Home values in the United States will rise 20% over the next four years, according to a panel of housing experts in a recent Zillow-commissioned survey.
The survey asked 104 economists, real estate experts, and investment and market strategists to estimate Zillow Home Value Index gains through 2018. The average response called for a jump of 19.5%.
On average, the prediction calls for home prices to rise between 4% and 5% every year, which would be a slowdown from the double-digit yearly gains that we have seen over the past several years.
A slowdown isn’t a bad thing. Prices have risen to the point that first-time buyers are finding it harder and harder to succeed in the market.
The recent housing market boom occurred because home prices fell to such an extremely low level. The real estate crash caused a flood of foreclosures and short sales. Suddenly the market was overloaded with inventory. Due to economic struggles and job loss, there wasn’t enough demand to sop up the extra supply. Listing prices fell as sellers attempted to tantalize buyers into a deal.
Eventually, prices fell far enough that investors saw the opportunity to “buy low” on properties at prices that were below their true values. Investors helped kick off the boom market, and as the economy improved, single-family buyers jumped back into the fray.
In San Luis Obispo County, home prices have jumped 31% in the past 36 months.
As Trulia Chief Economist Jed Kolko said in a recent article, the hefty jump in home prices after a recession is called the “rebound effect.” The sharp price recovery came as the market rebalanced itself.
Now that home prices are no longer artificially low (indeed, some may be artificially high due to lack of supply), Kolko writes that local housing markets “need to depend more on job growth.”
Last week, we published our mid-year SLO County housing market report. The major theme seemed to be that low supply and rising prices were squeezing middle-income and first-time homebuyers.
One reason for optimism: San Luis Obispo County is pulling it weight in the job side of things, and its unemployment rate is sixth lowest in the state. Another reason for optimism: with demand for housing on the mid- to low-end high and supply low, developers and sellers have incentive to enter the market in that price range. This is simply the balance of supply and demand on the open market.
Still, economic growth (read: job growth) and access to affordable housing will be two major issues for SLO County moving forward. Now that the “rebound effect” is over, home price gains will slow, but prices are already too high for a lot of local buyers. SLO County will need to keep adding good jobs and affordable home options to meet the needs of its buyers / citizens and balance out the housing market.
… have dropped to begin the week. From our update last Wednesday, the 30-year fixed has fallen by 3/8 of a point in cost. We are advertising the 4.125% conforming 30-year fixed rate at an APR of 4.171% (0.375% points), compared to 4.288% (0.625% points) on August 6.
Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email firstname.lastname@example.org to set up a free pre qualification. We are The Mortgage Experts: ask us anything!