California’s housing market will continue improvement in 2016, but a shortage of housing and lack of affordability in some areas will continue.
The forecast sees an increase in existing home sales of 6.3 percent to reach 433,000 units next year, up from the projected 2015 sales figure of 407,500 homes sold. Sales in 2015 also will be up 6% from the 383,300 existing, single-family homes sold last year. So while some areas will be hard to afford, the lower priced houses will continue to sell like hotcakes.
In San Bernardino and the Inland Empire sales are still gently rising. I think what’s coming is a migration from the coastal communities because a large share of buyers have been priced out of the ability to buy anything. It is very expensive as you get closer to the beach relatively speaking. I think we’re going to start to see more of that migration with the economy of Southern California, as a whole, strengthening and the inability of a very wide percentage of the population to afford housing in Los Angeles, Orange, and San Diego counties. This should be the stimulation that we need to boost our economy overall. With a widening price gap and less affordable houses in the coastal areas and more affordable homes in the Inland Empire we can expect good sales growth this year. The price gap is pretty large and it seems to keep growing. The Inland Empire is a bargain when compared to the other areas. The overall supply shortage should drive up prices in the Inland Empire, but still remain affordable.
Maybe we can build enough homes to accommodate the shortage. Right? Well, we are seeing an increase in construction, but we just aren’t building enough housing in California to keep up with the high demand. Plus, builders are generally cautious until they are sure they can sell homes. This is typical after there are some hard years in Real Estate. Who can blame them? The recovery finds people being very conservative about spending money. There are developments I have seen that never caught on due to price or location that I know were horrible losses for the contractors.
One of the key factors in buying houses is the unemployment rate. As that goes down, sales go up. Since people are being cautious nowadays, they buy houses they can afford with the jobs they have. It maybe bad to say but a little pessimism is needed when you buy a house. You have to go with what you can afford now, and will be able to afford if things start to go badly. Tragedies happen in everyone’s life, but we can’t make the potential for losing a job or family emergencies, deter us from buying.
In conclusion, just to put the price gap in perspective, here are some numbers I found interesting. In Los Angeles County, the median home price was at $517,000 in the second quarter this year; $698,000 in Orange County; $320,000 in Riverside County; and $263,000 in San Bernardino County. That is quite a gap. Hopefully we get what we need and build up our Inland Empire!