Before giving serious thought as to what my readers should expect from the 2024 real estate market, I wanted to first review what I considered the significant real estate topics of 2023 and my analysis at the time. Theodore Roosevelt famously said, “The more you know about the past, the better you are prepared for the future.”
Woke January: The Biden administration announced its plans to make housing more affordable for selected minorities. Federally backed mortgage giants Fannie Mae and Freddie Mac were directed to lower their mortgage underwriting standards and provide financial incentives exclusively for selected minorities.
My analysis, “Fannie and Freddie were not created to implement political policies or correct past social injustices. They should remain a financing vehicle with programs open to all who qualify regardless of skin pigmentation.”
Rent control February: Senate Democrats sponsored national legislation making the Federal Trade Commission the rent police. They would have authority to define “excess” rent increases as “unfair trade practices” making landlords subject to federal prosecution.
Analysis: “It isn’t mom and pop landlords who have created a chronic housing shortage and subsequent higher rents. It’s failed housing policies.”
March madness: State lawmakers were “mad as a hatter” when the UC Berkeley Center for Housing Innovation described the state’s past legislative efforts to encourage building affordable housing as “nonexistent.”
Analysis: “What were these legislatives geniuses thinking? California’s chronic housing shortage was 40 years in the making. It’s unrealistic to expect instant solutions or that by eliminating single-family zoning homeowners would become developers.”
April migration: According to the California Department of Finance, between 2010 and 2021 about 7.5 million people moved from California to other states. Since 2001 California has lost more residents to other states than move here.
Analysis: “Departing Californians and corporations reduce state tax revenue. If not reversed, California’s state budget will be in trouble.”
May said goodbye to a good neighbor: State Farm announced it would no longer be offering new homeowners insurance in California. More insurance companies will follow.
Analysis: “The continued exodus of insurance providers from the California property casualty market jeopardizes the financial integrity of the California FAIR Plan. Insurance Commissioner Lara needs to set aside his political aspirations and allow insurers reasonable rate increases.”
June sales drop: Mid-year home sales in the county were 44% lower than 2022 and the $625,000 median purchase price, is 8% under June of 2022. Inventory remains low.
Analysis: “The majority of homes have been selling at or above listed price. Sales will continue to be substantially under last year, but I expect prices to hold.”
July’s Grand Jury Report slams Planning and Building Department: The results of the Grand Jury’s investigation into the county’s largest bureaucratic labyrinth should not surprise anyone who has applied for a new building/remodeling permit or a change in land use.
Analysis: “Processing engineered plans should take weeks not months. The status of every permit should be easily available to permit applicants. If a permit application is deemed incomplete, the applicant should be notified within days not weeks. Homeowners and small independent builders need help not obstacles.”
August ADU grants: Included in the state’s budget was a $50 million set aside for homeowners who build an accessory dwelling unit on their property. Applicants receive up to $40,000 toward pre-development costs, including site prep, architectural designs, permits, soil tests, property survey and local impact fees.”
Analysis: “If building ADUs are to be the state’s primary and most cost-effective source of building affordable housing, perhaps the program deserves more than 1% of the housing budget.”
September’s interest rate pause: After increasing interest rates 11 times over the last 18 months, the Federal Reserve took a break at its September meeting. It’s about time. The Fed’s war on inflation has turned into a war on housing. Mortgage rates 18 months earlier were as low as 4% and now are higher than 7%. Interest rate hikes have cut home sales by 50% from a year earlier.
Analysis: “The Federal Reserve’s cease fire on housing needs to continue. Let the market catch its breath.”
October’s DIY roofers: I spent much of October and November recovering from my fall from my barn roof. According to the National Safety Council, more than 3 million people older than 65 will check into a hospital with injuries this year. Fifty-three percent of all injury-involved accidents occur at home and last year there were 130,000 preventable home-injury-related deaths in the U.S.
Analysis: “Having a broken body and dependent upon strangers for my care was a humbling experience. I have a greater appreciation for first responders and care providers.”
November’s fading American Dream: The high cost of housing and the increased mortgage rates has created a new phenomenon. Families are losing faith in obtaining the American Dream. A recent Wall Street Journal poll found only 36% of respondents said the American Dream still holds true. Half said life was worse in America today than it was 50 years ago.
Analysis: “The unaffordability of homes is leading people to examine their definition of success. For many, owning a home has been crossed off their list.”
December’s Christmas gift: The Fed has signaled further interest rate increases may not be necessary to defeat inflation. Mortgage rates dropped to 6.5%.
Analysis: “Happy New Year.”
Ken Calhoon is a real estate broker in El Dorado County. He can be reached for questions and comments at ken@kencalhoon.com.
(2) comments
It would seem to me that if 7.5 million people left California that would have resulted in a lot of vacant housing. Were all those people homeless that left? I don't think so. What sayest thou?
All things, mostly negative, described in this column can be laid right at the leftist doorstep of the dems/progs who have had their leftist political strangle hold on this state for many decades. As with all things that the dems/progs touch, it always make life miserable for the rest of us who still possess a brain. Ca. will be for the foreseeable future under dem/prog control, but we do have a chance to throw them out at the federal level come 2024. We shall see.
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