Seems like it's been a while since I did an update but it was only a month ago. Also feels like a lot has changed in that time. The weather is finally coming around to resemble spring/summer and so is our real estate. Things are picking up quickly. I was wondering if the influx of inventory was going to throw the balance off, but we see to be in the same equilibrium as before, so the buyer pool as jumped up too.
From this time last year we're looking at around 3-5% growth in equity. That's a good market indicator that we're in for another good year; however, there are a few things that concern me for next year. Right now we're seeing the 10 year treasury bonds at 2.8% and the 30 year at 3%. They're getting closer and closer. Every time I can recall when these numbers inverse, we see a market correct. (notice I didn't want to say depression) Another factor that's probably going to put the breaks on prices is interest rates. A stronger economy will benefit overall from a raise in the rates but it will effect the purchasing power of everyone. At the end of the day it's all about the monthly payment. If I could buy a million dollar house for 2,000 a month, sign me up.
I just put two houses on the market in west roseville, 95747 and both sold relatively fast. One in the first week, and the other in two weeks. The buyers are out there, seem like we have a fair amount of bay area buyers. To follow up on the point above about the market correction next year, I don't think the amount of buyers from the bay will sustain us. Those buyers tend to be in the mid market range, 400-600K. Most of them are buying down and paying cash. For the lower end, under 400K we will have plenty of competition, but the biggest hit will be above 750k. The new tax law will also come into play with the higher priced properties. Only being able to write off 10K a year in taxes is real. My house is only 450K and after sales tax I'm maxing out right at 10K. If we go and buy anything bigger then we'll loose out on the tax. It's not really a concern for me; however, for the people out there will million dollar homes, they're going to notice it come tax time.
Here's my advise: if you're looking for a primary then buy and lock a good rate. For investments, I would sit on cash until the market changes. It's tough to find anything out there that cash flows. You have to put down 20-25% for it to pay for itself. I'm not a fan at that cost.
No one know, and I hope I'm wrong but we seem to be in a 7 year cycle. The market started its upward trend in 2012. That puts us at 2019 for a correction. Is this exact science, of course not but we're due. Been going up and up to where costs are exceeding jobs and sustainability. To keep this going we're going to need some more creative loans. In fact, they're already starting that game again so the writing is on the wall. I have several investors right now liquidating!
If you're looking to buy or sell, give me a call.
Re/Max Gold - Chad Phillips