Real Estate Trends in 2018

According to Realtor.com, the following are some real estate trends we can expect in 2018:

  • Supply begins to catch up with demand: Analysts see a rise in construction of new homes in 2018 with the eventual result of a decrease in price appreciation. However, expect the higher end to be affected first.
  • More millennials to enter the market: For a variety of reasons – most predominately the crushing weight of student loans – most millennials have been unable to become homebuyers. However, due to rising income, advanced career development, and a strong economy, 2018 may be the year.
  • An increase in short term rentals: Short-term rental homes, such as vacation homes, should continue to increase in 2018.

Even Some at Google and Apple Can’t Afford to Buy

In an interesting twist, the same high-tech workers – engineers at Apple and Google – who are often blamed for the sky-high home prices in the first place – are now finding it difficult to buy a home within a 20-minute commuting distance from work.

For example, the median price of a home in Cupertino – Apple’s base – is $2.2 million. Homes within a 20-minute commuting distance have a median price of $1.2 million while the average software engineer’s salary is $188,000, which makes for 33 percent of monthly income, significantly higher than the recommended 28 percent.

Some companies such as Facebook and Google are looking to partly remedy the situation by backing the development of homes in Menlo Park and Mountain View, respectively.

Looking to Upgrade? Take a Look at the Outside First

We’ve all heard how kitchen and bathroom remodels bring the greatest return on investment. While this strategy is certain valid, there are other approaches to consider, especially if selling is the goal.

Don’t forget curbside appeal. Even before the potential buyers gets out of the car, first impressions are formed by the state of the landscaping. Updating the lawn and garden is a great place to start.

How about exterior improvements to the property? Is the siding old or fading? Can that wood fence use some repair? Does the deck need to be refinished?

When looking to upgrade, consider the outside first.

Home Seller Profits at a 10-Year High

The last quarter of 2107 saw home seller profits increase to $54,000, up from $47,133 a year before. This translates to a 29.7 percent return on a homeowner’s investment compared to the original purchase price, the highest return since 2007.

Not surprisingly, West Coast home sellers – and California in particular – saw the greatest return lead by San Jose (90.9% ROI) followed by San Francisco (73.3%), Merced, CA (64.6%), Seattle (64.4%), and Santa Cruz, CA (59.8%).

Finally, homeowners are holding on to their properties longer than ever. The average tenure of homes sold in the Q4 of 2017 was 8.18 years; the longest tenure since records were first tracked in 2000.

Concord Looks to Improve Affordable Housing

The City of Concord is planning to aggressively improve affordable housing by partnering on new projects and contributing subsidies to refurbish existing properties according to The East bay Times.

Over the next five years, Concord will increase its affordable housing fund from $9 million to $14 million in an effort to improve affordable housing from teachers, seniors and veterans. Developers have until March 1 to submit proposals to the city with a final decision due in April.

Moreover, the city will contribute between $75,000 to $100,000 per unit to refurbish between 140 to 160 units.

Apartment Development Slowing?

One of the nation’s and Bay Area’s largest apartment developers, Equity Residential, said recently that building new housing in major U.S. cities is becoming more difficult and predicts there will be fewer projects in the future.

According to Equity Residential, higher construction costs, the price of land, and less available financing are all responsible for the slowdown.

While prices in San Francisco remain high, softening rents and the city’s higher affordable requirements have slowed development. Oakland has actually seen more proposals in the last two years as costs are lower and approvals generally faster.

New Development: Targeting the Middle

The chronic shortage of housing in the Bay Area has left many developers focusing on one of two areas: luxury housing or low income housing. But what about the “great middle” – those who don’t make six figure incomes but can’t qualify for subsidized housing?

A group of developers in the Oakland area are focusing on just this demographic with an emphasis on “compact living”: units of 850 to 1000 square feet that can accommodate three to four people. These units will often include parking, gyms, and communal areas with an eye to keeping rents reasonably low and affordable.

Current plans call for a two bedroom unit in Oakland to rent for $2,950 per month – which is about the going rate for a studio in San Francisco.

Moving Out

The East Bay Times points out that moves out-of-state by the three largest moving companies in 2017 had the largest margin over arrivals in 11 years. Overall, the gap of 3,965 between outgoing and incoming was the second largest in the nation, behind only Illinois in 2017.

However, it should be pointed out that both exits and entrances by moving van are down considerably – by almost 40 percent – from the 2006 levels. Analysts explain this reflects the growing trend of all Americans to be be moving less as the population gets older and relocating is increasingly more expensive.

East Bay: Wrapping Up 2017

Not surprisingly the last quarter of 2017 in the East Bay housing market was a strong continuation of what had taken place during the preceding nine months. There were 6 percent more sales than in the previous final quarter in 2016; prices were up 10.2 percent and inventory was 2.6 percent higher.

The averages days on the market for homes in the East Bay was 23.

Moving forward into 2018 the prognosis is for more of the same, although the full effects of the recent tax reform policy remain to be seen.

Signs of Life: Check the Neighborhood

Home buying in an urban market can be a tricky business and Trulia has provided an excellent primer on what to look for n an up-and-coming neighborhood. Below are a few highlights:

  • Days on the Market: A steady decrease in the days homes are on the market is often a strong sign of a revitalized neighborhood, even before the prices actually increase.
  • Construction and remodeling: Are there new buildings going up and older ones being rehabbed? If so, this could be sign of a neighborhood coming back to life.
  • Organic grocery and other speciality stores: New restaurants, small boutiques, organic groceries and other speciality shops are strong signs that a neighborhood is changing and on the upswing.