November 30, 2018 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here are some highlights for the 38 East Bay Cities that I track:

Affordability, rising interest rates, increasing inventory, reduced sales, considerations of moving out of the Bay Area, are all topics of interest in a market in transition. Properties are staying on the market longer, we’re seeing fewer offers than before, more price reductions and some incentives now being offered, in effect, all favoring buyers. Yet indecision has many buyers on the fence with a wait and see attitude despite having more choices.

Here’s where we stand as of the end of November 2018 . There’s 82% more inventory now as compared to last year at this time. However, despite that increase, we’re seeing fewer go into contract. There’s 18.1% fewer pendings compared to last year. This creates a pending ratio of .71, the lowest we’ve seen since March of 2009. This is the fifth month in a row that it falls under 1.00. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory with fewer pendings) favors sellers as has been the case now for quite some time. A number below 1 favors buyers. This is the case throughout the East bay with 95% of the cities that I track now having a ratio of below 1.00. In short, we have moved from a strong seller’s market since the beginning of summer towards a more normal and balanced market, and in many cases, now favoring buyers.

Some of the articles below further support this. Some key statements made;

1. Mortgage interest rates went up from 3.90% a year ago to 4.81% as of last week. This is having an impact, real estate experts say. These increases are forcing some buyers to purchase cheaper, smaller homes and fixer-uppers in less sought-after locales. And it’s led many aspiring homeowners to go into standby mode—waiting to see whether prices will drop to make the whole thing more financially viable. With less competition come fewer bidding wars, and more inventory that isn’t being snatched up.
2. “Prices have risen so high in some of these markets that it’s very tough from an affordability perspective [for buyers]. Fact is, prices can’t increase at record levels forever. And we may have finally hit an inflection point in many bellwether markets.
3. More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. And that has led to a relative glut of available homes—more than even the hottest markets can easily absorb.
4. Homes sales in October were the lowest for the month since 2011. Overall sales in Bay Area counties have dipped, year-over-year, for the last five months. Contra Costa sales slipped 10 percent, Santa Clara fell 8 percent, and Alameda dropped 9.4 percent, while San Mateo remained flat.
5. The number and percentage of homes with a price cut surged last month to their highest level for the month of October since at least 2012 in the Bay Area and 2011 statewide. The jump in price cuts, which hit every Bay Area county, is another sign that after years of stratospheric increases, prices are leveling off and buyers are gaining a little more power in what had been a strong seller’s market.

Many economists are still predicting a recession in 2019 or 2020 and although the Real Estate Market will not be the trigger as it was in our last recession, it will be a factor. For many buyer’s there may be some opportunities to be realized, but keep in mind that for whatever modest corrections we may see, much of it may be offset by rising interest rates.

As anticipated, we repeated the dramatic drop off in inventory at year end, following our normal pattern for December, typically our low point. Although our inventory has come down slightly, (normal for this time of year), our available housing inventory is still 324% higher than at the beginning of the year, now 82% higher than where we were last year at this time.

Our monthly supply is now 42 days. Last year, our months’ supply, at this time, was 21 days. As a reminder of what we mean by “months’ supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months’ supply,” (in this case 42 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market. September is typically our high point over the year in terms of inventory.

It’s hard to predict how much tax reform will play into this but see the article, “Is California facing a tax exodus? Thanks to Trump’s tax law, more may start to flee.” We are seeing interest rates starting to go up. Prices have continued to rise and are only now beginning to flatten out. More and more, affordability, the high cost of living and our traffic woes are coming into play for those, especially in the “middle class,” who may now be considering leaving the Bay Area.

The number of pendings, (homes that are in contract), decreased again. The pending active ratio decreased to .71, now at the lowest point we’ve seen since March of 2009. This compares to last year at the same time of 1.57. This supply and demand ratio signals whether we’re in a sellers’ or buyers’ market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers.

The percentage of homes “sitting” has increased to 59% of the homes listed now remaining active for 30 days or longer, while 30% have stayed on the market for 60 days or longer. This is higher than last year at this time with 48% of the homes listed remained active for 30 days or longer, while 26% stayed on the market for 60 days or longer.

The “distressed” market, (foreclosures and short sales) are no longer a factor representing less than .05% of the market.

• The month’s supply for the combined 39 city area is 42 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. We are higher when compared to last year at this time, of 21 days.

• Our inventory for the East Bay (the 39 cities tracked) is now at 2,816 homes actively for sale. This is higher than last year, at this time, of 1,547 or (82% higher). We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 1,995, less than what we saw last year at this time of 2,433, or 18.1% lower.

• Our Pending/Active Ratio is .71, now at the lowest level since March of 2009. Last year at this time it was 1.57.

 

• Sales over the last 3 months, on average, are 2.8% over the asking price for this area, lower to what we saw last year at this time, 4.0%.

 

Recent News

The Housing Slowdown Is Here—and These 10 Cities Are Getting Hit Hardest

By Clare Trapasso, Realtor.com, Dec 3, 2018

Is the party really over?

Over the last decade, the seemingly unstoppable growth of the American housing market has created a bonanza for sellers, a cutthroat environment for buyers, and an endless source of fascination for just about everyone else.

It seemed to be an economic perpetual-motion machine. Could home prices in top markets really just keep going up and up … and up?

Well, no, actually. In the last few months, the real estate market has actually begun slowing down—including in some of the big cities that have been leading the go-go post-recession housing boom.

What does it all mean?

We decided to explore beyond the alarmist headlines to find the 10 metropolitan areas* that are seeing the biggest shifts—and why.

To be clear, prices aren’t always dropping in these places, which are predominantly located on the West Coast. Mostly, they’re decelerating, coming back down to earth. So bargain hunters can put their wallets away.

But in addition to a substantial increase in the number of home listings with price reductions, we found other potentially game-changing signs of market adjustments, including a surge in the amount of inventory for sale and the number of days on the market.

Here are the brass tacks: List prices only rose 7.3% nationally year-over-year in October.

While that’s certainly higher than most raises in compensation, inflation, and buyers’ comfort levels, it’s still less than the 10% annual hike the year before and the 8.2% jump the year before that.

Focus on the small victories, buyers! These markdowns can lead to more choices for those looking to purchase a home. And sellers, you’re still making bank.

“There’s a rebalancing that needs to happen,” says Len Kiefer, deputy chief economist at Freddie Mac. “Prices have risen so high in some of these markets that it’s very tough from an affordability perspective [for buyers]. … It’s not surprising to me that we’re seeing a little bit of a leveling off.”

So stash the B-word, at least for now: The dreaded Housing Bubble isn’t poised to pop. There are simply more homes for sale now and fewer buyers vying for them. In other words, the market is returning to some semblance of reality.

“Are we going off the cliff?” says Honolulu-area real estate broker George Krischke of Hawaii Living. “I don’t have a crystal ball, but I don’t think so. … It’s a temporary slowdown and may be a plateau.”

To come up with our rankings of the real estate markets that are slowing down the most, we looked at annual price, inventory, days on market, and price reduction changes from October 2017 to 2018 in our realtor.com® listings in the 100 largest metros.

Let’s take a look:

So why are these housing markets slowing down?

1. Mortgage rate increases are sidelining buyers

Unless buyers are paying all cash for their digs—not a likely scenario for most of us ordinary humans—they are probably smarting from rising mortgage interest rates. That’s because even the smallest rate hikes of just fractions of a percentage point can add hundreds of dollars to monthly mortgage payments. Over the life of a 30-year loan, it can add tens of thousands of dollars.

Here’s what’s going on: Mortgage interest rates went up from 3.90% a year ago to 4.81% as of last week. That seemingly small 0.91% increase made mortgage payments $127 a month more expensive on median-priced homes of $295,000. It adds extra payments totaling $45,540 over the life of a 30-year fixed-rate mortgage, assuming that the buyers put 20% down. And of course, the more expensive the property, the more new homeowners will be forking over.

This is having an impact, real estate experts say. These increases are forcing some buyers to purchase cheaper, smaller homes and fixer-uppers in less sought-after locales. And it’s led many aspiring homeowners to go into standby mode—waiting to see whether prices will drop to make the whole thing more financially viable. With less competition come fewer bidding wars, and more inventory that isn’t being snatched up within an hour of the “For Sale” sign going up in the front yard.

Borrowers are facing a little “sticker shock,” says Julie Aragon, a mortgage broker at Julie Aragon Lending Team in Santa Monica, CA, who works with buyers from San Diego, No. 5 on our list, and Oxnard, CA, No. 6. “They just don’t realize how much [rates] went up. Even an eighth to a quarter of a percentage point increase is going to make a big impact.”

That’s particularly true in high-priced areas like the Southern California city of San Diego, where the median price of $659,400 is more than double the national figure.

“I’ve seen people lose $50,000 in purchasing power,” Aragon says. And that’s giving buyers pause.

Higher rates are also stymieing move-up buyers who want to trade their starter homes for larger, nicer homes, but are reluctant to give up their existing low mortgage rates to do so, says Ted Wilson of Residential Strategies, a housing consultant based in the Dallas area.

The reality is that rates are still low compared to previous decades, when double-digit rates weren’t uncommon.

“Folks have been used to a world of dirt-cheap mortgage rates,” says Freddie Mac’s Kiefer. “We’re moving to a world where rates are more in line with what we’d expect to see over the long term.”

2. Prices just got too damn high

Fact is, prices can’t increase at record levels forever. And we may have finally hit an inflection point in many bellwether markets.   

“To some degree, the markets that went up the most and the fastest just pushed too hard [in prices],” says Patrick Carlisle, chief market analyst for Silicon Valley and the Bay Area at the real estate company Compass. “Over the summer, it was like something cracked, and people said ‘I can’t do this anymore.'”

In Silicon Valley’s San Jose metro area, No. 2 in our rankings, prices shot up a whopping 22.2% from 2016 to 2017. And this was already one of the nation’s most expensive places to live. But even hefty tech salaries can only stretch so far.

Add in those higher mortgage rates, and “that’s a whole lot more money that someone is going to have to spend to pay their monthly mortgage on a 1,500-square-foot, three-bedroom, two-bathroom ranch house that suddenly costs $2 million,” says Carlisle.

So is it any big surprise that about 36.8% of San Jose-area sellers have had to slash prices on their homes in the last year?

President Donald Trump‘s tax changes have also hit Silicon Valley and the Bay Area hard. (San Francisco comes in at No. 3 on our list.) Homeowners can now only deduct from their taxes mortgage interest on loans of up to $750,000, down from $1 million. This isn’t just a rich person’s problem—it’s hard to find even a modest starter home for less than $1 million in this region.

Then add in a new $10,000 cap on property and either sales or income taxes. Suddenly, owning a home is a whole lot more expensive.

The entire West Coast, long the growth capital of the United States, is showing signs of being overheated. “For everyone, there’s a maximum to what they can pay,” says Annie Radecki, senior manager at John Burns Real Estate Consulting, who covers Seattle and Portland.

3. Sellers want to cash in while they can—leading to more homes for sale

More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. And that has led to a relative glut of available homes—more than even the hottest markets can easily absorb.

“There’s a perception [among owners] that the market has had a good run and maybe it’s time to cash in,” says Honolulu broker Krischke. “The good times have to end.”

In Stockton, CA, which came in first in our slowdown rankings, price drops are common because sellers shot too high, says local agent Jerry Patterson of Cornerstone Real Estate Group. This is a city that has long been plagued by crime and poverty. But its location, about an hour and a half northeast of Silicon Valley and close to the vineyards in Lodi, CA, gave it a boost in recent years, with annual prices rising 8.2% last year and 14.3% in the prior year.

But with more homes for sale and less competition for them, “buyers are now in a bit more of a power position,” Patterson says. “[They’re] able to flex their muscles a little bit more.”

And sellers are learning the hard way that the danger of pricing their homes too high is that they can wind up stagnating on the market. “They’re entering what we call the ‘sludge,'” says Nashville real estate broker Brian Copeland, of Doorbell Real Estate. “There’s nothing wrong with their house. But that price becomes a stigma.”

4. New construction booms benefit buyers—but slow down sales

New construction in certain markets has given buyers more options—but developers may have overshot their goals, often to accommodate corporate growth. Just look at Nashville, TN, No. 4 on our list, where a new Amazon center is slated for location, and Dallas, No. 8, which has added more than 500,000 jobs in the last decade. About a third of Nashville-area home listings on realtor.com® and a quarter of Dallas-area listings are for brand-new homes.

In Dallas, “There’s more inventory than there is demand,” says Dallas-area Realtor Dee Evans of Ebby Halliday Realtors. But she’s beginning to see the pace of new construction slowing, and those extra units are being absorbed by buyers. “Hopefully, the builders will be smart about putting less new stuff up.”

* A metropolitan statistical area is a designation that includes the urban core of a city and the surrounding smaller towns and cities.

* Lance Lambert ran the data analysis on which this story is based.

Bay Area home sales slow, with few bargains in sight

By Louis Hansen, East Bay Times, November 30, 2018

Bay Area home sales ground down in October, with seasonal slowing and further indications that buyers are taking a wait-and-see approach before plunging into a record-setting market.

Home sales in the region dipped 4 percent from the same time last year, with more buyers sitting on the sidelines in Santa Clara, Alameda and Contra Costa counties, according to a monthly report released Friday by real estate data firm CoreLogic.

The median sale price in October for existing homes in the nine county region rose 6.9 percent over the previous year to $860,750. Real estate watchers say that is a strong showing in any normal market — but it’s the slowest rate of growth in the Bay Area in more than a year.

CoreLogic analyst Andrew LePage said price growth has slowed as buyers pulled back from sky high price tags. “There’s been a psychological shift in the market,” he said. “It can only go up, up and away for so long.”

Shoppers might find better deals in the next few months, but available homes and interest rates will influence the market. “The bad news for buyers is mortgage rates,” LePage said. “They’re facing a significantly higher monthly payment.”

Interest rates in the last year have ticked up nearly 1 percentage point, to 4.8 percent, on a standard, fixed-rate 30 year mortgage, according to Freddie Mac.

The real estate market continues to reward long-time homeowners with huge gains in property values, even as newcomers and first-time buyers are increasingly reluctant to drain their life savings and sign for big mortgages.

Median sale prices have climbed, year-over-year, every month since April 2012, a record-setting streak.

Gains in median sale prices around the Bay Area counties slowed from their scorching pace, with existing homes in Santa Clara rising 6.7 percent to $1.2 million, San Mateo jumping 8 percent to $1.45 million, Alameda climbing 5.7 percent to $861,000, Contra Costa increasing 3.4 percent to $600,000, and San Francisco rising 5.3 percent to a region-high $1.5 million.

Homes sales in October were the lowest for the month since 2011. Overall sales in Bay Area counties have dipped, year-over-year, for the last five months. Contra Costa sales slipped 10 percent, Santa Clara fell 8 percent, and Alameda dropped 9.4 percent, while San Mateo remained flat.

Local agents report less interest in open houses and more sellers forced to lower prices. Price cuts and longer sale times have become more typical, but most agents are unwilling to yet call it a buyer’s market. Home inventory, while growing, is still historically low, and the strong local economy continues to add new jobs and attract workers from around the globe.

“We’re at a point now where I think salaries just can’t keep up with home prices,” said Tim Ambrose, agent with Berkshire Hathaway and president of the Bay East Association of Realtors. “Buyers just can’t go that high any more.”

Buyers are less active during the holiday season, he said, but sellers are typically motivated if they are selling in November and December. “The market is changing,” Ambrose said. “I’m noticing it throughout the Bay Area.”

San Jose agent Jeff Hansen said the market for condos has cooled in recent months. Identical units are fetching less than they did in the summer peak. But Hansen added, “It’s not a horrible time to be selling. It’s still a seller’s market.”

Will Doerlich of Realty One Group in San Ramon said buyers are finding more choices in the East Bay, and homes are staying on the market longer. The sweet spot remains between $550,000 to $900,000 for most families, he said.

He added that concerns about future interest rate hikes “got some people off the fence.”

Mark Wong of Alain Pinel in Saratoga had a seller negotiate with a low-ball offer and reach a deal that satisfied both parties. But he said it’s not quite a buyer’s market. “The prices haven’t come down yet,” Wong said. “Not yet.”

LePage said the slow pace of sales could have been worse. The region was buoyed by transactions in Sonoma and Napa counties, which bounced back from devastating fires in 2017.

Homes in the middle and high-end of the market are moving more briskly, LePage said. About 8 in 10 homes in the Bay Area sold for more than $500,000.

Bargain hunters and first-time buyers stayed away, with sales of homes under $800,000 dropping 16 percent and under $500,000 dropping 21 percent, according to the company.

Tech wreck, worker shortage could slow California economy, report says

Kathleen Pender, San Francisco Chronicle, Dec. 5, 2018 

California’s economy is likely to slow next year, along with the rest of the nation’s, in part because it’s running out of workers, economists at UCLA said in their annual forecast for the state and nation, released Wednesday.

A further drop in the tech-heavy Nasdaq index could exacerbate the slowdown if it causes a decline in funding for tech companies, the authors said, noting that “employment in the tech industry has been one of the keys to the growth in California, particularly in the Bay Area.”

Nationally, growth “will gradually taper off in all of the major sectors of the economy,” the report said. “The economy is in the process of downshifting from the 3 percent growth in real GDP this year to 2 percent in 2019 and 1 percent in 2020. At full employment, 3 percent growth is not sustainable,” the Anderson Forecast said.

“With the Fed tightening, trade tensions rising, the impact of the fiscal stimulus coming from tax cuts and spending increase waning, financial markets will likely experience increased turbulence. Over-leverage in the corporate sector represents the major financial risk to the economy. Nevertheless, Main Street will likely experience higher real wages coming from a very tight labor market, as evidenced by a 3.5 percent unemployment rate. Thus, a good year for Main Street and choppy year for Wall Street.”

In California, nonfarm payroll employment in October was up 1.8 percent from October 2017, slightly higher than the previous year’s growth rate.

The growth in those jobs continues to be dominated by health care, leisure and hospitality, “reflecting the demand of aging and retiring baby-boomer Californians,” the report said. “However, the spurt in payroll jobs in the past three months was driven by professional, technical and scientific services,” which is heavily tech oriented. “On a percentage basis this sector is the fastest growing in the state. One of the risks to continued robust growth in the state is from a drying up of funding for this and other tech sectors,” it said.

The authors noted that tech funding is closely related to the Nasdaq exchange because rising stock prices let venture investors cash out and roll their money into new startups. Also, valuations of tech companies depend on the prevailing price-earnings ratios for tech stocks. The lower the Nasdaq, “the more difficult it will be for start-ups to obtain venture capital.”

After a 3.8 percent drop in the Nasdaq Tuesday, the index is still ahead 3.7 percent year to date.

The Nasdaq “is clearly not the only factor affecting Bay Area employment,” the report said. The Bay Area housing shortage and continued full employment “are contributory and possibly dominant factors.”

“However, venture capital and other start-up funding … has the greatest potential for dramatic swings,” it said.

That forecast calls for California’s average unemployment rate to rise slightly to an average of 4.5 percent in 2020, a rate that is consistent with full employment. “In part this is due to running out of workers. Though we expect positive net migration as well as natural population growth, it will not be enough to stem the trend of slowing job growth. Nevertheless, 2019 ought to see faster job growth in California than in the US as a whole.”

Well, this is new: Price cuts on Bay Area homes are surging

Kathleen Pender, San Francisco Chronicle, November 17, 2018 

They’re not exactly doorbuster deals, but Bay Area home sellers are cutting their asking prices at the highest rate in years.

October is typically a big month for price reductions, as sellers try to close deals before the market slows way down between Thanksgiving and early February. But the number and percentage of homes with a price cut surged last month to their highest level for the month of October since at least 2012 in the Bay Area and 2011 statewide.

The jump in price cuts, which hit every Bay Area county, is another sign that after years of stratospheric increases, prices are leveling off and buyers are gaining a little more power in what had been a strong seller’s market.

Price cuts are a leading indicator because they are reflected immediately, said Patrick Carlisle, chief market analyst with the Compass real estate brokerage.

Although Bay Area home prices are still going up on a yearly basis, home sales, median prices and days on the market are considered lagging indicators because it can take a month or longer for deals to close.

In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.

That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.

“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.

He just cut the price on an 1,832-square-foot Victorian condo in popular Hayes Valley by $100,000. He listed the Page Street home in mid-October at just under $1.7 million, which was realistic considering it has three bedrooms, parking and a laundry porch and is “absolutely adorable,” he said.

But the buyers didn’t come.

“In October, we saw more inventory come on the market. The economics of the Bay Area haven’t really changed,” Bennett said. But “if you don’t have people beating down your door after two to three weeks,” it’s time to consider a price change.

He has another listing right around the corner, a one-bedroom single-family home on Lily Street, that he listed two weeks ago at $1.125 million. Within a week, it had a “preemptive” offer and the sale is now pending. Single-family homes are still a hot commodity in San Francisco.

Another condo just down Page Street from his listing also had a $100,000 price cut. It sold in February for about $1.4 million and went on the market again at $1.395 million in early October. Now it’s listed at $1.295 million, below its last sales price. “That is a good indication of how the market has shifted,” Bennett said.

C.A.R. October Home and Price Report

CAR 2019 Forecast – Selected Slides

2019 Predictions: Worsening Affordability, Commutes, Natural Disaster Losses

By Aaron Terrazas, Zillow, on Nov. 28, 2018

Rising mortgage rates will set the scene for the housing market in 2019. They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Even current homeowners could start to feel locked into their mortgage rates.

Here’s a snapshot of what’s in our crystal ball:

Mortgage affordability takes a hit

Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing. That will change in 2019, as the 30-year, fixed rate mortgage reaches 5.8 percent – territory not seen since the dark days of 2008, when rates were racing downward in response to the housing crisis. In 2019, rising rates will compound the effect of still-climbing home values, making homeownership even less affordable. Already, rising mortgage payments eclipse home-value gains, a phenomenon that can both encourage homeowners to stay put – to hold onto low mortgage rates that are disappearing in the rear-view mirror – and discourage would-be first-time home buyers.

Rents reverse course

Although rising mortgage rates will affect home buyers first, renters will not be far behind. As higher rates limit the number of homes that potential buyers can afford, some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rentwill reverse and turn positive again. The shift will be muted, however, by continued steady investment in apartment construction, which will prevent rent growth from shooting too far above income growth. In the third quarter 2018, the U.S. median rent cost 28.2 percent of the U.S. median income – considerably higher than the 25.8 percent renters paid historically.

Commutes get worse

Job creation has been concentrated in urban cores, and so has the affordability crisis – a phenomenon that’s increasingly pushed people to nest and grow their families in the suburbs. The disconnect between urban jobs and suburban residents will continue in 2019 and contribute to longer, more crowded commutes. This may be especially daunting for people in markets where living within their means already requires lengthy travel times: A home in central Boston, for example, is valued 303 percent more per square foot than a typical outlying home, while the premium for homes in central Washington, D.C., compared to outlying areas is 218 percent per square foot. Politicians in Washington, D.C. and state capitals around the country are talking up new infrastructure investments, but some may be too little too late given rising construction costs and planning delays.

Amazon HQ2 ‘losers’ see a boost

Spurred by the possibility of attracting tens of thousands of jobs from online retail giant Amazon, some areas that lost their headquarters bids to suburban New York and Washington, D.C., nevertheless got in touch with their inner can-do – and that will pay off.

Shortly before Amazon made its big announcement, Chicago debuted its “P33” initiative, aimed at becoming a tech hot spot by the city’s bicentennial in 2033. It’s been dubbed the “Burnham plan for Chicago’s tech future,” a reference to Daniel Burnham, whose 1900 attempt to create “Paris on the Prairie” both beautified the city and made it a force in urban planning.

Former Amazon HQ2 contender Atlanta already has seen some action since it was passed over by the Prime vendor: Convoy, a much smaller Seattle-based company, is opening its East Coast office there. Norfolk Southern may relocate its headquarters there from the city for which it is named, Norfolk, Va.

While New York and D.C. weigh what Amazon’s arrival means for them, could even Tucson could find a taker for its 21-foot saguaro cactus?

Natural disasters claim a record number of homes

This prediction for 2019 is a logical extension of what’s already been happening: About 15,000 homes were destroyed by wildfires in California alone in 2018 – including at least one entire town in what used to be the “off” season – and many others by storms along the gulf coast.

As the frequency and magnitude of natural disasters continues to escalate, builders and developers will focus on preventative and/or protected building materials and designs. While in the past, builders have returned quickly in the aftermath of natural disasters – typically building nicer and more expensive homes than before – that may not be the case going forward. Building costs are on the rise, and insurers are increasingly reluctant to offer policies in danger zones (or are charging higher premiums to do so) – both of which could translate into slower and costlier rebuilding.

Flood losses are growing as well, and projections for homes inundated by rising sea levels and storm surges over the course of a typical 30-year mortgage begun in 2020 are not encouraging.

Home value growth slows

One mitigating effect to rising mortgage rates will be slower home value growth. In October, home values were up 7.7 percent from a year earlier, to a U.S. median of $221,500. Zillow forecasts growth of 6.4 percent from October 2018 to October 2019; a Zillow survey of housing experts and economists anticipates a 3.79 percent increase for calendar 2019. Both forecasts indicate cooling from red-hot growth of 8 percent in March of this year.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net