If You’re Waiting For The Market To Cash Before You Buy, It Will Be A Long Wait…

There are many reasons for the market to remain calm and somewhat steady, with the normal cooling trend in both sales volume and prices taking effect currently. Numbers just reported show the cooling trend has been underway for the past 12-13 months, reported by the OC Register and backed up with CoreLogic numbers. But there is no evidence of a looming bubble or imminent crash. Long time followers of the market, and by that, it means the last 39 years, will note that modern times has had only 2 crashes, with either a robust foreclosure or short sale market, and there has been a tangible reason for both: 

Firstly, the 90’s crash, which happened when the Clinton Administration shut down multiple military bases in downsizing the post WWII infrastructure which had remained largely untouched. This had a profound impact on the OC economy as we were far less diversified then, and had not yet developed our strong import/export, micro chip or car businesses etc. We were an economy based largely on defense, which relied on military. Hughes shut down, Lockheed and Boeing shuttered plants, and of course military and then all the support industries took hits, resulting in the loss of over 1,000,000 jobs— yes one million. People were leaving the state in droves and it was a long 6 year recovery. Then we saw one of the greatest recoveries followed by incredibly poor leadership by the Federal Reserve resulting in a flood off sub-prime mortgages being sold to Wall Street—resulting in way too easy, and non-qualified home lending, which led to a run up in prices, people refinancing their homes like it was an ATM. The result…complete disaster, The Great Recession. 

Now, we have recovered once again, home sales are steady and so are prices. There is a natural cycle to real estate, which we haven’t seen for 3 decades, but is here nonetheless. That being a natural slowing of prices based on supply and demand, notwithstanding SoCal’s inherent affordability gap. But strong forces are in play to keep the market going in a consistent trend, especially for the resale market: 

  1. Interest Rates — The Fed indicated in early June, that it would be open to lowering interest rates once again to keep the economy going if the tariff situation actually does develop.
  2. The new home shortage. There is not enough new product spread out over all price points and builders new permits seems a bit shy currently.
  3. There is still demand and interest rates were already the lowest we’ve seen since 2014, before the Fed announcement.
  4. Last but not least, hiring is still strong, Millennials are coming into their purchasing power, and the economy is steady. So if you are a buyer, get going.