By Ken McCord
It’s time again to get out the crystal ball and make some real estate predictions. I asked Mike Hickman, the president of Seven Gables Real Estate, to help, so you know who to blame if the market does not play along.
So, what do you think, Mike?
We have just experienced the most active real estate market since 2006. There has not been a more active market in 10 years. Home values have climbed above the values of 2006, and not only have homeowners regained all the equity lost, but added to their equity. This is a tremendous boost in wealth throughout Orange County.
However, it is a “two-edged sword” with respect to the future. Incomes throughout Orange County have not kept pace with the increase in home values. Even with record low unemployment rates of 4.1 percent in Orange County, versus 5.3 percent in California, and 4.7 percent overall in the U.S., we expect the “real estate headwinds” to blow in 2017.
With the rise in interest rates and the likelihood of an accelerated rate increase throughout 2017, together with the decline in affordability, this year will produce only modest gains in the number of sales and the appreciation of home values. Homebuyers will also see higher mortgage rates in the new year, and rates will settle in around 4.75 percent. We expect buyer demand to stay high in 2017 due to continued job growth in Orange County, with more millennial buyers entering the market as their employment matures and incomes grow.
Overall, we expect 2017 to be another positive year, with fewer sales of homes in Orange County than 2016. In a recent poll, the most optimistic about the economy, by age group, are people under 44 who tend to live in urban areas and have higher incomes. Their optimism is not limited to just the economy. They also see “now” as a good time to buy a home.
We remain bullish on the Orange County housing market for 2017. If you are contemplating selling your home, there has never been a better time in the last 10 years. If buyers are contemplating a purchase, even with interest rates in the four percent range, now is the time to purchase.
Thanks, Mike, for your insights! We are now on our fifth year of appreciating real estate prices fueled by low rates -- a nice run indeed. With rates now rising, is the party soon going to be over?
Stay tuned. Happy New Year!
Welcoming the 2017 OC housing market