One of the main factors impacting the housing economy is the increase in employment, a trend that might continue into the coming years. According to the California Employment Development Division, almost 470,000 jobs were added in metro areas in August 2015 and this has increased the buying capacity of the public. According to the employment rates, there has been a 2.4 percent increase in nonfarm employment in Southern CA, 1.8 percent in the Bay Area, 3.2 in the Central Valley, 3.1 in North Central and 0.9 in all of California.
The report also says that home prices have not increased significantly in California since 2013. The improvement in jobs and incomes and the low mortgage rates are other major contributing factors to the higher home sales this year. The lower interest rates offered by banks, credit unions and nonbank lenders have definitely increased affordability, both for first-time buyers and for those who were refinancing.
According to the National Association of Realtors®, home sales went up 8.1 percent YTD and 6.1 percent YTY in August 2015. The forecast for the eighth month of 2015 was a resale of 402,500 single family homes and as of October these numbers stand at 407,500. The current projection for August 2016 is 433,000.
The 30-year fixed mortgage rates that inched up (from 4.2 to 4.5) are expected to normalize by December 2015 and gradually increase over the next couple of years. The increase will not be sudden as that can cause an instantaneous halt in the thriving economy; it cannot be too slow either as the industry would not have any fallback area in case there is another downtime, so you can expect a gradual rise.
The report articulates that international buyers play a key role in the housing economy. In 2014, the top three countries investing in American real estate were China with 36 percent, Canada with 10 percent and India with 12 percent. In 2015, this list once again saw China as the front-runner with 43 percent, and Mexico and Korea each with eight percent. To keep this trend rising, the housing industry can introduce more programs and marketing materials to target these buyer groups.
The current home buyers include
- Millennial renters who are looking to buy their first homes
- Millennial home owners who are ready to upgrade
- Baby boomers who want to downgrade
- Minorities (who will play a big role in the housing economy in the next decade)