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Home Buyers Optimistic for 2015

January 13th, 2015 · No Comments · Hope Ranch Real Estate, Montecito Real Estate, Santa Barbara Real Estate

Here’s an update on housing trends.   Or, more precisely, here’s an update on what people think the trends will be. Despite having no objective way to know the future – and despite  an apparent disregard for the reality that housing hasn’t been a great investment over the long run – people are constantly changing their opinions about long term trends. And lately, they’ve become somewhat more optimistic.

Since 2003, Dodge Data and Analytics has asked, “On average over the next 10 years, how much do you expect the value of your property to change each year?”  In 2004, a boom year, the average answer was 12.6 percent, but in succeeding years the figure began to decline, bottoming at 4 percent in 2012.   The expected gain rose to 4.2 percent in 2013,   and 5.5 percent in mid 2014.

These expectations are hardly wild: If inflation ran at 2 percent a year, the Federal Reserve’s target, the expected appreciation in housing would be an inflation corrected 2 percent to 3.5 percent a year.  So, at the moment, there is no evidence of a real estate bubble.

One wild card in housing prices is the future of the mortgage interest tax deduction.  While it’s beloved by many taxpayers, it may not last – and if it doesn’t, short term trends could be affected.

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