Laguna Board of Realtors’ President, Charles Brickell, shares his insights on the housing market in Laguna Beach for 2017.
Q: Have you started to see higher than normal rates for listings in January 2017?
A: No. In fact inventory is still low and the demand for homes is still very high. To be more specific, anything under $2 million is a very tight market in Laguna Beach.
Q: Yet it seems sales were down in 2016. Is it because sales prices are at an all time high?
A: If you look at the trend, the median home price for Laguna Beach was $1.64 million in 2007. In 2009 was the bottom of the market and the median price was $1.12 million. Then in 2012 we saw the market start to improve. In 2013 we saw a large increase in sales prices, which was true of all Orange County. The reason for this increase was low inventory coupled with low interest rates and a very high demand. It also corresponds with consumer confidence, which was increasing too. In 2015 and 2016 prices continued to increase modestly. The forecast for the rest of 2017 is that demand will remain constant while inventory continues to remain low.
Q: And when interest rates go up?
A: The increases are gradual, moving incrementally, no sharp ramp ups. You can generally tie the interest rates to the stock market. Typically, when the stock market goes up, interest rates move up and causes the 10-year bond to increase as well. What people need to realize, as the stock market improves so does the economy and all the numbers fall into place. Right now, consumer confidence is at an all-time high and interest rates are still low. Looking at the bigger picture, interest rates are not as low as they were in 2013. The highest interest rates were in 1981 when they topped at 21% while the average was 17-18%. Right now, the average is just over 4%. We haven’t had rates at this level since after WWII.
Q: Consumer confidence is at an all time high?
A: Everything looks good right now. The U.S. consumer confidence index is at 111. Anything over a 100 is considered good. At the depth of the recession, confidence was at around 60. The University of Michigan’s Consumer Sentiment Index in 2008 was 55. Today their index reflects 99. Both indexes, from bottom to top, indicate a 40% spread giving a good confirmation everything is indeed looking up. If you want to look at another indicator, in 2008 at the bottom of the recession 246 properties were sold in Laguna Beach. In 2016, 478 homes sold, almost doubled. This is not a peak number of homes sold, but a good healthy number. Everybody wants good news and here it is.
Q: Why does Laguna Beach continue to have a low inventory?
A: Right now Laguna Beach has a six-month supply of homes available, which is a low number for Laguna. There are a limited amount of homes in our city. And we have people who have been here for a long time because their cost basis is so low. The houses are now paid for and their property tax overall is low, so they continue to stay in their homes. And there are very few available lots in town to build a home. Currently there are only 32 lots for sale and only eight lots sold in 2016. Shortage of housing is not just confined to Laguna Beach. It’s everywhere.
Q: Where else?
A: Throughout OC the inventory of homes for sale is low. By comparison Laguna Niguel has only a two-month supply. Newport Beach has a four-month supply. Costa Mesa and Aliso Viejo only has a half-month supply. Irvine has a three-month supply. It doesn’t take long for the supply of homes in each city to get absorbed through purchases. It’s across the state as well. The Bay area, Los Angeles, Orange and San Diego counties all have low inventories.
Q: What is the cause for low inventory?
A: We have more people moving into the state than are moving out creating a negative supply of homes on the market. We are not building enough affordable homes to keep up with the demand. The choice becomes rent or purchase, with rental prices increasing due to the shortage of affordable homes to buy.
Q: How can we have such a shortage?
A: It is all about desirability. Orange County is becoming maxed out on its available land to build on. But this is not the only case. In Sacramento, there are still places to build, but builders are becoming very cautious. They learned from the ‘80s and ‘90s where they would build whole housing tracks at one time, which created less demand for housing. Now they build in small phases, releasing 20 to 30 homes at a time, keeping demand constant.
CONTACT INFO
Charles Brickell, President
Laguna Board of Realtors
939 Glenneyre Street
Laguna Beach, CA 92651
Office: (949) 497-2474
info@lbrealtors.com
By Gina Dostler
