The 2015 California Housing Market Forecast by the CAR said to expect an increase in existing home sales of 5.8 percent next year to reach 402,500 units, up from the projected 2014 sales figure of 380,500 homes sold, according to a statement from the association.
Sales in 2014 will be down 8.2 percent from the 414,300 existing single-family homes sold in 2013. “We are transitioning into a slower price appreciation environment,” said Appleton-Young. The real estate scene going forward may seem dull, but is characteristic of a market that hit a tipping point after the rocket ride of 2013. Median home prices rose 27.5 percent. Investors swooped in, scooping up foreclosure stock. Inventory was crimped. Cash was king.
That dynamic has significantly impacted housing affordability in California and forced some buyers to delay their home purchase, association president Kevin Brown said. Any slow-down in price gains will help would-be buyers get into the market. “I don’t think it’s out of the question that within two years from now we could see some declines or retreats in terms of prices,” Appleton-Young said.
California’s housing market will see fewer investors and a return to traditional home buyers as home sales rise modestly and prices flatten out in 2015. The average for 30-year fixed mortgage interest rates will rise only slightly to 4.5 percent but will still remain at historically low levels. The California median home price is forecast to increase 5.2 percentto $478,700 in 2015, following a projected 11.8 percent increase in 2014 to $455,000. This is the slowest rate of price appreciation in four years.
“With the U.S. economy expected to grow more robustly than it has in the past five years and housing inventory continuing to improve, California housing sales and prices will see a modest upward trend in 2015,” said CAR VP and Chief Economist Leslie Appleton-Young. “While the Fed will likely end its quantitative easing program by the end of this year, it has had minimal impact on interest rates, which should only inch up slightly and remain low throughout 2015. This should help moderate the decline in housing affordability we saw occur over the past two years.”
C.A.R.’s forecast projects growth in the U.S. Gross Domestic Product of 3 percent in 2015, after a projected gain of 2.2 percent in 2014. With nonfarm job growth of 2.2 percent in California, the state’s unemployment rate should decrease to 5.8 percent in 2015 from 6.2 percent in 2014 and 7.4 percent in 2013.