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