Before I go on this post is for local San Diego housing. I think we will see inventory return to more normalized levels. I have seen a slowdown in buying activity compared to the frenzied levels we saw in the fall/winter/spring as predicted. Similarly we have seen the return of the “entitled seller” who feels justified in pricing his home above comps. That coupled with rising treasuries has been enough to push away buyers who were on the fringes of affording a home in the neighborhood they may have desired.
Investor activity to me will not change the market dynamic much. Those who were getting outbid by investors for the most part were in the lower end and even more affordable housing market along with a lot of investment grade condos. That inventory can be consumed by lower end owner occupant buyers who have suffered the most by being consistently outbid by investors. There are some exception cases but not the numbers many on this site claim.
I have already debunked the 30% cash buyers in Carmel Valley myth and showed that most of those purchases were the lowest end homes in CV which would be bought up by owner occupants if not for investors.
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I believe that the pace of the treasury yield curve will have a good deal to do with how we see things play out in the housing market. While pricing has risen much faster then it should have, and inventory is growing I don’t really see a bubble that will lead to a crash. I see a market that was driven by a staggering lack of inventory causing pricing to lurch forward. I believe we will now slow way down but not see a massive gain in inventory due to foreclosures, distress, and lots of unemployment.
I think the housing market is now acclimated to the new normal employment wise here in San Diego. We busted 2.9 on the yields this week and saw a small pullback Friday. (side note I have been in and out of TBT during the past few months and am kind of kicking myself for not getting back in Friday) so we have seen almost 130 basis points since May…. not freeking bad… however on a historical basis we are still in bouncing near the bottom of yields.
This economic recovery is and will continue to be different then those of the past. This one will be characterized by the new normal lack of quality jobs but with plenty of crappy menial jobs. However in San Diego that is not much as true so the housing market will be supported okay. At some point on the yield curve though, buyer supply will start to suffer. I believe we still have perhaps… 150 – 200 basis points. That puts us at around 5.5 – 6% 30 year fix. However even here it doesn’t get dicey. At 7-8% it gets dicey but I don’t see that happening until maybe year 3 or 4 of the presidency.
I don’t have much knowledge on price declines against mortgage rates though. It is dangerous to assume they will be substantial, but I do think there will be some effect.
Why?
Because there are plenty of people with money out there.
Now you get to 10% or more and yes I believe we see some good price declines.
