Economists see little break in the feverish Bay Area residential real estate market coming in 2020.
A consensus forecast from the National Association of Realtors (NAR) released Wednesday found a low chance of a recession next year, and expectations for steady interest rates and slower but strong jobs growth across the country.
In the Bay Area and beyond, economists predict a slow pace of new home construction and a smaller inventory of homes for buyers. “Low inventory means less mobility,” said NAR chief economist Lawrence Yun. “People are stuck in place.”
Absent more new homes, an economic crash or a sudden shift in migration patterns, real estate watchers expect a steady sellers’ market for the Bay Area. Prices are expected to level off but stay among the nation’s most expensive. Rents are predicted to rise.
The lack of new homes, despite low interest rates and a strong regional economy, is attributed to tight zoning regulations, fewer construction workers, expensive land and rising costs for building materials, Yun said.
Bay Area home sales have slowed this year, and prices have also dipped in tech-heavy Santa Clara and San Mateo counties for months. Santa Clara County median sale prices have fallen, year-over-year, for the last 10 months, to $1.08 million, according to Zillow. The median sale price for a single family home in the nine-county region was $805,600 in October.
Realtor.com senior economist George Ratiu expects the competition for housing in Bay Area to remain tight between boomers and millennials looking to get into their first home. Affordable starter homes in the lowest third of the market are expected to remain scarce, he said. “Demand has been strong,” said “What hasn’t responded is supply.”
The battle between boomers and millennials is especially pitched in California, he said. In the Northeast and Midwest, for example, older homeowners often chose to retire to warmer climates. The migration brings more homes to market, he said. California homeowners have powerful incentives to stay put — Prop 13 tax breaks and a steady supply of pleasant weather.
Ratiu said risks might come from outside — the global economy has slowed and trade tensions could spread anxiety through consumer spending, the major component of the U.S. economy. Lower interest rates, he added, “will only get you so far.”
A Zillow survey also predicted slower, stable economic growth next year. The real estate website expects the size of single family homes to continue to shrink — with the median square footage of a new house 80 square feet smaller since 2015. Millennials will be the largest group of buyers, with more preferring city living, pedestrian-friendly neighborhoods, shopping and services, the website said.
Zillow Director of Economic Research Skylar Olsen said the national housing market is getting back to historic norms after a few years of frenzy.
“If current trends hold, then slower means healthier and smaller means more affordable,” Olsen said in a statement. “Yes, we expect a slower market than we’ve become accustomed to the last few years, but don’t mistake this for a buyer-friendly environment – consumers will continue to absorb available inventory and the market will remain competitive in much of the country.”
Economists believe there’s little risk in a repeat of the housing bust of 2007, when homeowners defaulted on loans and the market crashed. Federal banking regulations imposed after the crash have curbed loose lending practices, they say, and diminished chances of another steep tumble.
The presidential election could also be a factor. But a bigger influence, experts say, is the strength of the economy, low unemployment and healthy wages.
The NAR poll of 16 economists picked ten hot real estate cities poised for growth: Charleston, S.C.; Charlotte and Raleigh-Durham, N.C.; Colorado Springs and Fort Collins, Col.; Columbus, Ohio; Ogden, Utah; Tampa, Fla.; and Dallas and Las Vegas.
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December 12, 2019 at 04:15AM
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Bay Area home buying in the New Year: high prices, slow sales - The Mercury News
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