2016 4Q MARKET UPDATE – Presidential Election Edition
It’s almost over – we can almost kiss this presidential election cycle goodbye, but how will the nastiness and result impact housing nationwide and locally in our market in Orange County, California? Well, first let’s start off with discussing how the market is performing today.
In the start of the third quarter, Orange County Inventory dropped as buyer demand remains seasonally strong. Currently, it is still a bit more of a seller’s market with well priced homes moving rather quickly, however, buyers have been discerning and are seemingly unwilling to jump at homes that are priced marginally higher than the last best comparable sale.
Market Sale activity is significantly higher this October than each of the previous 3 years.
Sellers Look to regroup in the Spring
There have been quite a few properties expiring unsold and sellers have been electing to keep them off of the market for the fall/winter months. In today’s market, it is important to price properties very close to their previous closing price as buyers seem unwilling to pay too much more than the last closed comparable. The drop in inventory actually could be predicting a glut of inventory in the spring, so selling now and locking in the sale before the uncertainty of interest rates and the election outcome is a reasonable strategy.
More homes expired and were not relisted than almost any time in the last 3 years.
Interest Rate Rise Looming?
Interest rates remain in threatening territory as the multi-year interest rate lows rolls on in seemingly endless fashion, but shows signs of finally reversing. The trend seems to be nearing a breakout higher- as you can see from the chart below. If rates advance through the top drawn line, then they could easily revisit the highs of last year and possibly exceed them. Of course rising rates put a chill on home prices as buyers payments go up with the higher interest rates and as a result fewer buyers qualify to buy at higher prices.
Interest rates appear to have put in a bottom and are rising
Presidential Elections Historically make buyers slightly nervous
According to an economic study published in the British Journal of Political Science, elections cause a decline in the number of home sales as well as a slight price decrease. The decline is greater in tight elections where there is increased uncertainty. This change can be compared to the effect of other market factors, such as growth in per capita income.
Candidate victories could predict the path of rates. Donald Trump has been an unpredictable candidate (understatement of the year), but the financial markets get jittery with the unknown and a Trump victory would likely find many investors selling stocks and fleeing for the safety of bonds, which would drive down interest rates. Hillary Clinton is seen as an extension of the current administration, which has produced some of the best returns for shareholders in decades. A Clinton victory will likely be seen as a business as usual result and result in an increase in interest rates. So, Trump may actually be better for the Real Estate Market as a whole, assuming that he doesn’t put change in motion that hurts the overall economy.
So overall, this uncertainty seems to cause a slight decline in the number of buyers and a slight price regression, but overall, the local market statistics seem to indicate that for the near term, prices are fairly stable and will remain stagnant until the spring where we will have to re-examine interest rates and post-election consumer confidence to see what will shape up for summer 2017.
Thinking of making a move? Let's examine your options and see if it makes sense to buy or sell now or to wait until the spring. Call me today to discuss your situation.
Christine DiCarlo - (949)433-4372