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Realtors forecast California housing market to see modest gains in 2017

Original Source: JEFF COLLINS, ORANGE COUNTY REGISTER


California’s housing market will post modest gains next year amid tight supplies and the lowest housing affordability in six years, the California Association of Realtors forecast Thursday.

Sales of existing single-family homes – which make up about 68 percent of the overall market – are projected to rise 1.4 percent in 2017 to 413,000 transactions.

Next year’s small gain will follow a projected 2016 sales drop of 0.4 percent to 407,300 deals, the forecast said.

Meanwhile, the median house price – or price at the midpoint of all sales – is projected to rise 4.3 percent to $525,600. That’s the smallest percentage gain in six years.

By comparison, 2016 house prices are projected to be up 6.2 percent to $503,900 by the end of December.

“The net result will be California’s housing market posting a modest increase in 2017,” said Leslie Appleton-Young, the Realtor association’s chief economist. “The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”

Housing affordability will fall as price gains continue to outpace pay raises.

Just 29 percent California homebuyers will be able to afford a median-priced house next year, the association predicted. By comparison, more than half the buyers could afford the median-priced home in 2011-12.

In Southern California, house sales are projected to be virtually unchanged this year and next from 2015’s sales pace, the forecast said. Sales are projected to rise 0.4 percent this year and 0.7 percent next year.

The median house price in the region is projected to be up 5.4 percent by the end of 2016 and to rise 3.2 percent to $501,500 next year.

The state’s hottest housing market – the San Francisco Bay Area – will see larger price jumps amid falling sales as buyers flee to more affordable markets. The forecast projected sales declines of 6.4 percent and 5.6 percent in 2016 and 2017.

Bay Area prices, meanwhile, are forecast to increase by more than 6 percent both this year and next, rising to $833,600 in 2017.

Mortgage interest rates are forecast to rise next year, but not by much. The average rate for a 30-year fixed mortgage is expected to be 4 percent in 2017, compared to this years near-record low of 3.6 percent

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LA housing market a safe bet, despite rising prices, report says

Originally published by 89.3KPCC Business and Economy

possible FB cover shot Tanager House 2015

What may feel like a real estate bubble in Los Angeles — with all-cash offers and frenzied bidding wars — is actually the midpoint of a steady housing market recovery, analysts say.

The UCLA Anderson Forecast released Monday said L.A. is only three years into a rebound that started in 2012. Home prices have since climbed 27 percent. History suggests there will be four more years of price increases and home values will go up another 35 percent before there is any sort of correction.

The reason comes down to a fundamental imbalance: there’s lots of job growth, but because of strict building and environmental regulations, there will be very little increase in the housing supply.

“That means you will not expect to see housing more affordable during the next few years,” said Jerry ​Nickelsburg, a Senior Economist at UCLA’s Anderson Forecast. “In fact, just the opposite.”

While entering the market is tough, buying a home right now in Los Angeles isn’t as risky as the high prices make it feel, the report said.

“L.A.’s housing market, despite becoming more expensive and unaffordable, is not in a bubble.”  UCLA economist William Yu wrote. “The current rise in home prices seems to be driven by rising effective demand and limited supply, not by speculation. Therefore, the housing bubble burst we experienced several years ago is unlikely to haunt us this year or next, and the smart money will continue to invest here.”

That includes Chinese buyers, who have been bidding up Los Angeles houses in recent years.

Though the Chinese economy has recently slowed, Yu doesn’t expect the downturn there to impact prices here. Yu said China’s economic problems could actually raise home prices in Southern California as investors seek stability outside their country.

“With the dismal outlook and uncertainties in China, contrasted with the promising and stable outlook in the U.S., it is wise to reallocate money from China to the U.S.,” he wrote in the report. “Even with the negative wealth effect generated from China’s deflating real estate, tumbling stock markets, and 3 percent currency devaluation, wealthy Chinese individuals still have sufficient equity to make a move.”

Other industries, he said, like tourism and trade, could suffer.

It’s still a buyer’s market, call me for information on the areas you are interested in.