Author: Rainy Hake, Executive Vice President, Alain Pinel Realtors
This article ran in the December 20th, 2013 Palo Alto Daily News publication Premier Homes, pg 10.
Inevitably, despite some conventional advice to avoid it, the topic of real estate will be discussed by families and friends at holiday meals across the nation. As 2013 is quickly coming to a close, it is only natural to reflect on the past year as well as make predictions about the year ahead – and real estate is no different.
Overall, 2013 was a very successful year in the local real estate market – especially in the luxury and higher end markets this region is known for. While we have known the real estate market has been rebounding, this past year we saw that recovery dramatically accelerate. While the numbers showed limited inventory and historically low interest rates, the headlines told stories of multiple offers and bidding wars. With an influx of cash from booming tech companies and international buyers – sales and prices reached or exceeded pre-recession peaks in many of our communities. In some areas, year-over-year numbers showed double-digit increases.
While the past few months have slowed compared to earlier this year, this is likely seasonal. In 2014, The California Association of REALTORS® is forecasting a continued strong demand for home ownership to continue – with prices and sales continuing to experience further gains. The California median house price is expected to increase 6 percent to $432,800 in 2014 – and even higher in our local markets.
As real estate is often cyclic, we can expect a more balanced market between buyers and sellers. The higher prices, which are expected to continue, will likely entice some sellers. CAR predicts slight inventory increases and decreased competition from investors. This will allow more opportunities for buyers to get back into the market to take advantage of the less-frustrating market conditions that we saw in 2013.
While this less competitive market will be welcomed by buyers, it is not without its challenges. CAR expects the average interest rates for 30-year fixed mortgages to slightly increase to a still historically-low 5.3 percent. The Bay Area also has a high pent-up demand of buyers, backed by a solid job market and bustling economy. Our world-class universities, temperate climate, and culture of innovation will continue to entice foreign buyers – as prices in even our most expensive markets still remain competitive with global cities in Europe and Asia.
With all predictions, we advise caution, as no one has a crystal ball. One wild card that is worth keeping an eye on is the actions of the Federal Reserve. How interest rates are changed, as well as the expected winding-down of their bond-buying program, can have large effects on the economy – and potentially slow the housing recovery. Additionally, dysfunction in Washington continues to remain a threat to the mortgage interest deduction and mortgage finance reform, affecting housing affordability.
As 2014 approaches, a continued healthy market, coupled with less competitive conditions, should give buyers and sellers a reason to celebrate. We may not see the dramatic increases we did in 2013, but a balanced, healthier, and more stable real estate market is good news. While outside factors loom, entering the market now will ensure you take advantage of the environment that exists.
Happy holidays to all!
About Author:Rainy Hake currently serves as the Executive Vice President of Alain Pinel Realtors where she plays a role in managing the strategic direction of the company, and also oversees the Marketing, Technology, Training and Strategy departments. She has over 15 years of experience in the real estate industry and holds and MBA from the University of Oxford.