California has experienced 5 years of rising home prices, and that trend is expected to continue for another 3 years. If prices rise the 4.2% projected for next year, the average price of a home in California will reach $561,020 and surpass the record set in 2007 or $560,270.
However, even at this level, prices will remain below pre-recession levels when adjusted for inflation.
The number of single family homes sold is expected to rise 1% over 2017 to 426,200.
The rate of both price gain and unit sales growth is slower than in recent years, suggesting that perhaps the market is beginning to stabilize.
The prices the market is currently willing and able to pay, are not high enough to entice owners to sell, so inventory (and therefore, sales) remains constrained.
Sellers face both income and property tax consequences if they sell, and therefore are choosing to age in place. The cumulative effect of this thinking keeps inventory off the market, and forces would be buyers to remain in rental housing.
This increasing demand for rental properties and drives rents up, which makes it harder for would be buyers to save for the purchase of a home.
In 2012, when the recovery began, half the the state’s residents could afford the average home. In the past 5 years, that figure as fallen to just over a quarter or state residents.
This affordability issue drives the lower income part of the population away from the coast and even out of state.
CAR expects mortgage rates to rise to 4.3% next year from 4% this year, and 3.6% in 2016. This rate is still low by historical standards and is not expected to deter home purchases.