The California housing market is a top performing real estate market when compared to other local markets in the US. Additionally, property buyers and real estate investors in California have one of the lowest mortgage default rates in the country!
But, why is the California housing market treating property buyers and real estate investors so badly when it comes to property prices? Is the market repelling certain types of property buyers and forcing them into other real estate markets? And what are the California housing market predictions 2019?
California housing market: Current trends and predictions for 2019
The tech wealth that blanketed the San Francisco Bay Area is not going anywhere. In fact, it’s attracting more and more tech giants into this already crowded and over-saturated location.
Putting the tech industry’s effect on California’s real estate market under the microscope tells us a lot about its connection to creating jobs and generating income, amplifying housing and rental demands.
The tech industry has been fueling the economy in the region in the past years and will continue to do so in 2019. As for the California housing market predictions 2019, the housing demand will continue to rise as businesses grow and attract more and more people to move to the Bay Area in search of jobs.
Besides the tech industry, one of the biggest drivers of the Northern California real estate market is foreign money! Is this going to slow down any time soon? Is this real estate market the only one appealing to international real estate investors among the many investment fields in the US?
Foreign investors are spreading across the continent in an effort to escape taxes or payouts in their own countries. In the next few years, and in 2019 specifically, foreign money’s role is showing signs of slowing down as the pool of interested investors is becoming smaller and smaller due to the high property prices. According to the California Association of Realtors, foreign investors made up 8% of the real estate purchases in 2013. Meanwhile, in 2017, it only made up 3% of all real estate sales in California real estate. Foreign investors’ role in real estate value fluctuations has decreased and will continue to decrease in 2019.
According to The Department of Numbers, the California median household income was $67,739 in 2016. After two years of tech booming and the real estate market pushing the economy and vice versa, the median household income has risen up by 9% from the 2016 level. So, how many residents are able to afford to buy for the first time? The answer is discouraging and disappointing for those residing in big cities that often come with big real estate prices! Over 44% of renting residents are not buying simply because they can’t afford to!
If you’re a buyer looking for affordability in the California housing market, you won’t find it in San Francisco, Malibu, or Anaheim. According to Housingwire.com, the annual salary needed to buy a home in San Francisco’s real estate market is a whopping $173,783. And California housing market predictions 2019 show that this number is expected to rise at least 5% in the next year!
Meanwhile, plenty of affordable cities have welcoming real estate values. We’re expecting more affordable cities such as Irvine, Fresno, and Long Beach to become more desirable as real estate investment destinations in California. Investing in these cities will ensure a desirable return on investment as residents seem to be moving away from big cities with big real estate tags to more affordable locations.
If you’re looking for affordable investment options in other cities in the California real estate market, make sure to check out Mashvisor’s heatmap tool.
Skyrocketing Sale Prices
The California housing prices easily reach millions. Real estate investors and homebuyers are being overbid by both local and overseas investors! The whole bidding war type of buying process is working for the benefit of property sellers in California’s busiest cities. Meanwhile, local residents are scraping the bottom of the barrel and buying demolish-worthy properties for high 5-figure prices!
Among the best cities in California for real estate investing is San Francisco. With real estate prices that can make most owners millionaires when selling their investment properties, the real estate market is a strong one. So much so, that a 10% annual increase in property values does not seem unlikely for California housing market predictions 2019.
While Southern California cities like San Diego and Los Angeles may not experience the heavy saturation with real estate values, the median property price is still among the highest in the country. For example, the median price of an investment property is $789,627 in San Diego. Meanwhile, the median price of a property in Los Angeles is $952,743 according to Mashvisor’s data.
With prices as they are, the average Joe is choosing to migrate to less dense residential areas. This is one of the most noticeable California real estate market trends, especially for millennial property buyers. It makes perfect sense that the California housing market predictions 2019 are implying more of this domestic migration towards less dense areas in Southern and Central California.
Accordingly, Sacramento and Riverside are receiving plenty of activity from property buyers who are looking for an affordable option when buying real estate and those who are willing to make the extra commute. This is a model that can be applied to most North American metropolitan cities for the housing market predictions 2019.
To start looking for and analyzing more affordable investment properties in your city and neighborhood of choice, click here.
Housing market crash: Probable or not?
After the housing market crash in 2008, real estate investors and property buyers have become more cautious than before. Moreover, anticipating how the California real estate market behaves became an obsession for both property owners and wannabe property buyers! Keep in mind that strong demand is not going away any time soon from the California housing market. The California housing market predictions 2019 indicate that housing prices are stabilizing and will continue to do so in 2019 and 2020.
With steady construction, a strong economy, and low mortgage rates, a housing market crash is nowhere on the horizon. However, this does not negate the fact that precautionary measures need to be taken to make sure the bubble does not keep growing any further, repelling middle-income household out of the Bay Area and most California housing markets along the way.
Sell or buy in the best cities in California?
For many real estate investors, selling is out of the question thanks to steady rental income! But should selling be one of the options in the California real estate market? Factoring in property price surges and low unemployment rates, the California housing market predictions 2019 indicate that it’s not going to be any less of a seller’s market than it is today in 2018!
The question that real estate investors in California are torn between is: Should I buy more investment properties or sell? Keep in mind that prices are reaching their peaks and most likely will do so in 2019! So, if you sell your investment property and find another affordable option in California or out of state, it’s definitely not a bad investment decision to sell and buy another investment property.
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The bottom line
The California housing market predictions 2019 indicate that even though the market is going strong, your choice to invest depends heavily on what you can afford. Keep in mind that while buying an investment property in California is not the same in all cities, many cities still have room to grow in 2019.
What are some of your California housing market predictions for 2019?