Are you wondering if it is time to sell your house in California, USA in 2017? There are two major risks to the housing market in California you should know about, which affect anyone that has a property for sale in California, USA.
The first risk is the rising interest rates, and the second, the declining demand from Chinese investors. They are both pretty serious, but not too many have been talking about them as yet.
There are other long-term problems that California has, such as the scarcity of water and mounting cost of living. But those are permanent problems that have existed for more than 30 year now. We are interested in specific risks that could emerge in 2017 that could hurt anyone who is either looking to sell or buy property in California, USA online.
Our larger prediction, based on the risks is this – home sales will be lower in 2017 than in 2016. Let’s discuss the reasons for this, beginning with the first risk to the housing market in California – rising mortgage rates.
The Federal Reserve, as you are aware, has been increasing interest rates in California gradually since December, 2016. This follows up from years of low interest rates, which actually came down to their historic lows.
This will increase the mortgage rates for sure and make the homes for sale in California so much pricier. Economists are generally of the opinion that higher mortgage rates won’t affect home sales because of the improvement of the economy, strengthening dollar and lower unemployment rate.
Actually, it does – the housing market in California, just as in Texas, Florida and New York, is very sensitive to mortgage rates. As long as the mortgage rates are under 4.5%, there should not be a problem. But the moment it goes beyond that, yes, we will have a problem. First-time homebuyers will be priced out of the property market. Well, they have already been priced out, but the rise in interest rates will make it worse.
Now, about the second risk – Chinese buyers, who have been among the biggest investors in luxury properties in California over the last 10 years or so, may not be so eager to buy anymore. As a real estate consultant, David Wong, said in an interview with Bloomberg, “The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China’s measures to control capital flight. You need to cut the price, or it may take a real long time.”
Chinese investors have been dissuaded from investing in California for two reasons – the strong dollar, which means they have less buying power, and the curbs placed on overseas property investment by the Chinese government.
It is no longer so simple for wealthy Chinese individuals to buy assets abroad. The Chinese government is very serious about stopping the flight of capital. This could have serious consequences for the overseas property market, much beyond California.