If you've ever driven along the El Camino Real from San Francisco to San Jose, you’ve probably noticed the seemingly endless stretch of parking lots and strip malls that line the entire route. Well, get this—apparently there’s room for an estimated 250,000 new apartments along this road. Developers are trying to figure out how to make this happen as an attempt to alleviate the housing shortage.
Now let's be real, everyone loves a good strip mall. Where else can you do your grocery shopping, get a haircut, and pick up a burrito for lunch all in the same afternoon? So the goal here wouldn’t be to tear down every strip mall completely. Instead they suggest creating mixed-use buildings that would keep retail space on the ground level while adding apartments on top.
California reportedly needs to build millions of new housing units to meet current demand. Governor Newsom pledged to build 3.5 million homes by 2025, but so far only around 100,000 homes are being built each year. Strip mall development might be a solid solution.
Anyone else read the word “cottage” and think of a quaint little home surrounded by wildflowers in the middle of a forest? No? Just me? Ok cool. Well I'm actually referring to an accessory dwelling unit, also known as an ADU.
Homeowners in the Berkeley flatlands can now build two-story ADUs in their front or back yards as long as they inform their neighbors and tenants first. The new rules allow for those who want to build an ADU up to 20 feet tall to get almost automatic city approval.
Meanwhile in the Berkeley Hills, council members still haven't decided how they want to regulate building ADUs, considering there would be higher wildfire risk in those areas.
Under these new regulations, city staff would notify any existing tenants and immediate neighbors about plans for an ADU on their property no more than 10 business days after a homeowner submits a project application. Those who oppose the plans likely won’t have the power to block or change them under Berkeley’s new rules.
Rent prices will go up. If you're a renter living without that proverbial security blanket called rent control, I come bearing bad news: rents, which are currently rising at a 7-year high, will continue to rise faster than home values. As renters continue to pour more and more cash into the dark abyss of indefinite monthly payments, economists expect that a fixed mortgage payment, a more stable housing market, and future equity may be enough to entice otherwise content renters to rethink their options and enter the housing market.
Home appreciation rates will decelerate. Just as we saw last year, the growth of home prices will continue to slow dramatically. Sellers will not have as much of the upper hand as they once did before, creating a more balanced housing market that more buyers can participate in.
Mortgage rates will increase. For years, economists have been saying mortgage rates will rise. And in those same years, we've been seeing consistently low rates. BUT, this year could be the year they finally get it right. Since keeping interest rates low after the financial meltdown, the Fed has indicated a coming change. Mortgage rates are expected to modestly increase in the summer, up to 5% by year's end.
The next generation of homebuyers. Experts predict that specifically the millennial demographic (18-35 years old) will soon stop renting and start buying. Their home-buying activity has been lackluster thus far, putting the share of first-time home buyer sales at a 27-year low. It's not that millennials are uninterested in homeownership, as many critics would accuse them of. It's that many of them have been waist-deep in student loans, feeling the longer-term effects of the recession in terms of employment and income, and much slower to get married and have children than earlier generations. But as maturity settles in and makes them settle down, along with the help of the low down-payment programs introduced in December (3% down!), they're expected to take over the title from the GenX cohort (35-50 years old) as the largest group of homebuyers this year.
So there you have it - our 2015 housing forecast in a nutshell. I'll check back with you in a year to confirm how right (or wrong) these projections actually are.
All things real estate.