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HOUSING FORECAST – C.A.R.’s Chief Economist

Leslie Appleton-Young is the chief economist for the California Association of Realtors (CAR). She’s a smart lady (Go Bears!). On Tuesday, April 4, she presented her current thinking, research and outlook to the Laguna Board of Realtors at the Laguna Playhouse. I took notes from her presentation and am sharing some highlights with you here:
• This year, housing trends will look very much like last year
• Reasons for optimism:
o Stock market gains
o High level of consumer confidence
o Promise of Infrastructure spending
o Potential of Tax reform
o Regulatory reform (softer lending guidelines, more access to money)
• Some areas of concern:
o Household debt is going up
o Household reserves are going down
o Huge trade gap
o U.S. has experienced less than 3% year-over-year growth for the past 11 years
• Inflation is currently at about 2.8%, suggesting three more rate increases by the Fed this year
o Average mortgage rates for the year should hover around 4.6%
• Job growth appears to be accelerating
• There are fewer transactions taking place in California, in spite of a much higher population:
o More people are staying put and remodeling
o Long-term owners stay put due to lower mortgage payments, lower property taxes and avoidance of capital gains tax
o Average time between sales is now about ten years – the highest ever since this has been measured
o Number of homes for sale is lagging historical levels – typical supply is 6-7 months, the State is currently at 3-4 months supply
o Under-building is a concern since the downturn in 2008. 100,000 new jobs have been created in Orange County, but new housing has been built for only half that man.
• Inland Empire is leading in growth, due to more affordable housing prices
• Continued upward price trends at lower level
• Home ownership in California is currently at about 50%
o Predicts that California will predominantly be a renter state within five years
• The Gallup polling organization recently stated that consumers see real estate as the best investment

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