Looking back at the first half of 2015, we find few surprises in how the market performed. This month, we will compare actual year-to-date market performance with our 2015 predictions and look ahead to what we can expect in the second half of the year. But first, a quick review of the June market data.
The volume of real estate sold across all Peninsula markets in June increased 11.1% compared to June of last year and was up 4.8% over May. The supply of inventory remained tight at 0.9 months, indicating a market that continues to favor sellers.
In Burlingame, the volume of real estate sold in June increased 20.5% on a year-over-year basis and was up 17% month-over-month. The supply of inventory is a scant 0.6 months, remaining at the lowest level in a decade.
Now let’s compare the actual year-to-date numbers through June with our predictions made at the outset of 2015. Our 2015 predictions:
#1. Sellers’ Market Rolls On
“Inventory levels will remain well below the six-month benchmark that divides a sellers’ market from a buyers’ market.”
Mid-Year Update: Unfortunately, this prediction has proven all too accurate. Even though many home owners have realized now is a great time to sell, not enough of them have listed their homes for sale to satisfy the demand of first-time buyers and relocators entering the market.
Looking ahead, inventory shortages may ease a bit in the second half of the year, moving into the 3 – 4 months of supply range. According to Fannie Mae’s June 2015 Housing Survey, the share of homeowners who believe now is a good time to sell has reached a new high. This sentiment should translate into more inventory, but there does not appear to be anything on the horizon that will significantly alter the imbalance between supply and demand, particularly at the lower price points.
#2. More Buyers Drive Up Demand
“Job growth and low interest rates will give consumers, especially first-time homebuyers, the confidence to enter the market. However, those buyers will have to compete for a limited supply of inventory, thwarting many from actually completing a purchase. The end result will be modest increases, in the 0% to 5% range, in the volume of real estate sold in 2015 compared to 2014.”
Mid-Year Update: Through the first half of 2015, the volume of real estate sold across all Peninsula markets is up 4.8%, which is on the higher end of our prediction but within the range anticipated.
Despite the inventory shortages, determined buyers are persevering, often making offers on two or three properties until they finally win. Undeterred by student loan debt, the millennials, America’s largest generation, are flooding into the housing market in a wave of first-time home buying bolstered by employment confidence, low interest rates, the comparative high cost of renting, and concerns that if you don’t get into the market now, you may be shut out for years.
In the second half of 2015, we expect monthly volume increases of 5% or higher to continue. The slight easing in our inventory shortage referenced above will “unstick” the market a bit and accelerate the pace of properties changing hands for a strong finish to the year.
#3. Home Values Up 6% to 9%
“We expect to see appreciation rates hover in the 5% to 7% range in 2015, with the distinct possibility that annual appreciation will approach 8-10% this spring before settling back down by year’s end.”
Mid-Year Update: According to the most recent Federal Housing Finance Agency (FHFA) report, California ranked #5 in the country with annual home price appreciation of 7.5%. The possibility of double-digit appreciation has become a reality.
As originally predicted, we still expect to see home price gains moderate a bit in the second half, settling back down to a 8% to 10% range, similar to the pattern we saw in 2014. That said, we could easily be underestimating the strength of this market, and finishing the year with appreciation of 10% to 12% would not be a huge surprise.
Overall, the second half of 2015 is looking quite strong. There are many opportunities and ways to participate in this market – for first-time buyers, downsizing sellers, investors, and move-up buyers/sellers. Please let me know if I can be of help to you or your friends. Here’s to a great second half of the year and a fun filled summer!