It’s Been An Unusually Cool Winter. Can We Expect The Same In the Housing Market In 2019?

Every day, someone asks me if I think the housing market is going to crash.  The short answer is no.  There should not be another crash like there was in 2008 for three key reasons.  One: Home prices are not depreciating; the level of appreciation is just decelerating. Two: Mortgage standards are not what they were before the crash.  Lenders are unwilling to tolerate defaults and therefore impose tighter lending standards, making it harder to get a loan.  Currently, you need to be a qualified buyer to get a loan.  Three: foreclosure rates are down.  At the end of 2018, foreclosure rates were less than 1% which is the lowest inventory since 1996. People have equity in their homes, and are not being forced to sell them for less than their value. 

So, the market is not going to crash.  Will it correct? That depends on your definition of correct.  Let’s discuss housing in the San Fernando Valley.  New numbers out from the Southland Regional Association of Realtors show a 3.3-month supply of homes out on the market for sale. That’s a 42% increase from January 2018. The last time the inventory of homes was that high in the San Fernando Valley was 2015. The average single-family home in the Valley is 8.9% higher this year than last, but experts believe that kind of price increase is NOT going to last.   

 “Prices will continue to rise because we still cannot satisfy pent-up demand, but the price increases will be much more moderate as we move forward,” said Dan Tresierras, president of SRAR. “Sellers will need to be flexible, willing to adapt, and perhaps even lower their expectation if buyers indicate that they believe the asking price is too high.”

Pending escrows – which is a good measure of future sales – were down 20% year over year in January. This suggests there may be further sales declines while sellers adapt to the changing market conditions, and buyers regain some of their negotiating power.