Residential building permits in the San Diego region saw a dip in the last several years, meaning potential buyers must look to existing homes for options.
The question is, are people selling?
The National Association of Realtors noted that November 2017 saw the tightest market of homes for sale ever, continuing a pattern of the last five years. They predict this trend to continue during the early months of 2018, according to a recent article in HousingWire.
On the one hand, less inventory means higher prices, yet they also note recent changes in the deductibility of mortgage interest could depress the increase that otherwise would have occurred.
Zillow predicts a 3.7% increase the San Diego County Home Value Index during the coming year. Currently, the median home price is $560,800. 2017 saw a 6.6% rise in home values, so price increases appear to be slowing.
Jobs recovery is another factor affecting housing prices in the region, as well as levels of home sales. Until jobs catch up with population growth, there isn’t likely to be significant wage improvements, limiting buying power.
Home sales will remain slower in 2018 as job growth continues catching up with population growth.
The San Diego region has been fortunate in terms of jobs recovery since the 2007 recession, and increased military spending means the regional outlook continues to look strong.
An increase in the working population, though, means the region won’t see a full recovery until 2019 or 2020 when wages are predicted to increase, giving potential homeowners more buying power, according to a report in the journal First Tuesday. That predicted economic boost will also likely drive the building of more residential housing units.
Another factor anticipated to drive housing demand in 2019 and 2020 is Generation Y entering the market and fueling a boom much like Millennials did in 2006.
Changes in tax law will impact financial incentives for homeowners.
There’s been much talk about how San Diego and other high value real estate areas will be impacted by the recently passed tax bill.
One change homeowners should be aware of is the limit put on deductions for state and local taxes.
The bill caps these deductions at $10,000 a year for those who itemize their deductions.
Another provision that will impact home buyers and homeowners is the cap on the mortgage interest deduction for new home loans. In the past, those who itemized deductions could write off mortgage interest on loans up to $1 million in addition to $100,000 in home equity loans.
The new law caps the mortgage interest deduction on new home loans at $750,000.
The California Association of Realtors warned this could depress home prices, which, in one sense, would be a win for those looking to buy, but who worry about skyrocketing costs.
On the other hand, they also warn current owners may not choose to sell, further tightening a market already squeezed for buying options.
November 2018 California ballot measures will be a hot topic for the housing industry.
For those frustrated by the lack of building in the San Diego region, ballot initiatives proposed for November 2018 could offer hope.
As The Los Angeles Times reported in September 2017, Governor Jerry Brown signed fifteen bills meant to put a dent in California’s shortage of affordable housing.
A $4 billion bond, plus a new fee attached to real estate transactions will amount to an additional $1 billion a year available to invest in affordable housing for the state’s low-income residents.
"Most of the money raised by Senate Bill 2, the $75 real estate transaction fee, and Senate Bill 3, the $4-billion housing bond, would go toward helping pay for the development of new homes for low-income residents, defined as people earning 60% or less of the median income in a given community…
The measures also will go toward new construction to benefit the homeless and farmworkers with a small percentage of money reserved to help pay for middle-class housing construction. For those homes, residents will be able to earn up to 150% of median income in the highest cost areas…"
Three measures are aimed at easing local regulatory restrictions that have discouraged builders from meeting the state’s high demand. Communities will be financially rewarded for designating a certain percentage of new building for low- and middle-income homes.
Another set of bills aims to require communities to create housing plans to meet the demands of population growth and follow through to fulfillment.
Changes such as the tax bill and proposed legislation at the state and local level will take time to fully comprehend, yet the near future of San Diego’s housing market remains bright.
Article courtesy of: https://www.sandiegorealestatehunter.com/blog/4-san-diego-housing-predictions-2018/