By Mike Gonzalez
What the heck is going on with the real estate market? Do you think it’s a good time to buy? Do you think it’s a good time to sell? I wonder if my home’s value will go up next year? These will no doubt be some of the spiked-eggnog fueled conversation starters taking place around the fireplace at holiday parties this month. And while there’s no crystal ball, certain indicators may help provide answers to these burning questions. After a volatile few years, it seems we’ll see a more stable housing market over the next twelve months. Real estate investors-who have largely driven home prices up steeply over the past two years-have exited the market en masse. It makes sense. The higher the price of a home, the less profit one makes in flipping or renting it. Soaring home prices have also put a pin in the explosive competition that had been occurring between investors and cash buyers on properties for sale considered to be bargains in desirable neighborhoods with low-inventory. As a result of all this, it’s estimated that single-family home sales for 2014 will be slightly lower than 2013 figures. Moving into 2015, then, it’s expected that we’ll see modest growth in home prices as traditional home buyers slowly begin to replace the investor class. A stabilized housing market is not necessarily bad news for sellers who have grown accustomed to dramatic price increases. A revitalized buyer market could yield sales at premium prices. Traditional buyers will have to contend with premium asking prices, especially in highly desirable areas which continue to have low inventory. However, slower growth and no competition may make it easier for traditional buyers to find better deals. There is of course the ever looming issue of interest rates-which to date are still lower than what the Fed projected a year ago-and at an all-time low, qualified buyers may be incentivized to capture a desirable 30-year fixed mortgage ahead of rising rates, which may occur toward the end of next year according to the Fed’s pronouncements. Transactions between traditional buyers and sellers is a strong indication that a more normal, stable housing market is in store for 2015, but other factors that cannot be predicted with any certainty like employment, household income, and the health of California’s economy as a whole will also be key influencers.