As the year draws to a close, we’ll take a look back at our 2015 market predictions and assess how accurate they turned out to be. First, let’s set the stage by reviewing the market data for November.
In San Mateo County, sales volume increased 7.8% on a year-over-year basis in November, while decreasing 8.6% on a month-over-month basis as compared to October. The inventory supply was at 1.1 months in November, compared to 1.2 last year at this time and 1.3 in October.
In the spirit of transparency and accountability, let’s review the predictions for 2015 that we made a year ago in the December 2014 version of this newsletter:
Prediction #1 – Sellers’ Market Rolls On in 2015
“The supply of inventory will remain tight, giving sellers the upper hand as buyers compete for a limited supply of move-in ready, market priced listings. Inventory levels will remain well below the six-month benchmark that divides a sellers’ market from a buyers’ market.”
Reality – Inventory has been tight in 2015. We started the year at 1.7 months of supply in San Mateo County. In March, the supply fell to 1.1 month as sales quickly outpaced new listings, and has hovered around 1.0-1.1 months all year with a slight uptick at the end of the summer to the 1.3-1.4 range, and back down again in the late fall.
So it’s the same story as 2014 – a lack of good listings continues to hold back sales and put upward pressure on prices. The market continues to favor sellers in almost all price categories and geographies, although some luxury markets are beginning to shift toward favoring buyers.
Grade: A This prediction was spot on.
Prediction #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 flat to modest increases, in the 0% to 5% range, in the volume of real estate sold in 2015 compared to 2014.”
Reality – Through the end of November, sales volume across San Mateo County actually decreased slightly by 2.1% compared to 2014, lower than the 0% to 5% increase we predicted.
According to the U.S. Bureau of Labor Statistics, the unemployment rate in the nation remained unchanged in October at 5.0% as compared to a year ago. California’s unemployment rate was slightly higher at 5.8% while San Mateo County was at an impressively low 3.2% in October. The year-over-year change shows an increase of 463,000 jobs (up 2.9%). A year ago, many were predicting that the slow down in the oil and gas sector would cause our housing market to fall, or even crash. However, as we predicted, strong home buyer demand continued to drive the housing market. Unfortunately, the limited supply of inventory has had more of an impact on the overall sales volume than we were expecting.
Grade: B+ We were spot on about buyer demand but the inventory levels were a greater factor than anticipated.
Prediction #3 – Home Values Up 5% to 7%
“Looking ahead to 2015, price increases are accelerating and year-over-year appreciation rates are increasing, not moderating. 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…the conditions of low supply and high demand that drive up prices are firmly in place and more pronounced today than a year ago.”
Reality – Home values have increased 7.4% in California according to the latest Federal Housing Finance Agency (FHFA) report, while the Core Logic Home Price Index pegs San Mateo County appreciation at 6.3%.
Our prediction lined up nicely with that of the California Association of Realtors, which expected a 5.2% increase in median home prices. We felt that while home prices would continue to appreciate, the rate of that rise would moderate slightly from the year before. Many so-called experts were predicting much higher appreciation rates. Zillow, for example, predicted annual appreciation in the double-digits for 2015 in the major California metro areas.
A final note not to be overlooked- California home prices are at all time highs.
Grade: A This prediction was also spot on. Two out of three –not bad!
Our overall prediction for 2015 was “a strong real estate market.” And that’s what we got! As a result, we gladly accept a cumulative grade of A-minus for our 2015 predictions.
Next month, we’ll make our market predictions for 2016. Sneak peek – a healthy, but more balanced market.
In the mean time, I hope you and yours have a wonderful Holiday Season!