California's housing market will continue to improve in 2016, but a shortage of homes on the market and a crimp in housing affordability also will persist, according to the California Association of REALTORS® (C.A.R.) "2016 California Housing Market Forecast."
"We in a much better place today," announced C.A.R. vice president and chief economist Leslie Appleton-Young, as she delivered the 2016 housing market forecast to members of the Silicon Valley Association of REALTORS® and other REALTORS® from across the state at the C.A.R. EXPO Oct. 6-8 in San Jose.
2016 is not going to be easy, though. Appleton-Young said the state's housing market will continue to improve in different degrees across the state, but the struggle with low inventory and housing affordability will continue.
"Workforce housing is a critical issue for our communities," said Appleton-Young.
C.A.R. forecasts an increase in existing home sales of 6.3 percent next year to reach 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold. Sales in 2015 also will be up 6.3 percent from the 383,300 existing, single-family homes sold in 2014.
Appleton-Young projects growth in the U.S. Gross Domestic Product of 2.7 percent in 2016, after a projected gain of 2.4 percent in 2015. With nonfarm job growth of 2.3 percent in California, the state's unemployment rate should decrease to 5.5 percent in 2016 from 6.3 percent in 2015 and 7.5 percent in 2014. 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 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300. This is the slowest rate of price appreciation in five years.
Due to the "IT gold rush," the San Francisco Bay Area is seeing prices above prior peak. Appleton-Young said Silicon Valley is experiencing an explosion of IT wealth, with "a lot of money chasing a limited supply of homes."
For 2016, in the San Francisco Bay Area especially, Appleton-Young said sales growth could be limited by stiff market competition and diminishing housing affordability.
"It's not because demand isn't there. It's because the inventory isn't there," said Appleton-Young.
While the overall 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, Appleton-Young said the wild cards for next year include a global economic slowdown, financial market volatility, and the anticipation of higher interest rates. More sales shift to inland regions of the state and the change in mix of sales will keep increases in the statewide median price tempered.
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.
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