National Real Estate Market Update

Courtesy of Wells Fargo:

RETURN OF THE AFFORDABILITY MIGRATION

“While the return to the center cities appears to be a shift with staying power, the housing market looks to be shifting back towards some of its long-term norms. For starters, most millennials have always lived in the suburbs, so the aging-up of the group into their peak family-formation years should boost first-time home buying, even if we do not see a shift back toward the suburbs. We expect to see demand shift back toward the suburbs, however, as housing costs in and near most center cities have dramatically outpaced incomes. There is also simply less land to be developed and redeveloped in areas closer-in to center cities, particularly relative to the overall population and overall demand for housing.

The return of the affordability migration is already evident in many of the areas that came of age during the era of automobiles and interstate highways. Los Angeles is one of the best examples. The early part of the economic recovery was largely concentrated in areas close to downtown Los Angeles, which has seen one of the most dramatic makeovers in recent memory, with thousands of new apartments, hotels, restaurants and entertainment venues. Residential development also increased in other close-in areas, including Santa Monica, Venice Beach and much of West Los Angeles. By contrast, demand for housing in inland areas has been slower to come back on-track. The momentum now appears to be shifting back toward the suburbs. Population and employment growth in the Inland Empire has surged over the past year and permits for single-family homes have risen 34 percent. Residential development is also perking up in Ventura County and plans appear to finally be falling in place to bring thousands of new homes to Newhall Ranch located in Santa Clarita, in the northern edge of Los Angeles County. Development is also returning to the suburbs in other historically suburban-driven markets that saw a renaissance in their urban and in-town areas earlier in the decade, including Dallas, Atlanta, Phoenix and Washington, D.C.

With preliminary data now available through September, we have a pretty good idea of where home sales and housing starts will finish 2017. Sales of new homes are expected to rise 8.7 percent, while sales of existing homes rise 0.4 percent. The median price of an existing home is expected to rise 5.3 percent, while the price of new homes should rise a smaller 2.7 percent. The smaller rise in new home prices reflects the shift in construction toward more lower-priced homes, largely in suburban areas in the South and West.”

Please click here to read the full report from Wells Fargo