A year ago, as we were writing this newsletter, the real estate industry was surrounded by uncertainty. Mortgage rates were close to 5%, appreciation was predicted to be somewhere between 2-3%, active standing inventory of homes for sale in Riverside was just under 800 homes, and home prices had started to cool. However, 2019 turned out to be a pretty strong year…but more importantly, how does 2020 look? Locally, what can we all expect from our real estate market in the coming year? Well, based upon our 35 years of providing real estate services to our clients and their families, here is what we see shaping up in the year ahead.
Interest rates…Rates were definitely the biggest winner last year. The Feds cut short term rates three times in 2019, erasing all but one of the raises they gave us in 2018…and they have indicated they have no plans to mess with rates anytime soon. Although these short term rates are not mortgage rates, they do set the table for our economy and its stability. Mortgage rates have seen continued improvement and look to keep on the same path as we head into the year ahead. Rates are currently sub 4%, and we have seen 30 year FHA rates as low as 2.99%. This is rocket fuel for buyers, and provides them an extra punch when qualifying for a home loan….a win-win for everyone.
Inventory…As we are penning this newsletter, there are currently 438 available properties for sale in the city of Riverside…a drop of over 40% from this time last year. This includes all condos, town-homes, manufactured homes, and single family residences! If low rates are rocket fuel for buyers, then low inventory is the fuel for sellers. High demand and low supply has always been a classically good scenario for sellers. These inventory figures always fluctuate throughout the year, but starting the year this low gives us a pretty good idea of where we might be headed. Low inventory will play a huge part in how our real estate market appreciates this year.
Pricing…The aforementioned mixing of these two housing fuels resulted in appreciation levels of 6-8% in 2019…more than double the estimates of a year ago! At some point, this rate of appreciation will start to put a strain on affordability and become unsustainable, but until that happens, the lack of housing in Riverside will continue to push prices upward. Keep in mind…we are the affordable housing answer to Orange and Los Angeles Counties, and that will always positively affect our supply of buyers. The average housing price in these adjacent counties is hundreds of thousands of dollars above ours, which results in more buyers coming our way.
SO WHAT CAN WE EXPECT IN 2020?
First…look for builders and counties/cities to find a way to get more new housing permits approved at a faster rate. We need more homes, and the lack of inventory will be at the forefront of everyone’s mind. This will take some time, and may not affect us this year, but hopefully it will help in the years to come. For this year, this low supply will continue to make a strong market for any seller who decides 2020 is the year to sell.
Secondly…look for our local market to remain very robust for the reasons outlined above. Buyers will be competing for the fewer numbers of homes available to take advantage of the very low interest rates, and sellers will reap the benefits. However, please understand that historically, this type of real estate market will not last long, so if any homeowner is planning on moving up or down, now would be a good time to jump on this real estate train. Rates may even dip a bit during this year (which will add to the buyer demand for a home), so keep all this in mind when planning for your real estate future.
In summary, full steam ahead pretty much says it all. In the real estate world, you can’t beat low interest rates, a good economy, lots of buyers, and reduced inventory. It could be a wild ride! Take care, and as always, I am only a phone call away if you have any real estate questions.
Happy New Year to us all!