New Year Likely a Repeat of the Last: U.S. Economy and Marin Home Prices to Advance

It’s 2015 and all signs point to this being a good year: for the country and our county. Marin home prices should continue their rebound and move up 5% – 12%, depending on a number of factors, which I’ll get to in a minute. But this year is likely to be a duplicate of 2014. Given what we’re all reading, the U.S. is also “back and ready to drive global growth” according to a recent AP article, which you can read in full here. Expansion will be in the 3% range, just over what we saw last year and the first time we’ll see this since 2005. Guarded optimism due to slow growth are the watchwords here for Marin real estate and much of America, though we’re not entirely out of the woods yet on either front.

A recent Marin Independent Journal recapped that median home prices were up in December 14%, but that’s just over last December, not for the entire year. That was also for the median price, which is $950,000 now and far less than the average price of approx $1,200,000. But as in most areas, the lower priced “affordable” homes sell quicker and increase faster than those in the mid or upper ranges. The complete article is here.

Sleeping grape vines in January

Six years after our county and our country sank to the depths of the Great Recession, both are back and on firm ground. I haven’t heard about any areas of the U.S. where the housing market hasn’t been in some form of protracted recovery, but we all know that other nations across the globe aren’t doing so well, particularly in Japan and China. Both countries are experiencing the hangover of too much growth too fast. This is the opposite of what we have in America and, ironically, also here in Marin.

As a county, we basically have a fixed supply of land, remaining at roughly 255,000 people over the last 20 years. The only housing expansion we’re likely to see will be in the form of affordable housing for qualified buyers: teachers, nurses, firefighters, etc. But with the state population looking to grow slowly and steadily, the demand to live here will only increase, particularly in the lower price ranges. Much like in the last two years, it often will be cheaper to own than to rent. Mortgage interest rates are down and rents are up, yielding easy math that will continue to push home prices slowly higher, though price appreciation in Marin isn’t an equal or simple curve. Predictable for busy agents, yes, but not exactly static for the average home buyer.

The factors are these:

• the three L’s
• price range, and,
• our long buying season

The L’s you’ve read here before:  lot, location and layout. The more level land you have, the closer you are to any of our twelve towns and the more one story living of the home, the more valuable it is today and tomorrow. Simply put, more people want to live in these types of properties than others. Not all mind you, as plenty of folks enjoy a mountain top view far from everything with no lawn to mow, but just generally speaking. Keep in mind that the aging Boomers are (and have been) preferring to live on one level for some time and this will only increase as that demographic seeks to avoid steps for those aching knees or hips. So if you want a safe bet, take less house with fewer stories over a bigger house on multiple levels, strictly from an investment viewpoint anyway.

Price range is simple and is the same in many areas. The more affordable your home is, the more people can afford it and the more it becomes a rental alternative. The average home price here is approximately $1.2 mil. (Another Marin IJ article notes that the median is just under $1 mil, see that here.) That house rents for an average of $5,000 a month, $0 of which is tax deductible. For the same monthly mortgage payment of $5,000 a month, you save more than enough to pay your taxes and insurance after your write off, making it cheaper to own. You just have to come up with the 25% down to make this scenario work.

The Marin buying season is new to most relocating here or buying for the first time, but it’s not that far off from other parts of the world. It just happens in a different time frame, where most home purchases take place over five months of the year, February thru June. Yes we have a twelve month market, but few transactions take place November thru January with seasonal slow downs also in July and August, which are typically vacation months for many residents. But most of our appreciation takes place in just half the year with the bulk of the sales volume happening then too. Family buyers scramble to seek, purchase and move in to a new place in June or July to get ready for the kids to go back to school in late August. This we’ve seen for the last twenty years as Marin has become more of a bedroom community for people who want our quality of life, paying more than 99% of the counties in the U.S. for clean air, low crime rates, excellent schools and very little traffic considering our proximity to three major employment hubs. They also like the 75% dedicated open space Marin has to offer and are likely to keep paying the price to live here. Absent something completely unforeseen, this should be a great year for all of us.

Snow levels are creeping back up at Tahoe

So enjoy January and all of 2015, wherever you are. As always, I’m here to help with any questions you may have. Feel free to text, email or just call me up. I’m always around.

Ted

415.377.5222 c

ted@gomarin.com

Filed under: Marin Real Estate Blog by Ted Strodder