Hot Real Estate Will Cool In 2020, Experts Predict
So read the headline of the OC Register Real Estate section, published at the end of June. Perhaps. It is the consensus of a dozen economists who attended the annual conference of the National Association of Real Estate Editors, held in mid-June. It is interesting in its prognosis. Selling homes, according to one builder, is not the problem–getting them built is; materials, a short labor market, and timing is more the problem. That being said, could it not be that the slow down is due to potential buyers being priced out of the market? There is not a clear answer to that one either. According to James Doti, the veteran economist and former leader of Chapman University, and long time author of his newsletter, prices are rational given all the factors that contribute to a Southern California lifestyle. In other words…Location, location, location. Yeah but, we all exclaim, money is money and wages are wages, and if enough people cannot qualify for loans, location be damned. It may be a combination of factors that will dictate and describe the 2020 market, and possibly even 2019. Factors will be interest rates, although it is starting to look more and more like we may have a government controlled interest rate. Some believe that the magic number that would kill the market is 6%. It is doubtful that anything above 4 1/2% will hit us this year. So one question is whether or not lenders will lean back into the market by loosening qualifying standards, which ultimately could be dangerous in terms of bringing on another short sale market.
The conclusion to these musings may be economics 101; namely, supply and demand. If buyers cannot stretch to current prices, sellers who really need to sell may need to reach downward to the buyer. Perhaps that will create a correcting market.