Is It A Bad Time To Buy A House In Northern California?

10 reasons to buy a California home sooner rather than later

1. Bosses are hiring … Forget all the industry-centric immovable statistics that are debated too frequently. First and foremost, Real Estate is about "jobs! Employees! Employees! "And California continues to be a platform for job growth. Bosses statewide have added 4.2 million jobs in the five years through the first quarter of 2019 — No. 1 among the states. That adds up to California bosses growing their staffs by 32% in the period vs. 29% nationally. Unemployment? At record lows, nearing 4%. Dear house hunters, without a job there is no hunt.

2. Wages are up, too … Pay matters. And while not every newly created job creates cash flows from homebuying, lots of new opportunities come with better pay. The average weekly salaries for California in the first quarter of 2019 ran at an annual rate of $72,800 — No. 5 nationally. And that's up 21 percent over five years — easily beating 14 percent gains nationally, and the third-best increase among states. More jobs with more pay translate into greater purchasing power , especially in households with two breadwinners.

By Stacey Baca - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=12222368

3. Low, low rates are not forever … If you have the creditworthiness of a household to qualify, a record-breaking drop in mortgage rates — again below 4 percent — makes for historically cheap rent. And while we've seen this on-and-off in the last couple of years, don't assume it'll always be like this. Since 1971, when Freddie Mac started monitoring mortgage rates, a fixed-rate of less than 4 percent of the time was available for 30 years. And for those folks who are waiting to buy a potential price pullback, remember this: you'll need prices to drop by 11 percent to compensate for the monthly cost of a 1 percentage point rate jump.

4. Lenders are lending … When you can't get a mortgage, who cares about the terms and conditions! And while this is not the easy-money days of a decade ago, since the market collapse of the last decade, it is NOT like the tight-money age either. The yardstick of mortgage availability by the Urban Institute shows the willingness of borrowers to lend at its highest level since 2013 in the first quarter of 2019. Who will be keen to lend? Seek out non-traditional lenders or conventional banks that develop their portfolios of loans in-house.

5. Price appreciation is cooling … Yes, California home values are expensive and have risen 39% in five years vs. 33% nationally. Yet the eye-catching gains are elsewhere for those contemplating out-of-state purchases: 11 states top the five-year appreciation average for the Golden State, including popular destinations for ex-Californians. In five years, prices of Nevada rose 63 percent, then Idaho (60 percent) and the state of Washington (57 percent).

6. Multiple offers are also out of style … Bargains in California may be rare , especially at lower price points, but at least there is a certain supply to choose from. Note a slightly above-average inventory of existing homes on the market as of Oct. 3: 34,456 listings in broker networks for the counties of Los Angeles, Orange, Riverside, and San Bernardino, ReportsOnHousing reported. At this time of year since 2012, this is slightly above the average listing count of 33,882. Please note: new escrows are up 14 per cent a year, and some investors are seeing the demand turn.

7. It’s not build-it-and-they-will-come but … Nobody’s building like yesterday. And, yes, in the last five years, California builders have filed permits to build single-family homes at a rate that is half the historic production. Nonetheless, homebuilding is 85 percent higher than the low post-recession and has been running at the highest pace in 9 years. However, the builders have recently had trouble selling, particularly those fancy low-seven-figure models. Thus there are price cuts, freebies, and ready-to - move homes (ahem, unsold standing inventory).

8. Yes, we’re having a sale … It’s amazing what “normal” inventory does. It’s no longer a seller’s market, so house hunters have room to haggle. Ponder that, according to Zillow figures, five of the 11 major metro areas with the steepest price drop jumps this year are in the Golden State. Price-cut listings in the San Jose area soared 115 percent in a year; 67 percent in San Francisco; 31 percent in San Diego; 28 percent in Los Angeles and Orange counties; and 18 percent in the Inland Empire. And the "calling" price is just that: a wish list for the seller!

9. Thus, relative “affordability” … Still, think about an index from the California Association of Realtors that tries to replicate those conditions for first-time buyers. It showed theoretically "qualifying" 47 percent of households across the state to buy a starter home. Ignore the mathematical rationale and note that this "accessibility" figure is down from 73% in 2012 ... but who was willing to bet on housing just after the Great Recession when unemployment grew by 10% across the country? Compare the current readings of "accessibility" with pre-bubble conditions: 43 percent of "accessibility" was the standard in 2000-06. So history says, perhaps on an odd scale, these are not times that are unbelievably "unattainable."

10. And, finally, your landlord … California homeownership is neither risk-free, nor inexpensive. Yet it may give other guarantees of cash-flow which renting can not. According to the Consumer Price Index, rental costs in Los Angeles and Orange counties so far rose at the fastest pace in 14 years—5.5 percent — in 2019. In the counties of Riverside and San Bernardino it is just marginally better: up 4.3 percent. You need shelter. Wanna make a wealthy landlord, or take your shot at home-owned success?