Here we are Thanksgiving is now in the rearview mirror and we are moving at lightning speed towards the end of the year. 2019 is virtually in the books and 2020 is fast approaching us! This is my last Market Observations not only for 2019 but for the decade!
Now with that said, let’s recap where we are, Black Friday sale were at an all-time high, to the tune of $7.9 Billion, which is a clear sign that consumers are confident. Most people do not realize the that is about 70% of the economy. Small Business Saturday brought in $3.6 Billion that is truly incredible and clearly consumer confidence is strong. This of course is in addition to the $4.2 Billion that was spent on Thanksgiving Day.
Despite record low unemployment and incredibly low interest rates, home sales remained lackluster.
What are the reasons most people are wondering? The answer is a combination of fearmongering by the News Media that started in the beginning of the year. Then the talking heads were spreading misinformation about an impending recession. (Just like a few on this platform) This in turn put a pause on home sales in the beginning of the year. Hence inventory of ‘for sale homes’ have plummeted. As the saying goes if there is no inventory there is going to be fewer sales. The move up buyers were afraid to “move up” because of the “impending recession” and this in turn had multiple domino effect on real estate. Ironically this was all “manufactured misinformation” or should I say wrong information.
Let me quote you “…all this talk of recession, and you know I thought that was ridiculous talk it’s not going to happen” Mohamed El-Erian Chief economic adviser at Allianz Global Investors. I have been saying this all year along to anyone that was willing to listen. BTW this quote was said on 12/02/2019. Small consolation that Mohamed El-Erian and I have been saying the same all year!
Now with that said, what does my Chrystal ball predict for 2020 from a Real Estate Perspective? As everyone knows, that Real Estate has always been local. Hence let me share here, that there has been an outward migration from California to other states such as Texas, Arizona and Nevada to name a few for the past three years. There are many reasons for that, one of them is the lack of enough new construction. This in turn results in keeping the home prices at an all-time high and forces many to move out. This is due to the lack of affordability. Then to boot there is an aging population that cannot afford the cost of living which is coupled with numerous tax increases on the local and state levels. There has been an on going discussion about easing up on building restrictions, due to many factors.
The combination of all this in a Presidential Election year will be the key how the local real estate market will fare. I predict inventory will increase due to an easing of building restrictions. Numerous condominium projects are about to go online. This in turn will have home buyers and sellers returning in droves to the Greater Los Angeles Real Estate market. They buyers and sellers will realize that they made a mistake in 2019 by listening to the false prophets about recession. Hence I anticipate a busy Los Angeles Real Estate Market in 2020!
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