The latest John Burns Real Estate Consulting report states that US businesses spent less money in Q4 than in Q3, and will officially enter a mild recessionary period if the trend continues with Q1 2016. Businesses have decreased plant utilization, cut capital orders, and made slight cuts in purchasing. Export demand has decreased due to global economic issues and a stronger dollar. CEOs are expressing less confidence than last year at this time, and job expansion is expected to decrease, although the number of jobs available is still very high. This will continue to drive job growth from current levels — a positive.
Although not yet reported by the sales data, Burns is forecasting that the recent and perhaps continuing stock market correction will slow the sale of higher priced homes nationwide. We are already hearing that some agents with buyers from the San Francisco tech sector are scaling back their plans for home purchases… settling for the $2M home instead of the one closer to $3M. On the other hand, lower interest rates and petroleum based product prices should allow more entry level buyers to purchase homes. This may even include buyers for homes in Lafayette CA, particularly as they consider the transition from renters in San Francisco to homeowners.
The competition for mid-market homes in Lafayette CA will be staunch. Homes that sell will be actively sought by millennial buyers between the ages of 25-34, and according to Realtor.com, over 30 percent of home sales in 2016 will be from this age bracket. These buyers are forecasted to purchase roughly 2 million homes in 2016. Generation X buyers are seldom mentioned by economists, but they are reaching peak earning years and experiencing influxes of cash into their household budgets. Forecasts suggest they will soon be seeking larger more suitable single family homes for their growing families and renovating their current homes to prepare for the selling season.
Much like we saw last year, “boomers” will continue to “right-size” their homes. Most are seeking more affordable housing options or housing more suitable to a smaller retirement lifestyle. We expect that most of the 2016 inventory for homes in Lafayette CA will come from this sector.