California Association of Realtors: Home sales will rise in 2016
GRASS VALLEY, Calif. — California’s housing market will continue to grow in 2016 — but that growth will be limited by a lack of inventory and persistent high prices, according to the latest forecast from the California Association of Realtors.
Leslie Appleton-Young, the association’s vice president and chief economist, shared details of the organization’s 2016 market forecast in a presentation Tuesday to members of the Nevada County Association of Realtors.
The California Association of Realtors is predicting a 6.3 percent increase in existing home sales in 2016. That’s 433,000 single family home sales.
Those projections build on the market growth in 2015, Appleton-Young said; home sales are also expected to increase by 6.3 percent from 2014 to 2015.
“It’s been a good year and better than we expected,” Appleton-Young said.
Next year’s even stronger outlook for the real estate market is due to a variety of factors, she said.
The organization’s forecast shows the nation’s gross domestic product increasing to 2.7 percent in 2016, up from projected gain of 2.4 percent this year.
The average interest rate for a 30-year fixed mortgage is expected to rise slightly from 3.9 percent in 2015 to 4.5 percent in 2016, but is still at “historically low levels,” according to the association.
The organization’s projections show California’s unemployment rate dropping from 6.3 percent in 2015 to 5.5 percent in 2016. In addition, real disposable income among state residents is expected to rise from 4.3 percent in 2015 to 4.5 percent in 2016.
“That’s very, very positive,” Appleton-Young said. “It’s people having more money to spend and being in really good jobs.”
One major problem affecting California’s real estate market is expected to persist into 2016 — lack of inventory. From August 2014 to August 2015, the state’s single family home inventory continued to decline, from 4.0 months worth of inventory to 3.6 months worth of inventory.
There are many reasons units are in high demand, Appleton-Young said, including less properties in the foreclosure pipeline, lack of new construction and investors choosing to rent out properties instead of selling them.
There are also fewer current home owners trading up to new properties, she said. Not only do they not want to give up their low mortgage and property tax rates, but they’re also wary about beating out the competition to find an affordable new property.
And for good reason, Appleton-Young said. She noted in 1970, the difference between California’s median home price and the nation’s median home price was $10,000. Today, it’s $247,000.
“The California Association of Realtors is very concerned about the affordability issue,” she said.
The median price of a single family home in California is projected to increase by 3.2 percent to $491,300 in 2016. However, Appleton-Young noted, there may be some relief in site.
That increase is the slowest rate of price appreciation in five years, a sign that market is leveling out.
“People want real estate, but nobody wants to overpay for it. The feeling right now is that things have gotten a little out of hand,” she said. “It’s not that the demand isn’t there, but the demand isn’t there at any price.”