A more placid year is ahead of us, right?
2016 looks to be a year of moderation, which may well create a refreshing market where buyers have a little more time to reflect on their potential purchases than they’ve had since the market began its rapid expansion in 2013. While we have a host more we could tell you about, here are some of our collected thoughts, observations and predictions from Kevin and Jonathan of Vanguard Properties:
While this first interest rate hike has had minimal impact on the real estate market — everyone was expecting it — the third or fourth rate hikes may tip the boat just enough to drive prices up.
It may be counterintuitive to think that rising interest rates will drive prices up as increasing the cost of money arguably reduces the number of buyers, but rate increases (and the question as to where rates will stop) may cause an almost imperceptible rush telling buyers to buy a property now so they can lock-in a relatively low interest rate for the long term before rates go up even more. Our buyers, however, will be guided by our long-term perspective and experience to help them navigate this new climate successfully. Also, it makes more sense to buy something at a lower price at a cheaper interest rate than waiting to pay more for something that is more expensive, right?
To add some predictability as to when potential rate hikes may come we’ve included the dates of the Federal Reserve’s Open Markets Committee meetings for 2016 as rate changes tend to be voted on and announced at these meetings.
Many agents will have to work harder than they have been over the past few years to get listings and those with listings will have to step up their game. This is a foreign concept to us as our sellers will tell you we go the extra distance and then some well before the first open houses. We create marketing plans, to-do lists, and provide current market intelligence and reconnaissance for our sellers. We do this in whatever market we’re in. Our work with buyers and our clients report that our efforts are the exception rather than the rule. Selling in a changing climate with more ponderous buyers means that successful sellers are ones who are well-served by better guidance on how to appeal to more discerning buyers in an effort to get the best, strongest and simplest offers possible.
Foreign cash will still be strong, if not stronger. There’s a lot of talk about Chinese money coming into Bay Area real estate. While this is more true in the Peninsula the Middle Kingdom’s capital definitely plays a role in the City. And even though China is going through economic adjustments of its own (going from a manufacturing economy to a service and retail one) people are still looking for safe havens for their money outside of China with California being chief among them. With the Bay Area being one of the largest population centers for Chinese folks outside of China, what other place would you expect cash to go? Given that capital export restraints are supposed to relax and continued uncertainty with the Chinese economy is on the horizon for the foreseeable future you can almost guess that the traditional Chinese mentality of being able to see the thing in which you invest will continue and that destination will be here.
More NIMBYs. NIMBY-ism, which tends to depart from reality may mean more restrictive ballot measures that will limit housing in the City. Proposition I’s Mission District building moratorium failed in November but with Aaron Peskin’s return to the Board of Supervisors and prospect of an election year voter turn-out will be too tempting for anti-development forces to pass up. So expect these types of efforts to continue.
Inventory will continue to be low. Sure there’s a lot of construction going on in the City now but a lot of the units being built are going to be rental units for at least a few years. Why? High rental income and having a developer own a new building during its first few years during which construction flaws can be remedied a lot easier (think: who would you want to deal with? Non rent-control tenants or having to plead your case with new owners who just forked over more than 6 or 7 figures to buy an essentially defective unit).
To see how your 2016 could look real estate wise, be sure to contact Kevin+Jonathan today by contacting us today.