7 Surprising Inland Empire Real Estate Predictions for 2018

Riverside Will Lead the Way as the Inland Empire Becomes Big Deal in Real Estate

The most amazing thing about the following predictions regarding the Inland Empire Real Estate Market for 2018 is that economics 101 is driving every single one of them. Here’s the list. The detailed explanations follow.

1.     Prices of all homes in all price categories in all neighborhoods will continue up

2.     Rents will also be up

3.     Mortgage interest rates will continue steady at least through April

4.     Inventory of homes for sale and rent will be similar to 2017. Extremely limited

5.     Moreno Valley will be the next city to gentrify

6.     The working poor will be forced further out into the desert or out of California

7.     Distribution, logistics, health care, and education will continue to drive growth

If you are reading this article, then it is likely that you are actively watching the real estate scene in the Inland Empire. If so, you might think the above seven predictions aren’t all that surprising. But if you are a residential real estate owner, or you plan to either buy or sell in this market, then you might be looking for confirmation of your own ideas of what lies ahead.

For the most part, this article will examine the Inland Empire from Ontario to Moreno Valley and from Chino Hills and Corona to Rancho Cucamonga. Another way to imagine this region is to think of four freeway corridors: The 91, the 60, the 10, and the 210. Now picture tens of thousands of trucks moving along those roads to distribution, logistics, and retail warehouses, and you get an overview of the present and future of the Inland Empire.

If you agree with this list, or if you disagree in whole or in part, we’d love to see your thoughts in the comments.

1.     Prices of all homes in all price categories in all neighborhoods will continue up

At the core of all markets we know that supply, demand, and price are forever linked. If supply outstrips demand, prices will fall. If prices go up to far, it creates downward pressure on demand. We have not reached either of those points yet. The influx of people and jobs in this region is far outstripping the ability of the builders. Moreover, almost all new housing, both owner occupied and rental, is built for middle class and upper middle class incomes. Affordable housing is non-existent, resulting in Riverside being one of the least affordable cities in California.  

The Inland Empire is blessed with plenty of suitable land to build new homes and apartments, but at least for the foreseeable future, the builders can’t find enough labor to build needed structures. The lack of workers has recently been cited by a University of Riverside report to be so dire that it will affect overall economic growth in 2018, limiting it to 2.5% rather than 3% or higher that would be possible if there was adequate labor.

The other side of the equation is demand. The Inland Empire is benefitting from the outflow of skilled and unskilled workers who can no longer afford to live in LA or OC.

The home prices in LA or double those in Riverside-Corona, and triple those in some of the neighboring cities.

Add to this, the demand for housing from students for the areas amazing centers of higher education, seniors looking for warmer year-round temperatures and lower housing costs, and millennials who are finally leaving their parent’s homes and looking for somewhere affordable to live, and you have an almost limitless que of new potential residents.

Finally, you have demand for higher priced homes from the home grown opportunities that are seen throughout the region. UCR and CBU are both growing their student populations, which means more employee support and neighborhood service jobs. The AQMD is moving their headquarters to the area, and a huge new Medical complex has just been approved for south Riverside. And these are just a few of the many new projects that will demand professional jobs.

And the distribution and logistics projects are mammoth. Just the proposed World Logistics Center will create 20,000 jobs and create 40,000,000 square feet of warehouse and office space.

Price pressure is the third component. The prices might get so high that the rational buyer or the incremental buyer is priced out. They’d rather live in Texas, Idaho, or some other lower cost state. Anything is possible, but the prices in these areas are not enough lower at this time to draw folks away from the incredible opportunities in the Inland Empire and the neighboring Counties of LA and Orange. Oh, of course, the playlands at the beaches, in the mountains, and out in the desert might also keep folks from looking too far afield.

2.     Rents will also be up

Econ 101 tells us about rents as well. Supply, demand price. Then you add in one more component…housing prices. There are two reasons why housing prices effect rent. One is that tenants have the choice to become owners, so there is always an equation that makes that choice more appealing. It isn’t all about finance, of course. There are plenty of emotional and practical elements, too. But the financial one is key even then.

If the economics of owning a home became so much better than renting, then the practical aspects such as length of planned occupancy change. It becomes practical to own even if you only think you’ll be in that home for four years instead of five.

The other side of the rent vs buy story is the landlord’s equation. The cost of the property must be low enough compared to the rent to provide the landlord with an appropriate return on investment. As rents go up, so does the cost the landlord is willing to pay, and vice-versa. 

The same factors driving up home prices are driving up rents. The Inland Empire is not building even as many apartments as LA and OC. The shortage is projected to last well into the next decade.

3.     Mortgage interest rates will continue steady at least through April

Can you find one pundit who, in 2012 or 2015 or even early 2017 would have estimated we’d still be under 5% for 30-year fixed mortgages? But here we are. We continue at these historic low rates, even in the face of Fed tightening and the beginning of the Fed selling off mortgages to reduce the huge overhang of assets that it has been carrying.

Why are mortgage rates still so low, and why might we get another year of only slight increases? Econ 101 again. The folks demand to receive “real” returns on their safe investments of about 2%. So if inflation is at zero, or close to zero, then real interest rates for treasuries and super-secure bonds will be around 2%. Mortgage lenders need to charge more than that, as home mortgages are not as secure as US treasuries.

What is the spread between inflation and mortgage rates. Around 3%. So an argument can be made that interest rates should be closer to 5% with inflation now moving towards 2%.

And there is every reason to believe that this will take place over the next year as the economy continues to heat up and wages begin to climb faster. That has been the missing component. To many folks out of the labor market or working way below their skill level. That gap needs to close before wages start moving to where they should be when unemployment is so low. It will probably happen this year or next.

So the bond market doesn’t believe in 2% inflation yet. Thus, mortgages for under 4%. There is also a supply demand issue for the mortgages themselves. Far fewer mortgages are being written, because home purchases and refinances are way down. This means too many mortgage companies chasing too few mortgages. That is not likely to continue. Markets generally close such gaps.

Figure mortgages around 4% until April when the single-family season heats up. Then we might see 4.5%. If wage inflation hits 2% or more for two quarters in a row, then 5% could happen in 2018.

4.     Inventory of homes for sale and rent will be similar to 2017. Extremely limited

When the market for anything gets really tight, and the prices start getting really high, those who own the thing commonly start thinking about cashing out. After this huge run up in housing prices, why aren’t folks in the Inland Empire cashing out. The list is very, very long

A.    Where will they move? Housing gridlock. “I can’t sell because there is nothing I want to buy.” It is possible that some wave effect might occur where a bunch of folks decide to sell, and then there’s enough inventory, which opens up another wave. This could happen because of a fear of recession or future downward pressure on prices. This does not seem likely. If you can afford to live in Southern California, there is not much motivation to leave. If you do want a larger or smaller house, or one that is in another neighborhood, you haven’t increased the local inventory at all.

B.    No mortgage. A very high percentage of the owners in the Inland Empire have no mortgage or a very low mortgage with very low payments. There is absolutely no incentive to move.

C.     Low mortgage interest rate. No incentive to pay for a new mortgage that might be a point higher than now.

D.    Low property taxes – prop 13. If you move, you are now paying current year property taxes rather than what might be substantially lower taxes.

E.     Cost of moving. Currently it will cost the average owner $35,000 or more to sell an existing $400,000 home and buy another. For some who bought that same home for $150,000, $35,000 seems like a lot of money.

F.     Been in the house for a very long time. Many residents have lived in their homes for a very long time. Moving means uprooting friendships, learning new neighborhoods, etc.

5.     Moreno Valley will be the next city to gentrify

You want a sure bet in real estate. Think back to Venice in 2005. Santa Monica and Mar Vista were sold out. Culver City had the fastest rising cost of housing in the state. Marina Del Rey was sold out. Playa Vista was an old helicopter testing field and wildlife preserve. Venice was surrounded and it was a gang-infested hell hole. Property was dirt cheap and it was walking distance to some of the best beaches on earth. What would one guess could happen someday.

Fast forward to 2018. Riverside and Corona have a fair amount of land that can be developed, and both cities should continue to see dramatic improvements in the infrastructure and the overall appeal of the cities. But Moreno Valley is going to explode, assuming the World Logistics Center gets built. Even if it doesn’t there is no doubt that the future of major logistics expansion is in this city.

6.     The working poor will be forced out further into the desert or out of the state

What do you do if you can’t afford $800 a month for a bachelor or $1200 a month for a one bedroom. You either have to move to poorer neighborhoods or go much further east.

There are places in Fontana and San Bernadino that are now improving due to the same pressures that are creating improvements in RIverside. Not enough room for the folks who can afford more. Thus those who can’t afford more have to move where the housing is affordable.

Where can you go? There’s still a lot of land between Riverside and San Diego or Palm Springs. Unfortunately, the drive times to work will kill you. Many of the working poor are already heading to less expensive parts of the country.

 

Distribution Centers stretch as far as the eye can see

8.     Distribution, logistics, health care, and education will continue to drive growth

The distribution centers in the Inland Empire are driving massive increases in the ports and all types of transportation businesses associated with distribution. Will we see hyperloops built to move freight from LA and Long Beach Harbors to Ontario and the Moreno Valley? Will headless trucks be driving in special lanes? Or will drones be the answer?

Moreno Valley officials suggested two possible headquarters sites for the new Amazon headquarters facility that could be accessed with a proposed monorail built from the Metrolink Moreno Valley/March Field station. They were just spit balling, but the future is their’s to write.

Service jobs in health care and education are growing much faster than jobs in construction or manufacturing. Look for this trend to continue with the Riverside area having half the doctors they currently need compared to other similar urban areas. The new health center will only partially alleviate this need.

Any recession in the next few years, unless it is worldwide and protracted, will be unlikely to slow down the Inland Empire. The economics suggest that this area is well positioned for years into the future.  

If you are looking to buy or sell a home In the Inland Empire area, Alice and Brent Bechtel are ready to help you. You can set an appointment to discuss your real estate needs by calling Alice Bechtel at

The Bechtel Team Has Some Mouthwatering Ideas for Super Bowl Snacks

Your Super Bowl party is only days away. Have you decided what to serve the ravenous crew that will grab their attention from watching Brady go for #6? If you’re still open for suggestions, we’ve scoured the internet and have found a few dozen ideas that might do the trick. Then again, you could just call out for pizza.

Best Picture (of food) Awards:

Bacon Cheese Ball – Winning 1^st place in the 100 calories per bite competition, this delectable looking treat cannot be prepared incorrectly. Any combination of cheese, bacon, and nuts should do.

Creamy shrimp, crabmeat, and spinach dip – This really is best picture, but the cheese ball had bacon in it. 

 

Fried jalapeño poppers – poppers are all the rage, and will likely surpass wings for second place after pizza. The fried part caught my attention.

 

Sweet potato shepherd's pie – This is not chicken pot pie. Look up the recipes. It might become a staple at your house even between Super Bowl parties.

Pepperoni Pizza dip – Honorable mention for best picture. I’m thinking this could even make my dreams.

 

For more amazing pictures like these, go here

Mouthwatering diversions (Recipes available here):

Jalapeño Poppers Super Bowl Pretzel Bites – Why are poppers becoming so popular? Baked or with Pretzels? Both please!

Pulled Pork Sliders with Sweet Onion Sauce – Let me count the ways I like this one – pulled pork! Sliders!! Sweet Onion Sauce!!!

Copycat Outback Steakhouse Blooming Onion – Never been to Outback? Here’s what you’re missing. 

 

 

The Best Party Meatballs Ever

Quick & Easy Grilled Avocado

Easy Sloppy Joe Cornbread Cups

Hot & Cheesy Pizza Dip

Chicken & Waffle Sliders

Buffalo Chicken Super Bowl Cheese Balls

All the above recipes are available here

The Unpronounceables

Everyone is a chef today, and here is a list of the trendiest food groups. Look them up; they’re real. 

Dessert versions of bao (China’s soft steamed buns) and gyros-filled arepas. Ethiopian berbere spice blend (paprika, allspice, coriander, ginger, cinnamon, cardamom and red pepper) and Japanese furikake (seaweed, sesame, sugar, salt and dried seafood).  Hot will be all the rage.

Puffed and popped snacks like cassava chips, puffed pasta bow ties and seaweed fava chips”) and shakshuka. Taco made with seaweed wrappers and poke filling.

More trending items: chicken masala pizza, tandoori chicken poutine, cotton candy, raclette cheese, and schnitzel.

9 Reasons Riverside Real Estate Is Booming

As noted in our post, 7 Surprising Inland Empire Real Estate Predictions for 2018, the Inland Empire is a red hot real estate market, and is unlikely to cool off anytime soon. But what is the secret? Why not Ontario or Cucamonga? Here are some thoughts on that subject. 

Riverside is the centroid or hub of a new urban region 

 

Like it or not, Riverside is not about oranges anymore. Every major city in America is now

surrounded by other urban centers. Unlike suburbs, these cities have their own high-rise city centers, freeway interchanges, and culture. LA has several, including Long Beach, Santa Monica, and Pasadena. Riverside is now in that group. Ontario, Rancho Cucamonga, Parris, Fontana, San Bernadino, Redlands, Moreno Valley, Corona, Norco, and Jurupa Valley surround the city and feed into and off of the resources unique to Riverside. Taken together these communities now have a population of 1,700,000 folks. 

Riverside has the largest population by over 100,000 at 313,000 compared to San Bernadino with only 209,000, and in total land mass. But more important that sheer numbers, Riverside’s location serves as a hub to the surrounding area. The next closest hubs are Anaheim and Irvine.
Riverside is the historic center

Only the Cities of San Bernadino could compete with Riverside for the historic center of the Inland Empire. Founded a few years earlier and sitting at the foot of the highest local mountains, San Bernadino had a very different set of attributes. But the Mission Inn created a cultural center that would serve to create a great deal of national attention to Riverside, including visits by multiple US presidents and movie stars. 

Riverside Chamber of Commerce

 

As one of the most influential chambers in the state, the Riverside Chamber works closely with local government and other entities to strengthen the local economy. The Chamber is pro-actively involved in every important issue facing Riverside business. One of the largest Chambers in Southern California, the Riverside Chamber is comprised of nearly 1,300 business enterprises, civic organizations, education institutions, and individuals.

Riverside is diverse

 

Riverside is amazing diverse with almost 50% Hispanic or Latino, 34% white, 7% black, 7% Asian, and 1% Native American.

Riverside is largely Christian and home to Catholic, Eastern Orthodox and Protestant churches, and an Islamic mosque, Mormon churches, Jewish synagogue, Hindu temple, several Buddhist temples, and a Universalist Unitarian church. Riverside is also home to the Inland Empire Atheists and Agnostics organization.

Riverside is an education center

 

With four major colleges or universities and 50,000 students attending institutes of higher learning, Riverside is truly a college town. This concentration of brains and talent has led to a very active business community and helped to spawn the cities claim of being a center of arts and innovation.

The business community, educational leadership, and city government have joined together in a successful attempt to keep the graduates of the local schools in the Riverside area. The overall combination of resources is beginning to draw larger enterprises to Riverside. 

Riverside is at the crossroads of America’s best playland

 

In an hour or less you can be in the snow, at the beach, crossing sand dunes, doing Disneyland, fresh water fishing, or at the top of the tallest building in the West. In under 2 hours you can add San Diego, Malibu, and be halfway to Las Vegas by car.

Within that two hour drive you have so many icons of SoCal that it would take a book to write them all down. Beverly Hills, Hollywood, the Getty museums, LACMA, LA and San Diego Zoos, Venice, the Rose Bowl, and so much more. 

Riverside has great weather 10 months of the year

 

Sure, it gets hot in Riverside. But compared to the rest of the US, Riverside is paradise. Today is December 30 and it was 76 for the high. Take that Seattle or Chicago, or Denver.

You can be sure that many who live in SoCal for the weather would prefer to live in West Los Angeles or Newport, but the housing cost is double that of Riverside in those more perfect weather locations. $700,000 gets you 3000 square feet on a half-acre in Riverside. That might buy a one bedroom condo in Santa Monica. 

Riverside still feels like a community

 

No one can predict whether this will still be true in 20 years or even 10, but at least for now, there is still a small city feel in Riverside. You can run into your friends at the Regal or Stater Brothers. The Festival of Lights at the Mission Inn is a community event. 6% of the residents are veterans and the local March Field Air Museum is a rare treasure. 

 

Riverside is thinking about the future and doing something about it 

 

Here are recent distinctions that Riverside has earned:

#2 Millennial Boomtown – Forbes 2014 #8 Coolest City in America – Forbes 2014 California Association for Local Economic Development - Award of Merit, Small Business Direct Installation Program – 2013 # 1 for Job Growth in 2013- Riverside and the surrounding metro area topped the nation with 4% job growth according to a report by Professor McPheters from the W.P. Carey School of Business at Arizona State University. Intelligent Community of the Year 2012 – Selected from over 400 of the world’s best cities, Riverside was recognized by the Intelligent Community Forum (ICF) for its efforts to improve the quality of life and is confirmed as a community that is a great place for people to work, do business, and raise a family. #3 in America’s 20 Can-Do Cities by Newsweek Top 25 City for Business – Executive Outlook Magazine named Riverside as a top 25 city for business and identified it as a bright spot in a tough economy. Great Places in America – The American Planning Association listed Fairmount Park as one of the great places in America. Public Spaces and City Parks wrote that revitalization efforts in Fairmount Park, “Exemplified the catalytic power of parks to transform urban areas.” #2 in Cities with the Fastest Broadband – Business Insider listed Riverside as #2 of 10 U.S. cities utilizing broadband technology. #6 Happiest City for Young Professionals by Forbes – Riverside earned an impressive 6th place ranking out of the top 10 cities in the U.S. 2013 Playful City USA Award – Riverside has been recognized five consecutive years by KaBoom! National Campaign for Play for American cities that have made innovation play for children a priority for the community.