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| More rates and news from It Looks To Be A Slow, Slow Rebuilding Process In California
(The fate of the housing market depends on a variety of factors.)
The end result of whether it is a buyer’s or seller’s market is obviously determined by housing affordability and demand. But how the affordability and demand is generated underlines what the end result will be.
There are numerous positive and negative economic forecasts that smudged print and television new sources with estimated guesses of what they think is going to happen to the housing market in a week, a month and in the next year. But without having an understanding of the underlying basics what they are currently representing, all forecasts have little merit.
It may sound a little crude but if you look back at the most recent real estate and housing patterns, you will see that California is the one state that seems to be ahead of rest in determining the market, whether positive or negative. California was the state that flourished the most during the boom and is now leading the way in the market’s decline. The article, “October housing production drops in California,” posted December 1, 2006 on Inman News, explains how the California housing industry is going to get a little worse before it gets better.
“The California Building Industry Association reported a 46.8 percent statewide drop in building permits issued for new single-family homes in October compared to the same month last year, and permits for the first 10 months of the year are down 30 percent compared to the same period last year.”
Let’s think about what that means. Building permits are required, well, to build properties. If permits are drastically declining that means that there will be less properties constructed in the coming year, which will relate to a lower amount of inventory.
Now, inventory has been a hot topic lately as California and the nation as a whole has had a surplus of it, stemming from the sudden end of the boom. As housing prices have begun to decline, consumer demand has begun to rise.
So, if there is a growing demand for less of an inventory, the market will begin to regain composure. Prices will rise as demand grows and inventory will diminish as these properties are bought. Eventually, demand will become great as the buyer’s market hits full steam that permits and construction will have to pick up business again. Sound familiar? A new boom could emerge.
But it will take time. It is a cycle that has been running its course throughout the U.S. for about a century.
“Robert Rivinius, CBIA president and CEO, said that builders will likely continue to reduce their standing inventory of unsold homes that are under construction or completed.”
“He noted that California is the second least affordable state in the nation, ‘with a limited supply of land and very high costs of government regulation and impact fees.’”
The housing market in California and the rest of the nation will get a little worse and then get much better. Once the market establishes its health, consumer confidence will fuel higher prices and more inventories. And the market will rebound as quickly as it fell.
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