What’s the real estate market going to do in 2018? Let’s talk about some of the big conversation pieces emerging in Sacramento and beyond. Any thoughts? What are you watching? I’d love to hear your take.
1) Affordability: This year we’re going to have more conversations on affordability – or lack thereof. This is a big issue that’s not only covered extensively by the media, but it’s something being felt by real people – both prospective buyers and renters. According to NAR’s Housing Affordability Index, affordability has been declining.
2) More Color: Lots of design magazines and articles are talking about seeing more color in the kitchen and other parts of the house. Some say totally white kitchens are on the way out. Others anticipate seeing more avocado green on walls (hello 1970s). And brass fixtures are back in style too (hello 1980s).
3) Marijuana: This is a big year for California because recreational or “adult use” marijuana is now fully legal. Whether you are personally for or against this, it’s something we need to watch because of the potential economic and real estate impact. I’m not writing as an advocate, but I am saying let’s pay attention to commercial rents, vacancy rates, job opportunities, cash purchases, changing zoning code, land value, advertising, public perception, etc… So far the City of Sacramento has been a lone wolf in allowing commercial cannabis cultivation since surrounding cities have basically said NO thus far. In 2018 I suspect we’ll see other cities also jump on the cannabis wagon.
4) Smart homes: We are seeing incredible advances in technology for homes. It’s not just the “Echo” or “Google Home” either, but “smart” products are showing up for thermostats, shades, color-changing light bulbs, appliances, door locks, security systems, etc… The market doesn’t fully expect these features yet in every home, but there may come a day when they are normative. I actually bought a Google Home for my office last week. Did anyone else?
5) Creative financing: There is still upward pressure on values in many prices ranges and locations in light of a housing shortage, but if interest rates rise too much it could soften values (duh). This is where lenders can artificially keep prices high by offering more creative loan products to help buyers “afford” the market. Sounds healthy, right? Keep in mind we are nowhere near 2005 when money was being given to anyone with a pulse, but if lenders loosen things up too much it’s probably a good thing to be concerned.
6) Appraisal waivers: About a year ago Fannie Mae rolled out an appraisal waiver program that would not require an appraisal on certain transactions. Fast forward to today. The narrative right now from quite a few voices in the real estate community is that we need to use more alternative valuation products (without a human appraiser) for the sake of quicker turn-times, a lower cost for consumers, and a more efficient mortgage process. I know, I sound like an angry human since robots are taking over the world, but there is a deeper issue here. Messing with a system of checks and balances can be dangerous for the market. Do me a favor and re-watch The Big Short and ask yourself if there is any reason to be concerned about loosening things up when it comes to real estate valuations. I may write more on this soon.
7) Rent control: Rents have risen dramatically in many parts of the country over the past few years, so let’s expect to see attempts this year to enact rent control. Remember, what rent control does is limit how much a landlord can increase rent by putting a price ceiling on rent. There are both staunch proponents and critics of rent control, so be ready for some heated conversation if you bring this topic up online. As an FYI, in Sacramento we’ve had near 10% rent increases for three years in a row without much wage growth.
8) Republican Tax Plan: Some say the new tax plan will create less incentive for home ownership and cut values drastically whereas others say there won’t be much impact in most of the country beyond some higher-dollar pockets. The truth is the future hasn’t happened yet, so in humility we must admit we don’t yet know the extent of any impact. This is why I like what Jonathan Miller wrote, “If there is one thing the housing market doesn’t like, it is uncertainty. As it relates to housing, this new law is an “uncertainty casserole” and homebuyers and sellers will take a while, probably 1-2 years to adapt to the new world order and sales will be tempered until there is equilibrium. Prices in high-cost housing markets will clearly slip, although I don’t anticipate a severity.”
9) Disappearance of the $150,000 market: Last year I put on my prophet hat and talked about the disappearance of the $100,000 market in Sacramento. It was a safe bet to make that prediction because there is so much upward pressure at the lowest prices. This year I think we’re poised to see few homes under $150,000 by the end of the year. Remember, it’s not just the lowest prices in the market that are experiencing upward price pressure. It’s really entry-level homes in most neighborhoods – regardless of the price. Yet the median price in Sacramento has been hovering around $350,000, which literally means half the market is shopping below that price point. This alone reminds us it can be much more competitive at lower price ranges since more buyers are shopping there.
10) Alternative housing: As values have risen for single family detached homes, buyers at the lowest prices may need to consider other options such as mobile homes, tiny homes, storage container units, and lower-priced condos. Some alternative housing can feel sexy because of the lower cost and the cool vibe, but let’s remember the most expensive thing in real estate is often the land and permits. Thus it’s not always easy to build that low-cost alternative structure.
11) Increase of real estate agents: When prices are hot everyone and their Mom gets into real estate, so let’s expect to see more new agents out there. I’ve talked to a number of former loan officers wanting to get back into action too (I wonder if they know how much the game has changed since 2005). I’ve also talked with a number of agents wanting to become appraisers.
12) Housing shortage: We’ve not had much new construction over the past decade, and we’re feeling it because there aren’t enough units to satisfy demand. The good news is builders seem to be busy at work, which will help add more units in 2018. But the bad news is it takes time to build, so sprinkling in some homes and apartments here and there is not a quick way to solve a housing shortage. Moreover, one of the struggles in Sacramento is many skilled laborers left the area when the previous real estate bubble burst, so having enough workers is an issue. If anything the housing shortage seems poised to persist, though it seems like there is some relief on the way too. Also, last year housing inventory was actually slightly higher during some months compared to the previous year (though still anemic).
13) Bubble conversations: With values creeping back to their previous peak (or beyond) in some neighborhoods, it’s only natural to have conversations about “bubbles”. If you don’t believe me, show this graph to 10 people and tell me how many mention the word “bubble”. See my open letter to buyers worried about a housing bubble because this is a loaded conversation. On a side note, one thing to keep in mind is some owners who sense the top of the market is near may choose to list this year, and that can create some inventory. Just today I spoke with someone who is planning to leave California (and probably move to Idaho or Texas). This guy’s idea is that he’ll list his home in a few months in order to cash out while values are high. Does this man represent all sellers? No. But does he represent some? Yes.
I hope that was helpful or interesting.
Questions: What else do you think will be important in 2018? Did I miss something? I’d love to hear your take.
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Hey Ryan,
Great article. It’s been awhile since I commented so I thought I’d drop in my two cents on your topics.
What I’ve learned from stock market and cryptocurrency investing is that irrational exuberance will persist until it is unable to persist anymore. At that time, the bubble bursts and then the next round of irrational exuberance starts.
I honestly don’t know why anyone would want to buy a home at these prices. As an investor, I just don’t see a great investment in buying at these prices (except maybe for the rent value) but even then it’s a big risk if the bubble pops. If it did pop, I think we’d see another 50% drop maybe more.
I do agree with you that lenders and regulators still have a lot of tools at their disposal to keep the irrational exuberance going longer so only time will tell.
In your opinion, where do you see the market right now?
Hi Brandon. Thank you for your take. I always welcome it and definitely appreciate it. You get extra points too for mentioning the phrase irrational exuberance.
Bitcoin is an interesting phenomenon to watch because the speculation is incredibly rampant. It reminds me of real estate in 2003 to 2005 when investors were buying newly constructed homes only to “flip” them. They would get into contract, the home would be built, and they would sell them 8 months later right after it was built. There was huge and quick profit in those days since values were going up about $10,000 per month at the height. Builders even imposed restrictions on investors buying and flipping like this, but they still did it. Anyway, Bitcoin provides an excellent framework for real estate conversations today, though I’ll admit speculators aren’t flooding the real estate market either, so it’s not the same game.
I hear your point on buying right now for an investment. If your goal is to sell for a profit down the road, we just don’t have a rapidly appreciating market, so I can see investors being shy. Yet at the same time the lowest prices are showing higher increases, so an investor who bought last year at $200,000 could easily have 10% equity right now. Thus part of this market involves being savvy and making sure to buy in the right neighborhood and price range.
Where is the market right now? It depends what you are talking about. In Sacramento in terms of price it looks like we’re poised to see a normal spring. I think there is still room to see prices move higher so long as the fundamentals do not change drastically. If you have any pointed questions, let me know.
Hey Ryan, Thanks for your response. As always, you are a tremendous fountain of knowledge.
Yes, I don’t think we’ll see the “irrational exuberance” of the housing market in the early 2000s return again anytime soon. I guess we never know though. If sales started slowing down and lenders start getting desperate, it could possibly return. I mean they learned a great lesson last time around which is that it’s ok to make risky loans since the taxpayers will come in and bail them out. On top of that, I’m sure they remember the sugar-topped bonuses they paid themselves with those bailouts. I’m sure most are probably hoping for a round 2.
As far as real estate as an investment, you make a great point. Good individual investments (picking the right house in the right neighborhood at the right price) can in fact produce returns that far surpass the macro market. That is truly one thing to consider to make buying into an “overvalued” market more worth the investment and that’s something I will kick around in consideration. Thanks.
What I’d like your opinion on as well is how much national macro market movement affects individual markets. Also how much do other individual markets in the same state affect other individual markets in the state? For instance, if the San Francisco real estate market slowed down drastically and started to drop, how would that affect Sacramento? If the national market or international markets fell first, how much and how fast would that affect California and the Sacramento local market in your opinion?
Thanks Brandon. Great questions too.
The market in the United States is made up of thousands upon thousands of sub-markets. Thus when we see “national” real estate trends, it’s really just throwing all of these markets together. Since there really isn’t such a thing as a national housing market, we have to take those national numbers with a grain of salt. Granted, it’s interesting to look at price trends, cash buyers, sales volume, new construction, etc… but we must realize there is not just one trend for the entire United States. This does not mean national metrics are not useful, but let’s make sure to recognize what is happening in some random market in Utah probably has nothing to do with trends in Sacramento. For instance, a colleague on Twitter often sees Sacramento graphs and is astounded by how much value has changed over the past 6 years because in his market it has been more flat than not for a number of years.
On a side note, this conversation makes me think of a brilliant website called Spurious Correlations in which you can put together two data sets to make it look like they’re correlated when in fact they’re not. I actually hope to do a similar post soon to compare some random data. Any onlookers can check it out here: http://tylervigen.com/discover
With that being said, there are some markets that truly are connected, and one of those markets for Sacramento is the Bay Area. What happens there can influence our market. I don’t believe the Bay Area absolutely drives the Sacramento market, but there is still a strong correlation. Thus when home prices skyrocket, some Bay Area residents head to Sacramento for affordability. Also, if the tech market in the Bay Area allows some employees to telecommute, it can bring more buyers to shop in Sacramento. Or if tech workers have loads of cash they may look to buy a rental property in Sacramento. Thus there is a connection with the job market and home values for the Bay Area. On top of this, if a tech bubble burst, the government could have less revenue and that could eventually impact the job market here in Sacramento because we have so many government-based jobs.
In short, some markets are more connected than others. It’s really easy to think they are all connected, but we have to step back and realize they are not. Even within some housing markets we might see different trends at different price points. In New York, for instance, right now the highest-end luxury market is softening, but the lowest end of the price spectrum is increasing. Or Vancouver is experiencing some hard times in their real estate market, but that doesn’t mean the rest of the world will follow. Even in Sacramento the lowest-priced neighborhoods easily saw a 10% uptick in value last year whereas that type of appreciation was definitely not seen in other price ranges.
The big truth is that each market has different dynamics and there are reasons why value is moving one way or another in different areas. Yet when the US market crashed ten years ago it absolutely had an impact on the rest of the world, so there is something to say about the connectivity of the world market. I think this is where I would step aside though and let economists be the best source to answer questions and talk through world-wide ripples. I will say though in some regard the world market seems like a game of Jenga. If some very important pieces are removed, it can affect everyone.
There’s a concept in planning called a mega region. The idea is that communities are connected by commutes for work. This article has a map that shows how Sacramento connects with the SF Bay Area by commutes and commuters.
https://news.nationalgeographic.com/2016/11/us-commutes-reveal-new-economic-megaregions-map/
We’ve seen how buyers priced out of the Bay Area move east along 80 and 580, raising demand and prices in Solano, Yolo, Sacramento, and San Joaquin counties. When the Bay Area real estate market softens, the exurb markets get hit, too. Will be interesting to watch what happens over the next couple of years.
Love it Joe. I hadn’t heard that term before, so thanks for the education. It would be fascinating to graph trends by mega region. It’s interesting to think of our markets by commute.
Thanks for your input Ryan and the detail to your answer. Well stated.
Ryan – You’re one of several recent writers who have talked about correlation between the Bay Area and Sacramento real estate markets. I’m wondering about another facet of this market correlation – a major Bay Area hiccup would likely be tied to a tech/Silicon Valley downtown, which would in turn greatly impact State tax revenue and, potentially, government employment. How much has Sacramento’s economy diversified in the past few decades, and how dependent is the real estate market on healthy State revenues/employment?
Hi George. Thanks for reaching out. I commented below on some Bay Area dynamics, so there may be some nuggets there too. Our local market is definitely contingent on government jobs. I don’t have fresh stats in front of me, but in 2012 28% of all jobs in Sacramento were government jobs according to the Sacramento Business Journal. That’s huge, so any impact to tax revenue can certainly make a difference in Sacramento. On a side note, the cannabis industry is poised to increase tax revenue, so this is a new industry to watch. I am uncertain as to how the percentage of jobs has specifically changed over time, though we are the state capital so we have always and probably will always have government jobs. In that regard it’s hard to diversify too much because of the nature of our location. The healthcare industry is a very large employer in our region too and has certainly made lists of growing industries in recent years. If I come across specific data to share, I am glad to do so. In the mean time I might suggest the following:
1) EDD: It may be tedious to do historical research, but this is the go-to source for labor stats. http://www.labormarketinfo.edd.ca.gov/
2) Sacramento Business Review: Each year a group based out of Sac State does a comprehensive market update to discuss the date of the Sacramento economy. They are scheduled to have a new update come out on January 17, 2018, and that may be some useful reading. Their last update is still online right now at the following link. https://www.sacbusinessreview.com/fulldoc
Let me know if you have any thoughts. Thanks again.
Thank you for the post Ryan. I am certain we will all continue to see trends in energy efficient construction and solar power both in the retrofit and new markets becoming the new normal. Everyone loves a home that costs less to live in, is more comfortable, is more durable, and more healthy.
Gary, that is an excellent addition. I clearly missed that one on my list. Thank you.
On a related note I found it interesting to learn recently that FHA will no longer guarantee loans when there is a PACE loan in place. PACE can be a good product for the right owner, but so many contractors on the front end have been taking advantage of home owners. I hope this next year we will see more transparency and systems in place to protect consumers.
Interesting observations Ryan. My wife will be retiring very soon and we will be selling our primary home and moving to a smaller rental. I do not think we are in a bubble situation, but when the market moves up so much, I do think it is time to think about selling and taking some profits, especially when they are tax free profits. Happy New Year! ! !
That’s great Ray. Congratulations!! I didn’t know you were at that stage yet.
I hear you. I don’t plan to dwell on bubble talk, but I think the stats alone will propel bubble conversation this year. The thing is IF we have a normal year of modest appreciation that is in sync with the past few years, then the median price will end up just about where it was in 2005 at the top of the market (I would suspect slightly lower). This will only fuel more conversation. We still have to realize the market today has much different dynamics compared to 2005 though. Moreover, there is no bubble formula for when a market goes “pop”.
Thank you, but I am not so much at that stage. My wife is much smarter than me. I will continue to work and be pestering you for some time to come. ;o)
You married up. Smart man. 🙂
I am most concerned about rent control. I am a beginning real estate investor and I think that rent control would really cut my return on investment. There were a number of local initiatives on the ballot in CA that would impose rent control. I think it is a matter of time until rent control is imposed, slashing our profits, slashing the incentive to invest and curbing growth of new properties. What do you think of the dangers of rent control, Ryan?
Thank you Gil. By the way, the first comment is always held for moderation because of too many spam comments. Now you can post freely. I always welcome your take.
Whenever a rule or law comes to town that might impose on the open market, we are right to be concerned. The obvious positive of rent control is providing relief for tenants who are paying substantially more than just a few years ago without much wage growth. It is really difficult for tenants right now. Though we have to realize before any rent control would be imposed you can expect landlords to jack up their rents as much as legally possible. This will be a very real dynamic. Moreover, there will be less incentive for landlords to fix problems too if they are making less money. Rent control does not actually stop increases. It only imposes the amount a landlord can increase. On a personal level I am really concerned about how much rents have increased. It’s not sustainable and definitely a burden for many locals. I worry about many who simply do not have the funds to afford rent. This is a really big deal for society and there is no other way to say it. On the other hand professionally I get concerned about rules that would potentially stunt housing growth. Some of the negatives of rent control is it can stall incentive to build, invest, etc… This article is long and paints a picture of some of the negatives: http://www.econlib.org/library/Enc/RentControl.html
These cities in California all have some form of rent control per the CA Dept of Consumer Affairs.
http://www.dca.ca.gov/publications/landlordbook/appendix2.shtml
Berkeley
Beverly Hills
Campbell
East Palo Alto
Fremont
Hayward
Los Angeles
Los Gatos
Oakland
Palm Springs
San Francisco
San Jose
Santa Monica
Thousand Oaks
West Hollywood
All things considered, the truth is we haven’t had mass rent control in Sacramento since I’ve been in real estate (15 years), so my knowledge is not experiential like it would be for someone else in a different part of the state or in places like New York. So in that regard I welcome others to pitch in their personal experience because my knowledge is only intellectual.
Thoughts? Any onlookers can pitch in. This is a loaded subject though, so I only ask for respectful conversation.
One more thing. I just saw an article posted on Twitter about rent control. It was written yesterday and there is a debate scheduled for January 11th apparently at 9am that can be watched here: http://www.calchannel.com/live-webcast/. Many of the points in the article seem to echo the link I shared above. This indeed is a conversation that will be playing out in front of us in 2018. https://calmatters.org/articles/5-things-californian-know-now-rent-control/
SUPERB post Ryan. Very thoughtful and comprehensive. So much to comment on.
But for now, I think I’ll just focus on the affordability piece. This is a MAJOR concern for all Californians. Too many people want to live here for how little homes are available, and so the prices skyrocket.
The biggest portion of Millennials doesn’t turn 30 until 2020, and those are the prime “settle down years” where they finally meet someone on Tinder and decide to move out of the ridiculously unaffordable Bay Area where they’ll never buy a home.
The Mercury just released a study showing that only 25% of homes in the Bay Area are priced under $500k, where nearly 70-80% of Sacramento is, and 90% of Stockton is. Disappearance of the $150k market? The Bay Area is about to experience the disappearance of the market that’s our Median home price.
Ultimately, those that can afford to choose Sacramento will, and those that can’t will be left with Stockton or moving outside the state.
In Realtor.com’s national housing forecast for 2018, Sacramento fell from #4 last year to #76 this year, and Stockton jumped from #28 to #4. Why? Because Stockton is the last bastion of affordability in Northern California. If you only qualify for $200k, where else are you realistically gonna look?
If they won’t live in Stockton because of it’s bad reputation, they’ll be headed to Las Vegas… which is projected to be the #1 metro market. The LA Times just wrote an article on this last month.
So while I think affordability is an ISSUE, migration is really the TREND. Millennials Migration of those seeking to buy their first home in an affordable market is what’s influencing the supply and demand. And it looks as though it will continue for at least 3-5 more years.
Wes, you knocked the comment out of the park. I salute you and appreciate your stats too. I very much appreciate it and like the way you are thinking behind the numbers too. We can look at stats, but we have to ask what is causing the numbers to move the way they are.
Speaking of California, it is not easy to live here financially for families and businesses. Though I see so many Facebook and Twitter friends freezing and posting things like, “Yeah, it’s 6 degrees this morning.” The Sunshine state has many issues, but I can see the draw too.
Great post Ryan. I’m especially sensitive to 6) above. Messing with checks and balances as prices are increasing is a return to the ’05-’08 way of thinking. I can’t see the country getting into a deep hole like last time because of strong underwriting but the push to save money and time at the cost of risk assessment is unsettling. At the same time, us appraisers need to evolve to meet the needs of the marketplace.
Thank you Joe. It’s hard to imagine strong underwriting going away, though greed is very powerful too. Anything can happen.
I agree about appraisers evolving also. The reality is appraisers aren’t in control of their own narrative unfortunately, so other voices and opinions about waivers seem to be given more weight. May 2018 be a year in which appraisers collectively find a more unified voice.
I, for one, would love to see an article from you on appraisal waivers. The two I’ve seen were both on properties where the value was a “no-brainer” and the buyers were supremely qualified and had 40-50% down. But still…something to be aware of.
And, re: bubble, definitely seeing some folks here in the hot Portland neighborhoods cashing out…folks who have flexibility and want to take their equity to a more affordable market.
Thanks so much Corey. I’ll keep that in mind. I do have some thoughts stirring. I just need to figure out how to best organize them. I’ll keep thinking through things. Thanks for the examples.
That’s interesting to hear about Portland. In my mind your market is like an older brother to Sacramento. It feels like the beer scene is a few years ahead of us as well as the general vibe. Maybe it’s just me, but that’s what I catch every time I go there.
On a side note I think of that new Matt Damon movie “Downsizing”. I keep waiting for the real estate community to say, “Speaking of ‘Downsizing’, I can help you find a new place…..” 🙂 Anyway, I suspect this year we’ll see some people downsize due to age, but others due to their equity. Moving to a market that is slightly outside the hottest hubs of town can really lead to pocketing cash. Thanks again Corey.
Very comprehensive post, Ryan. I actually bought an Echo this year and love it. I think we probably will see more use of smart homes this year since the price of these items has gotten so affordable. I really hope that we can get a handle on the PIW matter since it will definitely affect the checks and balances. I would hate for it to progress to a level that would compromise the real estate markets because valuations were flawed or even nonexistent. I look forward to reading your blog in 2018.
Thanks Tom. Congrats on the Echo. I hope you like it and have fun with it this year.
I hear on property inspection waivers. I keep hearing too about a hybrid product where someone else does the inspection and then an appraiser will do the value part. That seems to be another attempt to cut the cost of the appraisal, and I’m concerned because in my mind seeing the property and valuing it hold hands. They are both important and ideal for the appraiser where possible. On the front end I imagine there will be a problem because those inspecting are likely not going to be paid enough to do a good job. Will they report all deferred maintenance and any issues too? Then on the back end it can be very challenging for an appraiser to base his/her opinion of value on someone else’s work. My struggle in thinking this is a good idea is that seeing the street, location, layout of the house, quality of upgrades, deferred maintenance, etc… is such an important part of value during a situation where the appraiser is relying on the interior. We have to see what buyers see and then some. I realize many photos would be taken, but I’m highly skeptical because photos cannot tell the full story and really capture everything we need. Moreover, if the person doing an inspection is not skilled or trained to recognize certain issues, then that’s not a good thing for value. Things are changing. This idea though is a bad one in my humble opinion.
Agree, Ryan. What some do not realize is that it takes trained observation skills to pick up on the items you mention such as deferred maintenance, floor plan layout, the home’s proximity to undesirable exterior influences, etc. I think it would benefit appraisers to continue to voice their opinions as we have first-hand experience with these things and we know how potentially bad and appraisal can turn out if it is not done correctly.
Very true. Appraisers also know how to measure square footage. This is certainly a skill that can be taught, but it really takes experience to get good. My sense is some in real estate think they know how to measure homes too when they really don’t. This is a big issue since square footage is such a big piece of the valuation pie and will influence comp selection and adjustments.
If this type of inspection ends up attracting less-skilled professionals who don’t know what to look for (but think they do), that’s not going to be a good thing for consumers.
great article you must have esp too. 🙂 or years of experience. Umm- see this was written in early January- its now end of February 2018 . My phone is ringing off the hook now from lenders looking for clients . Two months of slowed sales nation wide I can feel it. 24 years of doing this I felt it coming in October. Sorry but must say the bubble is really big right about now and getting ready to burst. The hardest part for me is how not one agent i know wants to talk about it for fear they wont get a sale or listing. Really? I cannot do that to anyone again.And as for the new agents you have no idea how the rug can get pulled out from underneath you through no fault of your own, with a few new lines drawn on old regulations. Here we go- hold on.BIG SHORT should be part of real estate curriculum for all new licensees.
Thank you CH. I appreciate your take and always welcome your opinion. This is definitely something agents should be prepared to talk about. The real estate community can at times be good at saying things like, “It’s a great time to buy,” but it’s not a very good look in retrospect if the market indeed does turn downward. Though at the same time making a decision to purchase is really up to buyers, and the truth is if buyers can afford the market, they are buying despite what values are doing. This reminds me most people purchase because of lifestyle more than timing the market perfectly as an investment. Anyway, I guess the big question becomes what is going to trigger the “bubble” to burst. I like to ask this when the issue is brought up, and you are welcome to pitch in thoughts if you wish. No pressure. Thanks again.
I’ve been reading about the market in the north, where the inventory is almost nil from the fires, and the market is rotating between price jumps and stagnation. (https://www.homelight.com/blog/northern-california-fires-affect-real-estate-market/). Will this affect demand in other parts of CA? I’m assuming so. Or are people just leaving the state. I’m not sure how I’d feel.
Hi Sienna. Thanks so much. I’ll have to check out the link too. I just attended a class last month with some appraisers who talked about the aftermath of the fire. They talked about how some homes are beginning to be built, but it’s really an uphill tedious and expensive battle. It will take many years for homes to come back, but it is likely going to happen for the market just like it did after the terrible fire in Oakland in the early 90s. Some will leave though and not come back. That’s true. It’s hard to say how it will impact surrounding areas, though I imagine some other locations are bound to get an influx of residents. The thing is if people still have their jobs locally though, they are probably going to stay local somewhere unless they are going to completely uproot themselves. The struggle of course is rents are being jacked up because of a severe shortage of housing. It’s not easy out there for people in this situation.
On a different note the appraisers at the meeting were talking about how the cost to build was really somewhere around $250 to $300 or so per sq ft before the fire, but contractors are charging $500+ right now easily.