The health of the US
economy is back on track with the unemployment rate falling below 5%.
Greater stability has brought a sigh of economic relief. The fundamentals
of a sound economy reflect a healthier U.S. financial system and interest rates
remain at historic lows.
The strength of our
local housing market so far this year continued to be strong with most
listings having multiple offers. Although the number of offers are lower than
last year the sales to price ratio in different cities varied from 96.8%
to 110%.
Low inventory
continues to be a challenge to a more balanced market. The inventory this
year is even lower than last year and the imbalance between supply and demand
continues to push home prices to new levels. New records were reached
in most of the local market excluding Atherton, Palo Alto and Woodside. It
is not clear for now if these cities have reached a price peak or if this is a
passing blip.
2016 Sales Numbers
|
City
|
Number of Sales
|
|
Redwood
City
|
140
|
|
Palo
Alto
|
93
|
|
Menlo
Park
|
91
|
|
Mountain
View
|
66
|
|
Los
Altos
|
62
|
|
Atherton
|
24
|
|
Woodside
|
19
|
|
Portola
Valley
|
13
|
2015 Sales Numbers
|
City
|
Number
of Sales
|
|
Redwood City
|
152
|
|
Palo Alto
|
96
|
|
Menlo Park
|
83
|
|
Mountain View
|
66
|
|
Los Altos
|
92
|
|
Atherton
|
22
|
|
Woodside
|
21
|
|
Portola Valley
|
22
|
2016 Sale to List to
Price Ratio by Cities
2016 median sale Price
2015 Median sale Price
2016 price Per Square
Foot Ratio
2015 price Per Square Foot Ratio
International buyers' impact on our market:
The presence of Chinese buyers diminished in our local
market, scared off by the stock market selloff, slowing economic
growth, currency devaluation, tightened restrictions on capital outflows and
higher prices in the housing market. In mid-December, Shanghai’s Composite fell
by 5.5%, its biggest daily slide since August and the index continue to hover
around 3,000 as Beijing authorities stepped up a crackdown on the securities industry.
Are we driving into another housing bubble?
According to real estate experts, the national housing
market on the whole is expected to cool off in two years. While some experts
are worried about real estate bubbles in some areas, there is no clear
consensus on the potential occurrence of these bubbles. It is clear that there
are no signs of a return to the conditions that caused the last national
bubble. Tighter lending restrictions today mean that buyers are not getting
loans they realistically can't pay back like in years past. Therefore, there is
no danger of a severe crash like the one we saw from the last decade.
Outlook:
• For generations, a healthy housing market has been
central to the growth and prosperity of the American economy. As long as the
job market is strong, the demand for housing will remain strong.
• The average for 30-year, fixed mortgage interest
rates is expected to rise only slightly by the end of 2016 but will still
remain at historically low levels. For a few key demographic groups – including
current renters and younger would-be buyers – rising interest rates could lead
to changes in their home buying plans. But overall, a modest increase in
mortgage interest rates is unlikely to completely derail most buyers’ plans.
• The economy is growing faster than the housing
development. Inventory remains a main concern.
• Housing affordability is an issue and will keep a
high percentage of younger buyers out of the market because their income has
not caught up with the strong year after year increases in home prices.
• Investors will continue buying properties but at a
lesser pace. The vast majority of investors who own their homes see owning
property as "important" or "critical" to building wealth.
• The housing market is a picture of solid but lower
growth of about 4%. This indicates a trend for a normal but healthy market.
The question is what should sellers and buyers do?
Historically the longest lasting expansion or cycle
has been 8 years, which means that the market will probably start slowing down
in 2018.
For sellers if you are planning to sell your home in
the next 2 years you may want to think about selling it soon so you are not
selling in a down cycle.
For buyers, if you plan to stay in your house more
than 5 years, you may want to consider buying now before prices and interest
rates go higher.
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