Happy New Year and Welcome Back to your southern California Real Estate Market Report for January 2017! I’m Jeb Smith, Real Estate Broker with ReMax Terrasol. What should you expect as a Buyer or Seller in 2017? Sellers are really going to have the advantage as long as Buyer Demand continues to outpace our increase in inventory and I expect this trend to continue through the first half of the year. As the Fed starts raising rates, I expect Buyer demand to slow somewhat which will cause inventory levels to rise. With supply and demand more in balance, the market should stabilize as Buyers and Sellers become more in-line.
2017 has started very similar to last year but with a little less inventory if you can imagine that, in fact this is the lowest level of inventory we have experienced in our local market going back to 2013. This shouldn’t be a huge surprise considering we are coming out of the slowest season for Orange County Real Estate. As we move into the Spring, the number of homes on the market will increase from their yearly lows in December and continue rising through the end of the summer selling season. Although I do expect an increase in properties for sale, I don’t expect a significant change from last year with inventory levels remaining pretty anemic relative to the strong number of buyers looking for homes, keeping inventory at historically low levels.
Buyer Demand has been a big driver of market appreciation the past few years and I expect that trend to continue at least until the Fed rate hikes kick in which could happen about half way through the year. At the December meeting, the Fed indicated they expect to increase rates 3 more times in 2017. Once in the spring, again in the summer and a 3rd hike towards the tail end of the year. It’s important to keep in mind that long term interest rates like the 30-year fixed are not immediately affected by changes in the Fed Funds Rate. In fact, we have historically seen mortgage rates improve at the beginning of a Fed tightening cycle but Fed increases eventually lead to higher mortgage rates which will directly impact our local housing market. Until then, I expect Buyers to continue to cash in on historically low interest rates creating more demand and fueling a very strong Spring Market with another 3-4% rise in appreciation. As rates inch upwards, I do expect the demand to subside a bit until the market becomes a little more balanced.
As you know, all Real Estate is local, so if your New Year’s plans include Buying, Selling or Investing in Today’s market and you have questions, I would love the opportunity to help guide you in the right direction. If you would like more information about me, please go to my website www.jebsmith.net or check out my other videos on YouTube. As always, I appreciate you taking the time to watch and I look forward to seeing you again next month. Make it a great day.