The Malibu Life's Predictions for Real Estate in 2017
Selling a home in Malibu
My predictions for 2017, as well as overall real estate trends going forward, are the following: a) There is a large population of Sellers (the Baby Boomers - who are retiring and generally own their homes’ free and- clear), b) America’s largest population is comprised of the Millennials, and they are buying real estate.
Therefore, the Baby Boomers, who generally own their homes’ free-and- clear, which means they are cash rich, are selling, despite the state of the economy because they want to start the next phase of their lives and move closer to their children/grandchildren, they want to downsize their current residence, and most importantly they don’t have that much time on the “life clock”. After selling, they tend to be buying at least one residence, but in most cases I see them making at least two real estate purchases. First, they are buying a home either where their extended family live and/or nearby, and second, they are buying either a vacation place or a place for their Millennial offspring (many of whom cannot qualify or afford to purchase a home without the help of their parents).
Furthermore, the population who actually sold their home in 2016, yet didn't immediately buy something else, have rented a replacement home for a one year term, which means, until they decide what/where they want to go, the market will see another round of activity in late 2017 and early 2018.
Also, once the Millennial generation is able to save and purchase their own real estate, or inherit monies from their parents as the world ages, the need for real estate will continue to grow.
Lastly, not to get political, but Trump is our future, and for what it is worth, we all know he loves real estate - therefore, it is certainly a possibility that the government will continue to encourage Americans to buy a home and fulfill the American Dream.
What about land & new homes?
I see 2017 as a year that continues to see growth in new homes and construction as the economy and job market continue to strengthen and grow. With housing prices continuing to increase or hold steady, people looking to purchase land can now predict what the end product will be valued at much easier than they could a few years ago.
New product is not common in Malibu and it demands a premium. Developers are back in the market looking to build on spec. End users are also back in the market. Construction financing and land loans are now available again and clients that can not find a home in the style or standards they are used to turn to building their own.
There are beautiful and undiscovered areas of Malibu's canyons with affordable land for sale. In addition, there are prime beachfront opportunities such as our listing at 25360 Malibu Road where the owner has completed years in the planning process and is selling the property with development permits. No matter what or where a buyer is looking to build, there is still opportunity in Malibu. I see 2017 being a very strong year for land sales.
How might interest rates be affected?
Typically, we don’t see the Fed raising rates in an election year. That’s over now and we should see three anticipated Federal Reserve moves of .125 basis points each before the third quarter of 2017. The 30 year fixed mortgage will be pressured back in the mid 4% range. For banks, that’s good, as banks don’t like lending under 4.25% for various reason outside the scope of this outlook. With those rate increases we should see a small flurry of FTHB to high net worth buyers coming off the sidelines to not get priced out of the market in 2017, coupled with increased concerns of geopolitical events driving interest rate risk aversion.
Yes, the normal school of thought is that when rates go up prices come down, I know! But 2017, in my opinion, may be a further flight to hard assets year (being the Dow is at an all time high) for those who want to own property for diversification in our footprint. Foreign investment in the USA will continue from Europe due to Brexit, Chinese buyers should continue to buy as a safe haven diversification investment, along with other foreign investors trending prices higher.
Another 2017 concern that may come into play is building material inflation, especially if it is true a wall along our southern border will occur. We will see commodity price inflation and competition for those resources. So home construction costs will be higher in 2017 and should be passed onto buyers. Furthermore, the talk of tax reform in 2017, specific to the modification or elimination of mortgage interest deductions as seen in the “Better Way ” Blueprint House Republican plan is already being taken into considerations to buy or sell real estate by financial advisors. This could create a strong herd like motivation to secure a mortgage, buy a home or move to another in 2017 before that possible legislation as current mortgages in place may not be affected.
So I think home prices will trend higher in 2017 due to increased foreign investment, portfolio diversification, interest rate risk aversion concerns, commodity inflation, geopolitical risk and tax reform. We will see soon.
What does this mean for Buyers?
My predictions for 2017, from what I have seen on the buyer’s side of the market is that as the uncertainty of the Presidential election has started to wind down and interest rates have made a slight tick upward, the market is beginning to normalize. Even though it is still considered a “Seller’s Market” the ability to borrow money at record lows doesn’t seem to be going anywhere anytime soon. Also properties are staying on the market longer than they were in the summer or even the fall, and although multiple offer situations are still a norm, they are not as prevalent as they have been in the last year and a half.
Most first time buyers are either receiving help from family members who are either giving them the money to purchase their new home “free and clear,” or giving them the down payment to start their lives. With the uncertainty of the job market and the ability for Millennials to purchase homes, Baby Boomers are either downsizing or refinancing in order to help their children get a start on their lives.
How is technology changing things?
Technology is moving so fast and more and more people are getting comfortable with this. It is becoming easier to shop for homes without ever leaving the comfort of your couch. With most people having access to a smart phone or computer, 90% of home searches are started online, without even talking to an agent. You can find out pretty much all of the information about a home, get to know the local coffee shops in an area, see pictures, but sifting through all that data and actually making sense of it is where we come in. When you are serious about making an offer on a home this is where it becomes a process. Our jobs are to get you from the window shopper phase to sitting on the couch in your new home, as quickly and efficiently as possible, negotiating the best possible price and terms and making sure you are protected in all the paperwork along the way.
Trust and competence are the cornerstones of The Malibu Life's way of doing business. We want to make sure clients like us and trust us first and foremost, but also rest assured that we are competent and we know what we are doing. Having a powerful and robust client relationship management system such as PT, G-Suite from Google, Evernote and Realvolve ensures that none of our clients are neglected and the relationships remain strong. Forward thinking companies such as Docusign allow us to keep track of all the paperwork and make it super easy and convenient for clients to read, understand and execute documents that sometimes look scary and overwhelming.
First impressions are also key, Squarespace and Hootsuite allow us to make the very best first impression online and to stay connected with everyone via social media. The Malibu Life has a larger than average platform online, in print and on national television, which is great for our clients but also becomes much more important to stay connected and relevant in a fast paced world.