REAL ESTATE: Inland market to
be calm in 2016, UCR expert
Here’s what the Center for Economic Forecasting is predicting in the Inland market for the year ahead.
From Press Enterprise 12/31/15
The roller coaster ride is behind us, as far as the real estate industry is concerned.
No big hills to climb, no treacherous turns, say the experts.
The Inland region has cruised into the final leg of the Great Recession’s journey, and so for 2016, Christopher Thornberg, director of UC Riverside’s Center for Economic Forecasting and Development, predicts life in these parts will seem kind of boring.
“It’ll be nice, and comfortable,” Thornberg said. “There will be no big surprises in 2016.”
Though there has been much prognostication that the market has mushroomed in a way that’s made homebuying unaffordable and kept a squeeze on inventory, Thornberg said the fretting is unfounded.
“I would argue that rather than worrying about real estate going too far, that the conversation should flip to the real issue of what’s holding it back,” he said.
The Inland market still has head room on home price growth, he said. “There’s a lot of space there,” he said. “We’re nowhere near the top of a cycle: This market still has a ways to go.”
The forecast comes as National Association of Realtors chief economist Lawrence Yun on Dec. 30 reported the smallest year-over-year gain – 2.6 percent – in pending home sales in November in 13 months.
Home prices have risen too sharply in several markets, Yun said in a recent report. Waning supply levels have acted as headwinds against the market, despite solid job gains and low mortgage rates, he added.
Locally, real estate agents have long been saying homebuying interest remains strong, but would-be buyers have been hard-pressed to find move-in-ready homes or those in an affordable price range. With inventory conditions holding down the sales pace through 2015, Yun said supply issues and ongoing price appreciation will be a recurring theme in 2016.
Here’s what the Center for Economic Forecasting is predicting in the Inland market for 2016:
Existing home sales and median price: Watch for gains of 6 to 7 percent in each category.
New homes: New home construction and sales will continue seeing some churn, and that’s a function of existing inventories and overall demand for housing. The pace will quicken in 2015, but only slightly. That’s mostly due to ongoing tight credit and a glut of newly-built homes that would-be buyers can obtain, if they’re nimble, persistent and their credit is rock solid.
Mortgage rates: They will edge up, but in tortoise-like increments. It’ll take two years, or longer, for rates to hit 5 percent.
Affordability: With home prices nearly back to 2005 levels in some places, expect to hear more banter about affordability. While it mostly takes a credit score of 680 and above to qualify for a loan these days, the Inland region’s economy is one of the strongest in the state right now. Affordability, compared to the coast, is good. And it’s likely to gain more inbound residents, if price gains and inventory woes continue to dog the coast.
With health care and professional services coming into view as the second largest-growing sector, and logistics on the move, Inland Southern California is an economy that will continue to mature in 2016. That’s going to move incomes up, and keep the real estate sector on balance.
“I think the mid-term outlook for real estate is huge,” Thornberg said. “The region has the ability to grow almost faster than any other place in California right now, and it will carry the housing market along with it.”
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