Is This the Year for a West Coast Slowdown?

For the past three years, the western region of the U.S. has been infamous for its exorbitant housing markets. Western metros consistently topped lists of the hottest housing markets from realtor.com each month last year. Homebuyers in these markets have long struggled to make purchases because of a shortage of inventory and rising home prices amid strong demand. The good news for buyers: these markets may finally slow down this year.

Clear Capital’s latest HDI market report found that “the rapidly accelerating gains prominent in many of the Western metros are projected to level-off entirely in Q2 2016, which will be the first time the region has seen quarterly performance this low since January 2012.” The West has outpaced the rest of the nation in terms of growth for the past several years, but is now seeing market slowdown across some of its major metropolitan statistical areas.

The Clear Capital report said that Western markets began to slow in the latter half of 2015, with San Francisco, Los Angeles, and San Diego currently seeing quarter on quarter growth rates under 1%. If Clear Capital is right in its annualized predictions, these current levels would project to roughly half of the performance seen in 2015.

“While slower growth is typical during the winter real estate off-season, it remains to be seen how or if the markets will adjust once the typical market rush of spring begins,” the report said. The California Association of Realtors reported similar findings back in October, adding that while the housing market is expected to improve in 2016, a shortage of available inventory and continuing high costs are expected to limit the improvement.

Perhaps Clear Capital’s report is evidence that high costs will slow down from increasing even more this year. However, this “slowdown” will not bring relief for buyers battling against the effects of low inventory.

What do you think this year will bring to the housing market?

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  • Randall Jenk

    We’re seeing this slowdown because of the market’s seasonality. Let’s wait and see what happens during the spring rush…