Is 2018/2019 looking strong for the Sacramento housing market? Consensus is yes. It may be hurtling at top-speed toward peak San Franciscification as one report has it.
The US and California economies look good and with President Trump pushing for fair trade agreements, it can only produce more GDP growth, upward wage pressures and further reawakening of the American dream, long since abandoned in the last 11 years.
And even with NASDAQ and corporate tech threatened, Silicon Valley is still the lightning rod of the American revival.
Yet, there are other ways to view the Bay area outlook. Are peristent regulations, interest rates, or the natural tail end of the housing cycle harbingers of doom? Could Sacramento’s market collapse in a larger national or California housing crash?
Experts are torn in their predictions because there are so many conflicting factors affecting all US housing markets from Los Angeles and San Francisco to Boston and Florida. The rising prices are the result of higher demand and low housing availability almost everywhere.
Not in My Backyard Sentiment is Strong
And California is where the housing crisis is worst. Residents don’t want the inflation, immigration, higher taxes, congestion, pollution, water shortages, and crime that new developments might bring.
Some suggest these nationwide trends will drive all markets from 2018 to 2020 — the demand in Sacramento County was just delayed. Is Sacramento worth it? It seems the lower prices is all that matters to most, however this area has a warm charm and excellent climate that many residents could never think of letting go of.
Yuba City and Sutter County Real Estate
The desperation of Sacramento residents is pushing them north to Yuba City and Sutter County to find bargain houses for sale.
Lifestyle factors, lack of availability, and affordability issues will drive home sales in Yuba City, Sutter County and other towns outside of Sacramento, and it’s worth a look up north.
Buyers from San Francisco and the Bay Area are still eagerly checking out Sacramento for bargains themselves. Realtor.com reports only 2770 homes are for sale on the MLS in Sacramento, a county of 2.4 million people.
Sac was the fastest growing city in the nation last year with a growth rate of 1.4% which accounts to a whopping 33,000 new residents.
Zillow reports that 89% of homes in Sacramento increased in value whereas only 7.4% of homes decreased in value. The monthly rent index grew 8.2% in the last year showing rental income property investment and speculation may be adding to the price pressure. For renters, who seek relief from $4,000+ rents in San Francisco, the $1500 price tag in Sacramento is alluring.
Sacramento’s Affordable Homes Draw
The current average home price in the city is $323,000 while Elk Grove and Roseville are priced at averages of $421,000 and $438,000 respectively.
To someone cashing out of the market in San Francisco, even these rising prices are very attractive.
pic: sacramentohousingstats pic courtesy of Zillow.com
This excellent chart agove from Zillow reveals exceptional price growth in Citrus Heights, Elk Grove, Fair Oaks, Florin, Orangevale, and Sacramento. El Dorado Hills and Rocklin recorded the lowest rates of price growth.
Realtor.com rated Sacramento as the 5th hottest housing market in the nation in February 2018, up from 8th spot in January. 14 of the top 20 were California cities. And the forecast for the state of California remains hot, including San Diego, San Francisco, San Jose, and Los Angeles.
A report in the Mercury news shows demand for homes in Sacramento is coming from the Bay Area. One estimate is that 120,000 Sacramento residents work in the Bay Area. This makes this new mega region very attractive for all sorts of innovative living and working solutions.
“Each year, nearly 20,000 Bay Area residents are resettling in cities stretching from Davis to Sacramento and further east to the Sierra foothills, according to census data analyzed by the Greater Sacramento Economic Council.” – San Jose Mercury News
Home Prices 2017 in Sacramento County
This chart of home prices in Sacramento neighbourhoods, courtesy of Trulia, indicates those with the most intense demand from buyers. Take not of those in bold font below that have experienced the strongest price growth. Ask your realtor what are the keys to this jump in prices.
Year over Year Change
Upper Land Park
New Era Park
South Land Park
Tahoe Park East
Tahoe South Park
North Oak Park
College / Glen
North City Farms
Colonial Village North
Valley Hi / North Laguna
Ralley Industrial Park
Central Oak Park
South Oak Park
East Del Paso Heights
Golf Course Terrace
Del Paso Heights
RP Sports Compex
South City Farms
Sacramento County is one of the hottest housing markets in 2018. If you’re an investor, you have to take this market seriously. With home prices at one third of neighboring cities in the Bay Area and 300,000 new residents in 2017, within a strong economy, there’s opportunity.
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Toronto Real Estate Market Crash Overdue in 2018/2019?
When we begin counting the many reasons why and when the Toronto real estate estate market might implode, we might agree it is a possibility now. TREB’s market report next week will tell us if it’s already started.
Is the Big Toronto housing crash coming in 2018? Would it precede or follow a Toronto stock market crash? In this post we’re going to explore the crash factors, some of which are getting noisy. Check here if you’re looking for the latest US housing bubble report.
The Ontario government’s disturbing strategy now is now working within an economy on the downturn and a smaller tax base. Wynne is rightfully concerned about the TPP trade deal threat which holds little promise for Ontario manufacturing. With the US pulling auto manufacturing back into the US, our key industry is threatened.
Companies here are facing a rising loonie and looking longingly south at the low tax rates there. You can read the other reasons for a doom and gloom picture for the Toronto housing market below.
And with US President Donald Trump’s 2018 state of the union speech, it looks like the US is on its way to its biggest economic growth in history. Without the full benefits of NAFTA, the Canadian economic outlook is troubled, especially if oil prices rise only moderately, putting the economy in no mans land.
And for Ontario, the picture is less positive:
the TSX stock exchange is one of the worst performing in the world
the NAFTA deal may be cancelled or manfacturing exports down
the TPP deal would open up Ontario to cheap Asian competitors
the price of oil is rising and raising Ontario’s costs of doing business
real estate is very expensive
rent to income ratios are extremely high in GTA
interest rates are high
consumer debt is maxed out
the Ontario government is anti-business and anti-housing growth
Ontario’s taxes can’t generate enough money for infrastructure improvements
the CAD is rising and eroding Ontario’s competitive advantage
Canada has been near last in direct foreign investment for many years
US tax rates have plummeted giving companies reason to relocate there
cash strapped, stressed out Millennials will finally give up on the dangerous gamble of buying a home for $600k+
the Federal Government may raise the Capital gains tax
Are Canadians thinking crash?
From the Bank of Canada governor to expert authors, there’s a dull roar of people warning about a Toronto housing crash. Are they contibuting and pushing or is this just plain fact?
Now we’re into 2018, home sales are slow, sellers are definitely getting nervous, and younger buyers more frustrated. More worrisome is the recent troubles in the stock market, with the rising dollar and rising oil prices which just hit $66 per barrel.
The debate raged last year, but it looks like Douglas Porter (his most recent thoughts) might have it right for a 2018 forecast.
The Americans too are worried about a housing bubble in 2018, yet their economy is on a definite upswing. The amount of money being repatriated into the US (Apple bringing in $450 billion) is incredible. All that investment money is coming back home to create jobs in the US. Of course there will be a spillover into Canada.
Huge personal debt and a vulnerable economy combined with Millennial desperation and huge immigration growth are fueling some sort of event.
Everyone’s wondering what will start the avalanche. The election of the PC party in June could create the euphoria and optimism that will inflate prices severely next summer. There’s some risk in it, however the benefits will be tremendous for anyone in Ontario looking to buy their own home.
“This is either a pause in the bubble and inflation is going to resume into even more stratospheric levels, or this is the start of a hard landing,” said Hilliard MacBeth, portfolio manager at RichardsonGMP and author of “When the Bubble Bursts: Surviving the Canadian Real Estate Crash.”
Should you list and sell your house now? Will interest rates and inflation, and government policies lead to a catastrophic housing and economic collapse in Canada in 2018/2019? Could our prime minister mismanage the economy?
In the booming US, they’re asking similar questions about a housing market crash. That would make a Toronto market crash more plausible. Yet many see the market ready to boom. Very confusing, but let’s take a look at the Toronto market crash scenario first and see all the factors to consider before you buy or sell your home.
2018, 2019, 2002 or Beyond?
If it’s not a question of if the Toronto market crash might happen, then might a questio of when — 2018 or 2019? Or will the crash threat simply fade as demand for homes weakens? Lots of uncertainty and not much consensus.
There’s a list of the crash factors however if they line up in a certain squence, it might be enough to set the house of cards plummeting. Is the key crash factor financial, political, or would it be a sudden loss of consumer confidence in real estate and the Canadian economy?
Much of Canada’s prosperity comes via natural resources and trade with the US. Despite all the optimism, trade restrictions (Bombardier loss) by the US are no joke as are falling commodity prices. And if you were a bank, would you want to lend out billions to young first time home buyers in the face of an unstable government and economy?
I just read a story about a company that is ready to help buyers rent to buy so they don’t have to pay a downpayment in some cases. Is the same scenario we had in 2006 and 2007?
Provincial Governments and Drastic Actions
The Ontario Premier impulsively reacted with the foreign buyers tax which helped cool demand, but the crash may not be about the flame. It may be about the fundamentals of a Canadian economy which has the least direct foreign investment of any G20 country and a shaky trade deal with one country which seems to blocking imports of our wood and oil.
The Ontario, BC, and Canadian federal governments have been so negative, repressive, and unsupportive of the contribution of real estate to the economy, that those actions are the key to a disaster. Continued suppression of land development for housing is creating a true housing crisis.
1 million new immigrants are arriving in Canada by 2020, it’s sets the stage for desperate buying (the dreaded housing bubble) and bigger opportunities for rental property investors.
Some experts suggest a crash is impossible, while other expert predictions (from TD’s Bank President), support the theory that rising unemployment and rising mortgage rates would be needed to begin the landslide.
Canadians have one of highest per capita debt levels of any G7 nation. With the NAFTA deal in trouble, we could see those rise. So when someone asks “should I sell my house” in Toronto, the response depends on whether the government will change course and help in a massive housing development program.
What Causes Housing Bubbles to Form and then Burst?
What causes a housing market bubble? What factors could burst Toronto’s bubble and possibly send the economy into a skid? Most of those factors are listed below. The key is rocketing demand (like we saw in spring 2017) combined with intensive government meddling, during a time of economic prosperity.
The key may be market susceptibility, instability, caused by investor uncertainty. After a charged up price index, an event occurs that sends investors scurrying fast. It could be foreign investors or Canadian investors. Only if the economy suddenly loses its strength and people find themselves without jobs will they default and abandon their underwater mortgages, as they did during the US economic recesssion. When bank governors begin to use vague, waffling language, it creates the kind of uncertainty investors dislike.
Bank governor Poloz said that interest rates could move “in either direction.” He emphasized that the Canadian economy was still highly susceptible to shocks, and a cooling housing market combined with debt worries are still worthy of concern – from the Fool.ca
The lack of rentals is the “biggest pain point for our city,” With 100,000 people moving to the Toronto area annually, the region needs about 30,000 rental units. Toronto has about 1,500 coming on stream” from Toronto Star report.
If you’re thinking of selling your home to get in on this Toronto market winfall, you need to find a real estate agent. The market might not burst until 2018, but it could heat up badly in April, May and June to begin the freefall.
What exactly happens in a real estate market crash? Here’s one answer:
If a bubble were to burst, the real estate market would slow to a crawl. “You’d probably see very little transaction volume,” said University of British Columbia professor Thomas Davidoff. “People would be locked into their homes and their mortgages.”
In a crash, you couldn’t sell your home since buyers would just wait forever for the market to hit bottom and fewer could get financing to buy it.
Lots of questions to ask such as “is this just a monster luxury home problem?” If the market plummets, what will it mean if I have an underwater mortgage and can’t renew at higher mortgage rates? Are my relatives wise to buy right now? Will a crash have an effect on employment in the Toronto area? Consider this from a report on CBC:
1 in 10 wiped out by 20% correction — “A badly managed downturn in real estate prices could wipe out the wealth of a large number of Gen-Xers and Gen-Yers. We need to recognize that young families are the most likely group to be plunged underwater by a nasty housing correction,” said CCPA economist David Macdonald.
Sound scary? Then let’s take a real, no holds barred look at the real estate market in Toronto and the factors that could create a crash because our assumptions might be false.
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This report from the CBC tells us a lot about the whole business of forecasting crashes (and that they haven’t happened)
Prices keep rising. Bearish predictions that Canada’s housing market is about to crash, and calls for the government to cool hot markets, have been around for at least that long.
In fact, prices have risen steadily since the recession of the early 1990s and even the dip during the financial crisis of 2009 was a mild one. “Da Bears may some day be right, especially on the hottest markets, but getting the timing down is half the challenge,” Porter said. A Goldilocks market is not too hot, not too cold. But Canada’s housing market is running both hot, cold and lukewarm all at the same time. From http://www.cbc.ca/news/business/bmo-porter-housing-crash-1.3493809
Nostradamus and the Pundits
Some experts are calling for a housing crash in 2017, based on overheated prices, yet they don’t discuss what might be done to alleviate the problem in the Toronto region. The key issue for the Toronto real estate market, (as it is in the US market) is a lack of housing supply but there are other factors outline below. A host of government leaders have sought to crush land development and have quietly gotten away with their policies. But now the spotlight is aimed directly on them.
Could Premier Kathleen Wynne arrange to cancel the Places to Grow legislation and open up new land to ease home prices? Isn’t that a more sensible thing to do rather than providing more incentives for first time buyers who are up to their ears in consumer debt pondering a very high priced condo or house purchase? Is Kathleen Wynne is precipitating risk factor for a big housing crash in Toronto? Will interest rates rise so buyers would be less likely to bid on homes and condos?
Some would suggest that she and the Liberals are too ideologically driven to flex on that one. Yet Wynn’s approval rating is now below 20%. That is really low so easing up when the Federal government is crack down on mortgages doesn’t make a lot of sense. Her super low rating means Ontario doesn’t want her as Premier anymore and out of desperation facing years more in office, she could do something risky to seek approval. Wynne is a sell now factor.
More Foreign Investment Needed
The high demand for homes and property from foreign investors from China and the Middle East and the US, has been a wonderful thing for Ontario and Canada. If not for real estate, the world has no interest in investing in Canada. Foreign investment is at its lowest level in 60 years which means no one is going to save us.
Federal Justice minister Bill Morneau recently announced measures to cool the Toronto market, however experts feel the Feds can’t do much, in fact the Feds have said that themselves. They believe the provinces should be managing their own affairs. That brings it back to the Wynne government who has used risky, sudden measures. So when ministers start using words such as fragile, you’ve been given fair warning about a potential crash.
Justin Trudeau should be travelling and posing for cameras on the subject of why investing in Canada is wise. New free trade deals with ailing South American countries won’t work because we have nothing to export and they don’t buy our stuff. Without financing, the Ontario companies don’t stand a chance competing against well funded foreign firms. A low dollar and access to the US market is all we have.
If the 2018 Toronto Housing Market does Crash
If a housing crash is imminent, you’d be wise to unload your property now during the winter. Is 10 or 20 thousand dollars worth missing out on the greatest real estate cashout of all time? Up or down market, a wise person would answer the question of “Should I sell my home now” is in the affirmative.
Toronto Housing Market Crash Factors
What are the economic and real estate market factors that affect your selling decision?
strength of the US economy
GTA economy and employment starts to fall
Canadian consumer debt reaching lmits
NAFTA agreeement conflicts and refusals
US restrictions on imports from Mexico and China begin to topple their housing markets
immigration levels drop off
add on taxation by Ontario, city and Toronto governments
soaring home prices fall
moderate new home construction – abandoned security deposits
government meddling with property use
mortgage rates rising faster
number of millennials buying homes drops or house prices are out of reach
Wynn and Trudeau don’t have a handle on the economy
political pressure to keep home prices up to protect homeowner’s equity and credit situations
What the Heck Happened in Vancouver?
The booming Vancouver real Estate market plunged not long after the foreign buyers tax was implemented. That hurt speculators and Asian buyers who were finding a way to invest in Canada. It was good for BC renters, but not good for Vancouver. Foreign investors will have lost some trust in the BC government. These sorts of radical taxes and regulations don’t go over well with investors.
Unfortunately, the pain of high rents and no vacancies was too much for the Vancouverites to to bear and they pushed the tax through. The Asian money soon transfered to Los Angeles and Seattle where potential is so high.
Will the bubble burst in Toronto soon? A lot of buyers and sellers and mortgage lenders are struggling with that question.
Kathleen Wynn and John Tory aren’t talking about the crash possibility and the various mayors in Vaughan, Richmond Hill, Aurora Newmarket etc aren’t saying much either. They’re enjoying the tax haul, but they realize Canadian consumer debt is a huge matter. If mortgage rates and unemployment rise, we’ve got a crash type situation on our hands.
With high home prices come new home construction and if you’ve been to Aurora Newmarket, Bradford and King township lately you’ve seen the huge growth in new communities. But the demand far outstrips supply. The fact is Toronto is a hot market and prices aren’t slowing.
If the past does tell us anything, it tells us we’ll probably make the same mistakes again about forecasting crashes and bubble downturns. If we look at Toronto home prices over the past 60 years, we’ll see that they’ve just kept rising. Even the great recession cause only a small blip and the US recession of 2007 didn’t even leave a dent. As long as there’s a lack of development land, the price will speed up like an angry commuter on Indy 400 (or 404 or 401) and inevitably crash.
The last thing we’re left with in pondering the possibility of a Toronto housing crash in 2017 is what starts an avalanche? Is a stock market crash in 2019 a possibility that will affect your decision to buy?
A Laser Clear View of Toronto Housing — 2017 to 2018
Spring 2017 is almost here in Toronto, and tens of thousands of homebuyers will make the decision to buy a home. Yet buyers are confused, not because it may be a housing bubble, but because they can’t picture the value clearly, perhaps in numbers.
The question of whether to buy a home isn’t about seasons, and housing type, or even the neighbourhood. There’s more important factors to considers and you should weigh your pros and cons carefully.
But for some Toronto residents, do they even have a choice? We all have to live somewhere, and it doesn’t seem there’s enough homes to go around.
While Canada is suffering its worst ever performance in attracting foreign investment, foreign purchase of homes here has been high. Foreigners are desperate to park their money somewhere. With that, Vancouver, Kelowna, Toronto, Mississauga and even Montreal have seen their housing markets explode in price. Many of these properties sit idle and empty, waiting for a quick flip.
Yet our hyperactive housing market hides a big secret — our economy is not so hot. If not for the US revival occuring now, you’d have to say Canada’s future is very bleak — hence the lack of investment. Foreign investors are giving Canada a big thumbs down.
Vancouver Danger Signals
When BC applied its foreign buyers tax, it effectively killed the housing market in Vancouver. And with Toronto booming and its prices continuing a rocketing pace, will the Ontario government take similar action? While TREB might describe the market as balanced, it is a precarious, bubble like one where an irreversible slide might grow to a crash. Is this really a good time to invest in Toronto homes? Let’s look further.
The Key Role of Foreign Buyers in Toronto Real Estate
Foreign money may well be the key to Toronto Real Estate Market in recent years. Canadian investment in US property has fallen dramatically because of the sagging loonie, and perhaps due to new border restrictions expected by the Trump government. Canadians will now only be able to afford to buy in Canada. And many are selling their US properties to cash out their windfall. With that, they’ll likely be competing for GTA homes.
With the loonie so cheap against the US dollar, properties in Toronto, Mississauga, Oakville, and York Region look very inviting to Middle Eastern, Chinese and US buyers. Political and economic turmoil may well see foreign investors tune into Canada as a safe alternative to the US. Toronto real estate will be their first choice.
The Toronto Real Estate Board just reported another record month of sales on the Toronto MLS for January, and there is no sense or data to suggest condo and home prices won’t keep climbing.
8 Fundamentals of Rising Home Prices to Look for:
1. limited housing availability and people have to live somewhere
2. continued staunch refusal of homeowners to sell their properties
3. low mortgage rates rising only slightly
4. influx of foreign investment money from the Middle East, Russia, Germany and China
5. strong US economy set to spill over into Canada
6. high numbers of Millennials looking to buy their first home
7. condo rental prices are high with low availability meaning a sizble pool of potential buyers exists
8. immigation volume into Toronto is high thus soaking up rentals and creating more buyers from across the globe
The above fundamentals speak well of home prices in Toronto. As long as a US economic disaster doesn’t occur, the Toronto market looks okay. The question then becomes one of do you really want to buy vs rent? Can you afford repairs, taxes, and to commute to this location? Should you buy now so you can lock in at lower mortgage rates?
Worries on the Horizon
However, there is the negative side of the coin. Canadian debt loads are very high, bordering on crisis levels, and should interest rates rise, these same people may face foreclosure. If mortgage rates rise, few buyers will be able to buy at today’s prices. If prices are too high with a threat of a housing crash, fewer people will willingly take that big risk.
The biggest factor for a housing crash or continued growth comes from the US. The repatriation of jobs and business investment back into the United States is the biggest news story of the last 3 decades but there’s worries Canada might be shut out.
Note: Vancouver’s Market has Stopped Rising but Hasn’t Crashed
If the US can carve away at its monstrous trade imbalances and bring back the American middle class, the effects on American wealth will be dramatic. We’ve all seen what this wealth has created in Dubai, China, and Mexico. When all that wealth returns to the US, it will spill over into the Toronto Real Estate market.
The Canadian economy, particularly Toronto’s is intimately tied to with the US, both parties would be devastated by a break in trade. But Donald Trump may have little intention of alienating Canada, even with Justin Trudeau at its helm. The biggest threat we face is Donald Trump’s dislike of Justin Trudeau.
Trudeau’s lack of sympathy and joy for the great American revival will gnaw at Trump’s government. Canada may receive a weaker bilateral trade agreement, which Trudeau will have to negotiate. It could be much worse than the softwood trade has been.
The second biggest factor will be the lack of housing availability. Ontario’s governmental regulations on land development near Toronto is crippling growth. Its plan to intensify development in certain cities such as Markham, North York, and Mississauga will supercharge prices in those areas. Ontario’s high flying tax increases will further put upward pressure on house prices and make home ownership more costly.
Statscan reported job growth only in Ontario, with 20,000 new jobs. This followed on the heels of last month’s 74,000 new part time jobs. People working part time or with low wages can’t buy homes. The future lies with a growth in Canadian exports (the low loonie didn’t make that happen, likely because other countries are manipulating their currency downward for persistent advantage).
With demand continuing right through the winter, it’s hard to believe it won’t be a record spring for the Toronto market. The anticipation of the great American Revival will play increasingly on the psyche of hopeful buyers and those who would like higher paying jobs. It’s this anticipation that will have the greatest effect on where anyone will willingly purchase an average $600k to $1.5 million dollar condo or home.
It takes courage to buy a home, and courage should be built on a systematic pros and cons assessment of real estate investment. I hope your analysis gives you the right outcome. If you’re looking to buy in the Toronto area, please visit my Toronto homes for sale page.
Forecasts of political intervention by Canada’s biggest banks: http://business.financialpost.com/news/property-post/canadas-biggest-bank-warns-of-possible-cooling-measures-coming-to-toronto-housing-market
Best time to buy a home: https://www.newhomesource.com/resourcecenter/articles/smart-time-to-buy-a-new-home
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The Toronto Real Estate Board has released their November 2016 MLS sales report which includes home prices in the Greater Toronto market. Sales are up 16.5% from last November, and home prices rose by 22.7% YoY. It’s a scary time for investors, and perhaps a tougher time for millennial aged couples trying to buy their first home.
The TREB November market update shows Home prices in Mississauga were also up 20.8% overall. While most eyes are glued to the price of detached homes in Toronto, the sales of apartment condos continue an even more torrid pace, up 27.9% in sales volume, perhaps revealing a continuing strong condo apartment rental investment market similar to the one burning up San Franscisco and the Bay Area of California. Not surprisingly, Richmond Hill, Newmarket, and Aurora leads the GTA price rise parade. These 3 top performers had detached home price rises near or above 30% YoY. Richmond Hill home prices hit an astonishing $1.3 Million. Brampton lead the way with a 25% price growth for townhouses.
Mississauga Real Estate Brokers
Ready to Sell? My client Damir Strk is a licensed Realtor and Mortgage Broker with extensive experience across the GTA including downtown Toronto condos. He specializes in Mississauga, and can also represent you very well whether you’re in York Region, Toronto, and Oakville and Milton. He’s a great choice for the biggest financial decision of your life. Damir has 16 years experience in all housing types, including Mississauga’s many condo developments, very familiar with properties in Mississauga’s many communities, and can help advise you on mortgage financing. Contact Damir now at: (905) 828-3434.
Real Estate Investors
Investors from Germany, China and Persia may find the market perfect for rental income investment. Buyers within Canada are finding the market too far out of reach. The extreme prices could make it more likely local and the provincial government may attempt to intervene without addressing the issues of lack of available land. The places to grow legislation and the OMB will be put under more intense scrutiny.
“Home buying activity remained strong across all market segments in November. However, many would-be home buyers continued to be frustrated by the lack of listings, as annual sales growth once again outstripped growth in new listings. Seller’s market conditions translated into robust rates of price growth,” said Mr. Cerqua Toronto Real Estate Board President.
Where to Invest in 2018 – Real Estate, Stocks, Gold or Cash?
Looking ahead to 2017 and wondering where to invest? US stock markets have had a fantastic run the last 6 years, with the DJ hitting 20,000. But is this the end of it?
The real estate market had a sharp rise these last few years, but has it topped out too? Could they both crash or soar like an eagle? We know the past, but how are we on forecasting the future?
Choosing between property or stocks might seem like choosing between wine or cheese, ice cream or pizza, or, tofu or sushi, but after you read this post, you might find that one is more financially nutritious than the other. And if both markets crash in 2017, well, if you buy a house or property, you still have something!
To ensure you make a good investment decision, you can read up on the advantages of buying real estate, to whet your appetite for the interesting video interview with investing guru Grant Cardone at bottom.
Like most real estate investors or stock market investors, you’re wanting to beat the averages and pull off a big win in 2017. And who can blame you? If you’re open minded and smart, you might double or triple the ROI anyone else is earning. This post not investment advice but rather a wake up to the strength of real property in the best zip codes.
Let’s take a quick look at real estate investment opportunities which might produce exception returns in 2017 compared to the stock market of 2017, which has pretty well peaked.
US Stock Market Forecast 2017
“For 2017, J.P. Morgan anticipates geopolitical risk stemming from Europe and the Middle East as well as questions surrounding the new policies from Donald Trump’s presidency will permeate markets. Still, the firm also estimated in the report that the S&P 500 Index will surge 8% to 2,400 by the end of 2017. A stronger U.S. dollar and higher rates pose risks for stocks in 2017, as these factors can affect price-to-earnings ratios, emerging markets, the housing market, and U.S. equity groups such as multinational, domestic manufacturing, and bond proxy companies, according to JPMorgan. – from a report on the WSJ.com.
Where are the Best Opportunities and Cities to Invest in Real Estate in 2017?
If you read my post on the best US cities for real estate investing, you know that some cities offer a 30% return right off the bat. Choosing the right city is a big part of the profit equation especially if you’re modest investor. The other parts are which specific types of properties to pursue, whether there’s plenty of millennial buyers in the area, and which types of upgrades bring the best return.
Home flippers will want to choose single detached homes especially where there is an income apartment built in to the property. Is San Francisco or New York or Los Angeles or Waco a good bet for a solid flip? Ask Chip and Joanna as I’m sure they know that market well enough. For other markets, there are sources so don’t shy away from a little research.
Pick all the right property buying variables intelligently, and you raise the likelihood of making a lot of money on your investment. Take a good look at rental income properties in Los Angeles, San Jose, Bay area and San Francisco simply due to the persistent high apartment rentals prices. It doesn’t look like there is a solution for that overheated market. With no new construction, current rents can only go higher.
Is Stock Market Investment a Good Choice?
Take a look at how the Dow Jones has fared since January of 2015. If it wasn’t for the recent Trump bump up, the market barely progressed. And the stock markets were all aglow about record prices. Well, they also said Trump would ruin them. After a lot of turbulence, it looks like investors believe Trump will be good for all the big corporations and perhaps economic growth in the US.
The stock markets are at all time highs with nowhere to go. The percentage gain on current prices will not be good. Of course, you may find specific stocks to gamble in high growth industries, but it all seems like roulette to me. Contrast that with real property in some of the hottest upcoming cites and what you could do with that property and now you have incredible potential for profit. And could all those people on HGTV be wrong?
The Trump rally will continue into the early part of 2017, then drop off as the Fed hikes interest rates more than the market expects and sentiment shifts, Goldman Sachs predicts in its forecast for the coming year — Goldman Sachs
And here in the last 12 months on the Nasdaq, we’re seeing flat growth in prices. If Trump hadn’t won the election, we would be seeing a flat line right across into 2017. If the Trump euphoria wears off and he can’t create the economic results he says are possible, you might see this curve heading back down to the 4500 mark. Personally, I think Trump’s efforts will provide much improvement, but that improvement might be more visible in the real estate market. That’s why in 2017, investing in real estate is where everyone is headed. That transfer of cash to the property sector should create some stellar returns. Discovering the best cities to invest in is half the battle.
Has any small investor ever gotten rich off of dividends?
So the tale of the stock market curve is really all you need to know.
Another important benefit of investing in real property, especially for house flippers, is that you’re more personally and emotionally engaged in the process and outcome. Stock market investing is passive and you can do nothing to help the performance and ROI. With real property, you are able to find ways to help yourself succeed. Wether it’s flipping or living in an income rental property, you can effect the performance of that investment. Let’s hope you make the right decisions and hire the right people!
Hear what Grant Cardone says about real estate marketing for next year.
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2018 looks like it’s going to be a more stable period for home prices from Boston to Miami to Los Angeles. Limited residential property, stable employment picture, and rising mortgage rates should keep things in balance in 2018.
What’s dampening that price flame is that prices are too high for Millennials (thus powering up the rental property investment market) and high mortgage rates.
Home prices are anticipated to increase 3.9 percent and existing home sales are forecasted to increase 1.9 percent to 5.46 million homes. Interest rates are expected to reach 4.5 percent due to higher expectations for inflationary pressure in the year ahead — Realtor.com Research
Case-Shiller reported a spate of very positive news regarding the state of the US economy and the housing outlook for 2017 to 2020. Housing is boosted by positive indicators coming from two separate reports published on Trading Economics, include:
US housing starts rose to a 9 year high in October 2017
US consumer sentiment rose to a 6 month high
US durable good orders rose
Job vacancies to fall 500,000 by 2020
US GDP will rise 2 Trillion by 2020
From the chart below, the Case-Shiller Home Price Index, building permits, housing starts, home sales, will rise slightly next year and significantly grow to higher levels in 2020. Home prices may rise another 10% by 2020 according to their forecast. Still a good time to look for houses for sale.
Case-Shiller also sees the Fed raising interest rates and that US inflation rate will rise. These estimates may not take into account the intent of the Trump government.
And from a reuters news report on the economy, Joel Naroff, chief economist at Naroff Economic Advisers is quoted as saying, “Everything seems to be moving in the right direction in the economy … The weak links are recovering and the strengths are staying strong. The Fed is not going to continue doing nothing.” That would mean he expects the Fed to raise interest rates, and that would push the US dollar to further highs.
Overall, it’s a good report that has something for consumers and entrepreneurs and business. Read the full forecast here.
The US housing market 2017 report is positive and this report from the Urban Land institute is positive too. Sure there are variables, especially in different regions and cities across the US, yet a lowered deficit sends a positive message to startups and small businesses that US businesses will have an easier time competing in the US. Looking to invest in rental income property in 2017?
Best Cities to Invest?
Cross reference this compiled list of cities with a previous post on best cities 2017 to invest in rental property. In this chart with data from Realtor.com and Kiplinger, I’ve highlighted what might be the best cities to discuss with your real estate investment advisor. I’m not advising anything, just to point out the advantages of diversifying your investment portfolio to cities that are strong and ones that could become strong.
Cities such as Springfield MA, Sacramento CA, or Detroit might pay off in 2020 to 2025. For rental income, Silicon Valley, Los Angeles, Dallas, San Diego, and Boston might be best picks. It might be a case of the usual suspects, but start here, work your way to the best zip codes and neighborhoods, types of house, employment growth, and migration patterns of Millennials, and you may have yourself a winner (real estate investment). Who knows which cities will rule after 4 years of the Trump overhaul of the US government and US economy?
Average Home Price 2015 – Kiplinger
San Francisco-Oakland-Hayward, CA
San Jose-Sunnyvale-Santa Clara, CA
Los Angeles-Long Beach-Anaheim, CA
Salt Lake City, UT
San Diego County, CA
Providence-RI Warwick, MA
Atlanta-Sandy Springs-Roswell, GA
Grand Rapids-Wyoming, MI
Greensboro-High Point, NC
Oxnard-Thousand Oaks-Ventura, CA
Las Vegas-Henderson-Paradise, NV
Riverside-San Bernardino-Ontario, CA
Tampa-St. Petes, FL
Palm Bay-Melbourne-Titusville, FL
Boise City, ID
Colorado Springs, CO
Lakeland-Winter Haven, FL
New Haven-Milford, CT
Kansas City, MO KS
Augusta-Richmond County, GA
Dallas-Fort Worth-Arlington, TX
Minneapolis-St Paul, MN
Oklahoma City, OK
New York-Newark-Jersey City, NY N.J Pa.
Miami-Fort Lauderdale-West Palm Beach, Fla.
New Orleans-Metairie, LA
El Paso, TX
Washington-Arlington-Alexandria, DC VA
Austin-Round Rock, TX
St. Louis, Mo
Buffalo- Niagara Falls, NY
San Antonio-New Braunfels, TX
Deltona-Daytona Beach, FL
Little Rock, AK
Des Moines, IA
Cape Coral-Fort Myers, FL
Baton Rouge, LA
Durham-Chapel Hill, NC
Chart Data courtesy of Realtor.com and Kiplinger.com
From a report in the Pacific Coast Business Times, Mark Schniepp, director of the California Economic Forecast is quoted as saying that economic indicators do not point to a recession this year or next.
Nationwide, consumer confidence is near a seven-year high and corporate profits are trending up, which slumped prior to the Great Recession. And even though more people are buying cars and homes, household debt levels are tame, said The current seven-year economic expansion is old but it’s not running on fumes, he said.
Schiepp said “We really don’t have any imbalances or bubble concerns. Therefore, at this time, we don’t see any recession — none. If you were wondering about 2017 and all those blogs and articles (forecasting a recession), well forget about them.” Schniepp spoke to an audience at the Hyatt Regency in Westlake Village LA, during the 2016 Los Angeles County and Ventura County Economic Outlook.
ULI Real Estate Consensus Forecast: A Short Term Outlook from Real Estate Economists/Analysts
The Urban Land Institute has just released it’s Fall 2016, 3 year Short Term housing and real estate outlook report with predictions from 51 real estate and economic experts. Quite a few organizations including NAR, National Association of Home Builders, Trading Economics, Kiplinger, Freddie Mac, Fannie Mae, Bloomberg, Moodys, and more produce their own housing forecast reports.
Which ones are credible and reliable outlooks of housing activity ahead? If you’re a homeowner, investor, mortgage agent, or realtor, it may be wise to read and weigh a number of them for a more reliable forecast.
The Urban Land Institute, or ULI, is a Washington, D.C., Hong Kong, and London think tank and research institute whose purpose is to provide leadership in the responsible use of land to build thriving communities worldwide.
Some of its organizational mandate is to encourage progressive development, conduct research in sustainability, smart growth, compact development, and workforce housing. The ULI was created during the Great Depression in 1936 and now has 38,000 members (according to Wikipedia).
The ULI housing and real estate report offers up specific forecasts for:
Broad economic indicators
Real estate capital markets
Property investment returns for four property types
Vacancy rates and rents for five property types
Housing starts and prices
From the report overview, HUD states:
“The ULI Real Estate Consensus Forecast for October 2016 projects continued economic expansion over the next three years but at a somewhat slower pace than the prior two years; relatively high but declining commercial real estate volumes; continued commercial price appreciation, rent growth and positive returns but at more subdued and decelerating rates; better than average vacancy/occupancy rates, except for retail; continued growth in single family housing starts but remaining at levels below the long-term average.”
All indicators are above their 20 years averages with the exception of commercial price appreciation, equity REIT returns, and NCREIF returns. Looking ahead to 2018, HUD forecasts: commercial property price growth, equity REIT returns, NCREIF returns for the four major property types, retail availability, rental rate growth for office and retail, RevPAR growth for hotels, and single-family housing starts will perform below their 20 year averages.
Commercial Real Estate Still Looking Good
From the report:
“Commercial real estate prices are projected to grow at relatively subdued and slowing rates in the next three years, at 5.0% in ‘16, 4.0% in ‘17 and 2.5% in ‘18, all below the long-term average growth rate of 5.7%.” “Capitalization rates for institutional-quality investments (NCREIF cap rates) are expected to inch up gradually to 5.2% in 2016, 5.3% in 2017 and 5.5% in 2018.”
“Commercial real estate transaction volume has consistently increased for 6 years and reached a volume in ‘15 that is surpassed only by that in ‘07. Volume is expected to decline for the next three years to $475 billion in ‘16, $450 billion in ‘17, and $428 billion in ‘18. Despite the decline, these volumes continue to stay substantially above the 15-year average of $280 billion.”
The report reveals the experts forecast an easing up of rental apartment vacancies with the national rate up 5.23% in 2018 however these rates are still below the 20 year average vacancy rates. The report doesn’t forecast apartment rentral rates in tight markets such as San Francisco or New York.
Do you need help selling your home or land? One crazy good outside the box idea is to hire an innovative digital marketing consultant to create massive reach to buyers and jumpstart their desire to own your property. Real estate agents can present a lot of value however they’re not digital marketing masters. They still have to hire a real estate marketing firm to get results.
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