By: Nicolas Jonville, Jonville Team-Keller Williams Realty
It’s that time of year again for our market update. This is our 15th year in the neighborhood and we have seen all kinds of markets. Since 2012, the national, regional and our local San Elijo Hills/Old Creek Ranch home values have been recovering in a strong way. After experiencing double digit price increases in 2012-2013, and fair hikes in 2014-2015, 2016 was again a strong year and most home prices now stand above the pre-crisis peak for detached homes, and just below for townhomes.
December 2016 shows a year-over-year median price increase of $15,000, +3.5% for townhomes/condos ($440,000 median price in Dec 2016) and a 6.5% increase for single family residences, up $49,000 ($799,000 median price in Dec 2016), in San Elijo Hills/Old Creek Ranch.
This is a close performance to the rest of North County, which shows approximately 6% year-over-year median increases for both single family residences and townhomes/condos.
2017 Outlook, Opportunities and Challenges
LOW inventory is the current state of our market in January 2017.
January-May 2016 saw steady property value increases and multiple offers due to low inventory, with a cool down beginning in June and continuing through the rest of the year. We saw an obvious imbalance between buyers and sellers in the first few months. History looks to be repeating itself, and this year we are expecting much of the appreciation to happen in the 1st part of 2017. We are living in an “inventory crisis”: the inventory level in mid-January 17 was less than one month supply, and most of the County has seen less than ½ of the new listings counted for the same period in 2016.
The low inventory is currently driving prices upwards, but the summer and fall will likely level off if we experience a higher inventory of homes for sale, a reduction in the demand and mortgage rate increases. Our proven and successful strategy with our clients has been to study the micro-market specific to their property very closely, and to enter the market at the ideal time with a precise price and marketing strategy.
Policy Changes and Possible Impact
Regarding the new US administration and policies, we are anxious to see how this unfolds.
“Trends (for 2017) are positive” says Christopher Thornberg, former UCLA professor and founding partner of Beacon Economics. “On the other hand, you’ve got this new administration coming in, and we’re not sure (what policies) they’re going to pursue.” He added that tax cuts and infrastructure spending would stimulate economic growth – and that’s good for housing – but trade wars and ideological confrontation would be detrimental and “could really hurt our economy, and all bets are off”. Any global crisis, economic or political conflicts, creates uncertainty and could results in a buyer freeze thus affecting the market. Only time will tell how this unfolds.
Interest Rates and Other Market Effects
Interest rate levels and home prices directly impact affordability levels. San Diego remains one of the least affordable counties in California (26% affordability rate: only 26% of San Diego County households can afford our home prices). This is the same rate as Los Angeles, slightly better than Orange County (23%), and far better than San Francisco at 14% – the least affordable in California.
Low interest rates, in the 3.50-4.25% range for a 30 year mortgage last year, have been helpful in maintaining a healthy level of buyers. Most economists say that higher rates would dampen but not halt this year’s expected increases, which are expected to be in the low – mid 4% range throughout 2017, remaining near historical low levels.
Locally, the desirability of our neighborhoods, top schools and relative affordability compared to nearby Carlsbad and other coastal communities will be contributing to the growth. The likely development of the town center, giving life to the vision that many residents have been looking forward to, will certainly help in supporting the growth of our home values.
The average rents increased again in 2016, nearly 5% up, causing more renters to consider a home purchase with the financial benefits of homeownership. San Diego is among many counties where owning is often less expensive than renting.
The projected numbers of new construction projects in the county (multi-family and particularly single family) is far below the demand and is affecting our market as well. Land is scarce and the large project of Lilac Hills was just voted down, which is affecting the future supply of new homes.
The market has been shifting to slower, more sustainable price increases. In 2017, price increases of 4 – 5% are predicted in our area, with some seasonal spikes, particularly for the first half of the year. This will be fueled mostly by low inventory, buyer demand before further interest rate increases, insufficient levels of new construction and a strong regional economy.
Could There Be Another Bubble?
As long as the buyer demand is maintained at decent levels, it is unlikely that the amount of homes for sale will be sufficient to satisfy the level of buyers, and this will likely keep supporting values. The low new construction level is far from being able to fill the gap. Moreover, lenders have been much more diligent in their lending guidelines in recent years and it is unlikely that we experience any new wave of distressed properties.
What Are Your Plans?
- If you have a home loan with a higher interest rate, consider refinancing. Our preferred lender can assist you with a no-cost analysis.
- Improving your home? Choose your improvements wisely and consider current trends for maximum return when you sell your home. We’ll be happy to give you some tips.
- With the high risk of a rate increase, buying now might make a lot of sense. Make sure to get pre-approved with a reliable lender and seek the advice and representation of an experienced agent who understands the market, is a skilled negotiator and well connected. We will gladly meet for a buyer consultation.
- If you are considering buying an investment property, it may be wise to purchase before interest rates rise. Rent hikes will likely slow down, but the vacancy rates remain low, and the desirability of our Coastal communities is supporting prices.
- In a fast-paced market, many strategies allow record breaking sales within a short market time, while still allowing to identify and secure a replacement home. It is essential to implement a comprehensive strategy, price and market your home very effectively and market to the largest audience possible…beyond the community and county borders. Our hyper-local knowledge and experience, along with our affiliation with Keller Williams Realty, has allowed broad marketing exposure for our client’s benefits.
When buying or selling a home, there are numerous aspects to consider. Every year, we consult and build strategies with families who each have their own needs, desires and budgets. We provide information and expertise to enlighten them with the process and help them build their real estate plans. Our local presence, knowledge of the market, relationships and comprehensive marketing program have been key in helping our clients achieve successful results. Located in the heart of San Elijo, we are always available to provide advice and services.
Nicolas Jonville, Owner/Broker Associate of The Jonville Team with Keller Williams Realty at 1501 San Elijo Rd, Suite 101 in San Elijo Hills, between Epoch and Postal Annex, T: 760-471-5098, E: Mail@JonvilleTeam.com, W: www.SEHproperties.com, (BRE Lic# 01410224/01417209)