With the Fed looking to increase interest rates again this year, many potential home owners in California may feel that now is the time to buy. However, low supply in many markets has resulted in bidding wars and steep price increases that are blocking many entry-level buyers from the market. An economist with Trulia announced that sellers have the upper hand in 2017, and it is unclear when residential development companies will be able to capitalize on the growing need.
Evidence of the sellers’ market isn’t hard to find. Even as the average 30-year mortgage rate has increased almost half a percent, the median price of residential property has jumped almost eight percent. It will take a significant correction in supply to make a dent in rising prices as well. The Denver market, for instance, is still amenable to sellers with a growth in residential inventory of 6.5 percent this year.
With all else equal, builders would have already been working overtime to reap the profits of a supply shortfall. Increasing production capacity after the housing bust and resultant contraction in residential development is not simple, though. Developers point to burdensome regulations and lack of a skilled workforce as primary reasons for the lack of slow development despite the profit potential.
Home buyers in California markets may face a difficult task in locating acceptable residential property and securing favorable contract terms. In many cases, there is a threat of competing bids and rising prices as other buyers compete for the reduced number of offerings. In such a market, buyers have incentive to consult with legal counsel for ideas on the best tactics to acquire developed land and residential property. An attorney with experience in residential real estate can also help prevent costly title issues and problems with contract terms for options and closing.