale Price – Up 1-3% mostly.
Mission Viejo is up 8%