The Southern California real estate market, especially in Pasadena, has seen every kind of historic event possible in the last dozen or so years—from the crash of the market in 2008 to historically high home prices, to historically low inventory, to the lowest mortgage rates in anyone’s memory.
But are we beginning to reach the peak of the market? Will mortgage rates and supply and demand, along with inflation, cool off the market and provide some balance for first-time buyers as well as wealthy buyers?
Some signs may point in that direction.
The Federal Reserve has now raised interest rates in an attempt to combat inflation, and mortgage rates are rising again, away from their historic low of 2.67% rate in December of 2021. The 30-year fixed-rate surpassed 5 percent for the first time in more than a decade last month.
But that rate is the lowest it’s been in any month but June 2003 in the years from 1990 to 2008, even as they rise at the fastest rates in 40 years, according to Freddie Mac.
And at least a few professional forecasters are predicting a rise in housing inventory this summer or fall, perhaps based on higher interest rates.
Len Keifer, deputy chief economist at Freddie Mac, said recently, “Buyers have been thrown for a loop because of how frenetic the housing market is and how fast homes are selling.
Keifer continued, “I anticipate we get a much more typical seasonal pattern this year; people start listing in the spring, and of course, activity heats up too. Then the homes that didn’t sell through spring and summer sit on the market and that’s where you see inventory pick up.”
According to a panel of housing market experts polled in the latest Zillow® Home Price Expectations Survey, the housing market won’t return to pre-pandemic 2019 in terms of inventory and first-time homebuyers until 2024.
Zillow asked a range of economic and real estate experts what year they expect to see national inventory return to at least a monthly average of 1.5 million units. Four percent of those polled predicted 2022, and 37% answered 2023. Thirty-eight percent of the experts predicted an increase 2024, thus 79% those polled expect an inventory increase sometime between now and the end of 2024.
But homes still need to be built across the nation. As Pasadena begins to slowly ramp up affordable housing and anticipates building in the former 710 “Stub” site, that trend needs to be duplicated across the nation, says Daryl Fairweather, chief economist at Redfin.
“Fundamentally,” said Fairweather, “We need more homes. We can’t just rely on existing homeowners turning over, because when they sell, they put their home on the market and contribute to supply but they buy again and contribute to demand.”
Fairweather stressed that the “real source to increase supply” would come from new construction, adding, “We have to make it easier for people to build and get rid of some of that red tape around it as well. A lot of it’s controlled at the local level. It means a lot of local communities switching attitudes from being protectionary in housing to being pro-housing and pro-growth.”
