Source: Redfin

Most other housing analysts still expect U.S. house prices to rise a modest single-digit amount in 2024. This includes forecasts by:

• Mortgage Bankers Association: +4.1%
• Fannie Mae: +2.4%
• Wells Fargo: +2.5%
• Goldman Sachs: +0.6%
• AEI Housing Center: +4.0%
• CoreLogic: +2.6%
• Zillow: 0.0%

With all the experts forecasting in such a narrow range, we agree that most markets will hold steady and desirable areas will see normal appreciation of a few percentage points for most areas in California.  Our core markets of Los Angeles, Orange and San Diego counties may see more elevated appreciation rates.

Multifamily, the largest pool of assets securing our trust deeds, is holding strong and continues to perform well. Although rent growth has slowed, the vacancy rate has remained roughly 5% throughout 2023. Current interest rates will likely keep mortgage rates up near or above 7%, continuing to price out would-be homebuyers and sustaining the multifamily rental market demand. The only notable concern is the lack of demand for luxury apartments. They may be easy to build, but they’re not necessarily easy to occupy. As a result, many high-end apartments have reduced rents and offered concessions to attract residents.  The good news is that these large, luxury developments are usually 70-units or more and Coastal Capital is not a viable financing partner due to the needed financing amount.

Commercial real estate trends continue to be a mixed bag across market segments.  The office building vacancy rate reached 19.2% in Q3 according to Moody’s Analytics. That’s up from Q2 and approaching the historic peak of 19.3%. Despite these headwinds for office, it’s important to remember that while there is and will continue to be obsolete office, the office is not obsolete.  Older, less-desirable Class B and C offices may face obsolescence, but Class A is booming. Employers, especially tech, are realizing that they must upgrade to attract workers to return to office.  Many are going with downsizing from Class B and paying more per square foot for newer offices but a less total monthly lease cost.

Industrial continues to perform well, especially cold-storage properties, but the signs of softening are starting to show. The asset class may be moderating as the post-pandemic demand for more inventory decreases and renters hold off on expansion due to uncertainty of how rising interest rates will

While the rental rates are no longer sky rocketing, they are holding steady and creeping up. For landlords this continues to drive the demand for multi-unit buildings as the average age of first-time home buyers is at an all-time high of 38 years old. Keep in mind that is a national number and pretty sure that number is in the 40s for California. Younger Californians won’t be surprised to hear that homeownership rates are declining in their age group, and they are staying renters much longer.

Specifically in Southern California’s unaffordable home buying market is also pushing up the cost of renting one. Landlords have never seen rents this high on average, hence why they are borrowing to renovate as fast as feasibly possible. Rentometer tracks rent for three-bedroom houses in 857 cities nationwide, including 84 in Southern California. In 2024 the average rent in our 84 local communities was $4,154 per month up $122 or 3% from 2023. This is only $1,000 less than the average mortgage payment of $5,060 per month for owners in the same markets! 

The major problem is that to purchase the median priced home of $800,000 in Southern California one has to come up with a 20% down payment of $160,000! Remember that these are the averages for California. As one gets closer to the Pacific Ocean affordability is reserved for only the top 15% of the population as the California Association of recently shared below.