Home prices throughout most of California will post modest declines next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to the California Association of REALTORS® (C.A.R.) "2008 California Housing Market Forecast" released this week to Silicon Valley Association of RELATORS® (SILVAR) members and other Realtors gathered in Anaheim.
The forecast was presented during the CALIFORNIA REALTOR® EXPO 2007 held Oct. 9 to 11 at the Anaheim Convention Center in Anaheim, Calif. The trade show attracts nearly 12,000 attendees and is the largest state real estate trade show in the nation.
The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.
"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," said C.A.R. President Colleen Badagliacco. "Now is not the time for homeowners to 'test the waters' – only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."
"Sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase," she said
C.A.R. Vice President and Chief Economist Leslie Appleton-Young also told Realtors at the Expo, "Geographically, more affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large number of new homes coming onto the market in recent years. Higher priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles, and Orange counties will react more to affordability constraints."
Appleton-Young also noted, "By price-range, the highest-priced markets – those with medians over $1 million — will show less stress. The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new home developments where price-cutting has been even more severe."
C.A.R. economists likewise projected a 23 percent decline in sales this year to 367,500 units compared with 2006, and a 3.5 percent increase in the statewide median price to $576,000. However, the projected increase in the 2007 statewide median stands in contrast to the situation in most counties, regions, and communities of the state, where slight to modest year-to-year percentage declines have become more prevalent and will continue next year.
Historically, the last time the sales level fell below 2007's projected 367,500 units occurred in 1995, when annual sales totaled 342,540 units. Sales last fell below 2008's 334,500-unit forecast in 1985, with 328,270 units. The last time the statewide median price fell was a 0.5 percent decline in 1996. The most recent statewide median price decline greater than 4 percent was a 4.5 percent decline in 1993.
Officials emphasize all real estate is local with large variations within a given area. The Silicon Valley housing market, for instance, appears insulated from the impact on sales by subprime problems and rise in foreclosures, Badagliacco told SILVAR Realtors at a SILVAR district tour meeting last month.
"Only a small portion of the Valley is affected by subprime lending problems and foreclosures compared with the rest of the state. We are adding jobs and the economy is strong," said Badagliacco.
The robust economy and other assets like location, weather and good schools have created an unwavering demand for homes in the area, she said.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.