8 California real estate battles worth watching
Rent or buy? Build or don't? And what about investors vs. house hunters?
It’s playoff season for basketball and hockey with sports fans glued to the big matchups.
But that kind of emotion and energy isn’t just limited to athletic contests. For example, there are plenty of big real estate battles brewing across California this spring.
Now, the property game rarely has clear winners and losers. And these contests aren’t often settled quickly.
Still, in the spirit of the season of championship competition, here are eight real estate wars worth watching.
Renting vs. Buying
High home prices compounded by high mortgage rates translate to lofty monthly mortgage payments that easily exceed the cost of being a renter. That doesn’t mean renting is a financial champion in the long run, but its winning streak is a key factor behind lethargic homebuying.
Key number: A typical mortgage payment for a California home purchase is two-thirds higher than monthly rents, says GoBanking.com.
Edge? Renting’s short-run financial advantage will not go away anytime soon. But that doesn’t mean the benefits of ownership – financial and otherwise – won’t continue to appeal to many folks.
Fed vs. Inflation
For two years, the Federal Reserve has fought to control the escalating cost of living with higher interest rates – including mortgages. Yes, the central bank scored some wins in cooling inflation off from four-decades highs, but a complete victory remains elusive.
Key number: Hopes for lower inflation and rates have dimmed. The 30-year mortgage is now at a four-month high.
Edge? Fed officials admit this battle will take longer than expected. So “higher for longer” is the interest-rate playbook for 2024.
Build vs. NIMBY
It’s a classic tussle. Most folks know that the state, no less than the nation, needs more housing. But there are not-in-my-backyard opponents who think new residences should be far from their current homes.
Key number: Between 2010 and 2020, California’s population grew by 6.1% while its housing supply rose by just 4.7%.
Edge? It will be a slugfest, but it’s a reasonable to think the pro-development will eventually prevail as the cost of housing grows. But it won’t be an easy game.
House hunters vs. Investors
It’s a never-ending tug-of-war between house hunters seeking a place to live and others looking for investment properties. Low homebuying affordability puts a focus on investors – especially big-money giants – and their role in rising home prices.
Key number: Investors of all shapes and sizes were a record 29% of US purchases in the fourth quarter, according to CoreLogic.
Edge? Despite lots of legislative tough talk, it’s unlikely significant action will be taken to limit investors’ access to the housing market. But upsets do happen.
Realtors vs. DOJ
Lost in the commotion from the settlement of the National Association of Realtors’ commission lawsuit was news that the Department of Justice had won the right to reopen its investigation into how homes sell nationwide.
Key number: 21 million US home sellers in the “settlement class” could get as little as $13 each.
Edge? Tough call. But this heavyweight fight could reshape the homebuying process.
Office space vs. Work from home
Efforts to get more workers back to the office have stalled. And that’s a big commercial real estate headache, as copious office space remains vacant because of remote jobs.
Key number: 46% work a hybrid schedule, up from 34% in 2023, says KPMG.
Edge? So far in this work/life struggle, workers are the winners. Office landlords will be the losers.
Malls vs. Online shopping
As life returns to a new normalcy, in-person shopping revived. This is also a commercial real estate contest – pitting retail space vs. warehouses built to handle the online shopping craze.
Key number: Online was 15.6% of US retail sales at the end of 2023, up from 9.9% five years earlier, according to Commerce Dept. stats.
Edge? The feel-good nature of a trip to the mall is hard to beat. But online shopping’s convenience and pricing make it the winner.
Bankers vs. Risk
This historic rivalry helps determine how much money is available to borrow. Bankers are still scarred by the Great Recession and have been quick to pull back lending activities with recent discovery of risks.
Key number: 1.2% of California consumers missed a bill payment in the fourth quarter – up from 1% a year earlier but off from 2.1% at year-end 2019, according to the New York Fed.
Edge? Risk, real or imaginary, seems to have the advantage – and that won’t change quickly.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com