Four local real estate and mortgage experts forecast what home buyers and home sellers can expect in Riverside County’s Real Estate and housing market for 2016.
Will home values and prices in Riverside County go up, down, or stay flat in 2016? Will mortgage rates go up, down, or remain about the same? Will home ownership become more or less affordable than renting?
Everyone has one, but all opinions are not equal. Some are based on fear, optimism, experience, wishful thinking or facts.
Rather than listen to the opinions of doomsdayers who think we are on the verge of a major housing market crash, or the overly optimistic person who thinks mortgage rates will go back to the low 3% range and think that their home will appreciate 20%+ each year, I think we should defer to a handful of local experts on what we can expect in Riverside County’s local housing and real estate market f0r 2016.
“The sparkle to 2016 will be if home builders begin to offer homes in an affordable price range for first-time home buyers”
Home buyers in Temecula Valley California historically have acquired homes that are comparable to, or exceed, those in Los Angeles, San Diego and Orange County for less money because of new construction. New home developments bring luxury, economic growth, and safety. From the FBI 2014 Crime Report, bordering cities, Temecula and Murrieta, were voted in the top ten safest cities in America by 24/7 Wall St.
Over 60% of Temecula’s residents commute to San Diego, but the tradeoff is worth the quality of schools and lifestyle; a 2-hour drive to beaches, mountains — Big Bear is known for the best snowboarding in the country.
According to the National Association of Realtors®, 2015 turned out to be the best year in home sales since 2007. Although a much needed return to normalcy after the housing bust, in Temecula Valley, median home prices fell in November. Temecula’s November median price of $400,500 dropped 6.9% from October, and Murrieta’s November median price of $367,500 dropped 1.5%. Year over year comparison for November shows Temecula’s median home price increased by only 0.3%, and Murrieta’s median home price increased by a whopping 8.4%.
My 2016 forecast is continued downward price trend and number of home sales to continue in the new year, and then pickup in the last half, finishing much like 2015 – similar number of home sales, and lower increase on median home prices in Temecula than in Murrieta because of projected population growth and high demand for housing.
The sparkle to 2016 will be if home builders begin to offer homes in an affordable price range for first-time home buyers, so as to advance home buying opportunities. When new home sales are booming, so are re-sale homes, but don’t expect a housing boom this year or next. Overall, 2016 will be stable.
“Mortgage & Real Estate Agents will use Fear to Manipulate People to Refinance or Buy a Home in 2016.”
My real estate prediction from last year seems to have been fairly accurate, however, I feel predicting what direction mortgage rates will go is getting to be more and more difficult.
In fact, Government entity giant Freddie Mac, famous for their market survey and forecasts, is on record of forecasting mortgage rates will rise to 5.1% and then changed their prediction that rates will remain at historic low levels through 2016.
Personally, I think mortgage rates will be fairly volatile, seesawing up and down due to world politics (China & Middle East), inaccurate financial reports being revised, and a general seesaw of overconfidence and fear by investors of what direction our economy is headed.
I suspect mortgage rates will end in 2016 being slightly higher by of .25% to .375% of where they are at the time of this article.
Will the 2016 Presidential Election Impact Mortgage Rates?
There is no historical evidence that supports mortgage rates consistently go either up or down in a presidential election year.
One prediction I know that will be 100% correct is that both real estate and mortgage brokers across the country will use election fears of rising rates to manipulate people to take action and refinance or buy.
Should you buy, sell, or refinance a home today?
No one can properly advise or answer that for you without knowing your goals or specific situation. But I can say with confidence is that never let ‘what if’ control your decision making in real estate.
This is why it’s critical for you to work with a trusted and experienced real estate or mortgage professional who is more concerned about helping you make an informed decision than just blindly stating now is the best time to buy or sell.
I would highly encourage you to contact one of the real estate professionals in this article to discuss your situation and goals.
“A Great Year of Balance for 2016”
Brett Chappell, Temecula-Murrieta-Menifee Real Estate Professional, CA BRE #01360291, Chappell Team Real Estate Services, ChappellRETeam.com
In Southern California we’ve had nearly 15 years of real estate market extremes, highs and lows. In the early 2000’s prices began their increase to all time high’s just before the market crash in 2006/2007. Cash buyers ruled the market place as prices hit rock bottom and we pulled out of recession. In 2012 cash buyers accounted for 30% of all buyers compared to 21% in 2015. That number should drop a little more in 2016.
We have finally found some calm water in the market and I believe we will have a steady 2016 with a healthy balance of inventory and buyers. My local market, Temecula Valley in Southwest Riverside County, is seeing inventory levels creep up which means there are more homes to choose from.
My last listing had about 3.5 months worth of inventory as competition. A normal market is found in 3-6 months worth of active inventory meaning if no other homes hit the market it will take 3.5 months to sell the remaining homes on the market. Too many homes for sale makes a buyers market and too few is a sellers market.
In 2015 California has seen a year to year increase of 2.5% in median price. I believe that number will be about the same in 2016 as interest rates will continue to increase and eventually the market in terms of affordability.
While I do not see a huge gain in median price or increase in equity I do believe the market will find a fill for the huge void in the market: first time home buyers which currently account for 29.5% of all buyers. The historical average is about 38%.
First time home buyers (FTHB) suffer from low affordability in California markets. Temecula, Murrieta, Menifee, Wildomar, and Lake Elsinore have an affordability index 10 points higher than the state average of 30%!
Meaning only 30% of Californians earn enough income to afford the median priced home. The affordability in S.W. Riverside County is nearly double that of neighboring counties such as San Diego and Orange with 25% and 21% affordability.
Household formation is another major factor for the FTHB. Annual household growth is at its highest point since 2005 meaning we’ll see a great deal of new buyers hit the market which fuels the mid and high end move up markets. Down payment assistance program in Riverside County, along with a steady economy, will allow those FTHB numbers to increase in 2016.
“Slight Sellers Market as Buyers Make a Move Due to Mortgage Rates Increasing”
Alex J Gonzalez, Moreno Valley/Riverside Real Estate Professional, CA BRE Lic #01384006, Excellence Empire Real Estate, RealtorAlexGonzalez.com
The 2016 housing market in the Inland Empire’s Riverside County will continue to see a seller’s market as inventory has been decreasing towards levels seen throughout 2013 when prices appreciated rapidly in a year when the Inventory Supply was low, prices were depressed, and interest rates were also at historic lows!
I don’t foresee a return to those types of increases in value since both prices and interest rates are now higher and affordability has decreased, but the depressed supply of inventory will buoy the market in 2016 even if interest rates increase into the mid to high 4’s as some market experts are forecasting.
A Look Back At 2015 Market Statistics for the Moreno Valley Market As A Subset For The Inland Empire Market:
The Moreno Valley area is a micro a representation of trends for the Inland Empire market (monthly averages for 2015 unless otherwise noted). New Listings averaged 227 units, pending sales averaged 184 units, closed sales averaged 176 units, average Days On the Market was 58 days, and average Inventory Supply was 3.0 months.
These metrics have been trending lower as compared to 2014 which means a tighter market that bodes well for sellers that price their homes right.
Further, the average price per sq ft climbed to $151, and the average Sales Price was $262,193, which represented an increase of about 8% for the year.
Factors Affecting the Market In 2016
I see the market continuing to appreciate at similar levels in the strong mid-single digits in the areas of Moreno Valley and Riverside which increased 8% and 6.5% respectively in 2015. Higher interest rates will not bring price depreciation as some people are expecting, but they will bring slightly lower levels of appreciation than that mentioned above if rates start moving closer to the high-4’s.
Factors supporting the Inland Empire real estate market include:
- New Home Building that has not jumped back to levels necessary to meet new household demand
- Continued demand from buyers that have been priced out of the LA and OC markets that look towards the Inland Empire for affordability and to get larger homes for their families; more buyers that qualify after having short-sales, foreclosures, and BK’s affecting them
- Strengthening local economy in spite of hiccups in the international markets
- Did I forget to mention buyers that can get more home “bang for their buck” in the Inland Empire?
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