What will the housing market look like in Orange County for 2017?
Economic indicators show that in 2017 Orange County housing market will see an increase in home prices, increased sales, rent hikes, and booming home construction for the fifth year in a row. However, President Donald Trump is one, huge player that indicators don’t take into account.
While trends are positive, the implementation of the new administration leaves forecasters unknowing about what policies will be pursued. Trump intends to implement tax cuts and increased infrastructure spending, both of which typically stimulate economic growth, according to Christopher Thornberg, former UCLA professor and founding partner of Beacon Economics. This would be good for the housing market.
Forecasting is often considered risky, as it tends to be viewed as either extremely lucky or just wrong, but when it comes to housing there are plenty of forecasts to choose from.
Here are six predictions for 2017, according to The Orange County Register.
Home prices are rising:
Prices of homes in Orange County are projected to rise 2-6% this year. Home prices have been steadily rising since the national housing market turned around in the spring of 2012. Year-over- year prices have been up for 54 months running, rising by $216,000—a 50% increase from May 2012 to May 2016, according to CoreLogic.
May and June 2016 saw an all time high for the median price of all homes. If forecasts are accurate, the median for existing homes will set new records in 2017.
The reason for this is solid income gains, continued growth in the employment market, and more people moving into their own homes, according to Anil Puri, director of CSUF’s Wood Center for Economic Analysis and Forecasting. The number of available homes is also fairly limited, competition for which drives up prices.
Increased home sales:
Southern California should see an increase in home sales compared to 2016.
The state Realtor association predicts sales across Southern California to increase 0.7%.
31,641 Orange County homes were sold in the first 10 months of 2016, the highest number since the recession, according to CoreLogic. That’s an increase of 2.3% from 2015 but still 10% below the average for the past 29 years.
The reason for this is again, more jobs, higher incomes, and greater demand.
Builders will be busier:
Construction is expected to increase by 3-13% in Orange County–the 7th year of increases.
It is predicted that anywhere from 11,000-14,000 permits will be pulled for new housing units in 2017, and that construction jobs will increase 3.5-6%.
Mortgage rates up:
Interest rates for a fixed, 30-year mortgage will be 1 percentage point or more above the 2016 average of 3.6%.
In October 2016, California Realtors forecasted that mortgage rates would be around 4% throughout 2017 but are now revising that estimate, predicting rates in the 4.5% range and possibly as high as 5%. Higher mortgage rates translate into higher home-buying costs.
If rates hit 4.5%, monthly payments for a median-priced home will increase about $300 ($4,000 annually). If rates hit 5%, monthly payments will rise almost $500 (nearly $6,000 annually).
If you’re looking to buy, it might be better to do so now rather than risk higher rates with a purchase later in the year.
Prices will be up and affordability will be down:
By the end of 2017, the median income of an Orange County family will only pay 60% of the amount needed to buy a median-priced home.
Median home prices are also predicted to be 8.6 times the median income, compared to 6.1 times the median income statewide.
Rent increases will be smaller:
Asking rents for an Orange County apartment will increase 2.7-4% in 2017.
In 2016, rent hikes ranged from 3-5%, according to apartment trackers. Rents are up 20% since 2010, and have been steadily rising for 6.5 years, according to Reis, Inc.
Of 79 large U.S. metro areas, Orange County had the eighth-highest apartment rent in the third quarter of 2016.
If forecasts are accurate, the county’s average rent will range from $1,826-$1,849 per month.
So if you’re considering buying in 2017, you shouldn’t wait too long so you can get a home without spending too much.