California's housing market is recovering better than other parts of the country and the Bay Area is the strongest housing market in the state, according to California Association of REALTORS® vice president and chief economist Leslie Appleton-Young.
The Bay Area's recovery has been unparalleled, with high income earners, high desirability, and no budget constraints. "You really are a beautiful anomaly," Appleton-Young told members of the Silicon Valley Association of REALTORS® at the association's economic seminar and general membership meeting last week.
With the exception of the Bay Area, Appleton-Young described the rest of the country's recovery from the recession "disappointing." GDP growth is currently at 2.5 percent, but indicated the country needs at least a 3 percent growth rate to be on full recovery. By the fourth year of recovery, the country should have replaced 80 percent of jobs lost, but it hasn't. The office market has the highest vacancy rate because technology has introduced new ways of doing business at the expense of employees and space.
Distressed sales are down, especially in the Bay Area, where their share of total sales has dropped to 4 percent. According to ForeclosureRadar.com, as of October 2, 2013, Santa Clara County had 84 bank-owned properties and San Mateo County, 33.
Inventory is down because there has been little new construction for the last five years; underwater homeowners are stuck; the foreclosure pipeline is drying up; investors are renting out property instead of flipping; and off-market listings are growing.
Due to the lack of inventory, the share of home sales has increased sharply at the upper end market. Home prices have increased, "but it's taken a bite out of our affordability index" and made homeownership more difficult for first-time home buyers to attain, said Appleton-Young. With investors and first-time buyers competing intensely for lower-priced properties, the share of first-time buyers dropped to 28 percent this year, well below the long-run average of 38 percent.
C.A.R.'s chief economist said 2014 will see a "lackluster recovery" with positive, but slow growth and wild cards for the housing market. She said while the government shutdown has ended, nothing has been resolved and temporary funding expires on Jan. 15, 2014. The Feds will likely begin "tapering," which means higher interest rates are coming. The future of GSEs Fannie Mae and Freddie Mac continues to be uncertain, as is the viability of FHA and preservation of the mortgage interest deduction.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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