The California housing market will continue to improve next year, according to the recently-released California Association of Realtors “2016 California Housing Market Forecast,” but it’s not all roses and sunshine. The trade organization also pointed out a shortage of available homes and a lack of affordability will continue to be a drag on the market next year.
C.A.R. projects sales of existing single-family home will increase by 6.3 percent to 433,000 units in 2016. Sales for this year are projected to be 407,500, which in itself was a 6.3 percent increase from the 383,300 units sold in 2014.
In the report, C.A.R. noted solid job growth and favorable interest rates will continue to drive strong demand for homes in the Golden State. C.A.R. predicts the average for a 30-year, fixed mortgage interest rate will increase only slightly to 4.5 percent next year.
C.A.R. Chief Economist Leslie Appleton-Young noted there are challenges facing the California housing market that could ease momentum, including financial market volatility and the anticipation of higher interest rates. But, she added, “the foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth.”
The median price of a home in California is expected to 3.2 percent to $491,300 in 2016. This year, home prices are projected to 6.5 percent from 2014 to $476,300. That would be the slowest rate of price appreciation in five years, the report notes.
It’s great news to hear the housing market in California will remain on solid footing next year, and that California home prices will undergo only modest gains. However, the dearth of available homes and lack of affordability is an increasing problem in the state. New home construction has been up throughout the state, which could eventually help in rectifying the lack of supply and affordability issues. But that’s still a ways away, so it appears it will be more of the same next year.