With more homes for sale on the market, California’s housing market will see fewer investors and a return to traditional home buyers as home sales rise modestly and prices flatten out next year, the California Association of Realtors said today in its 2015 California Housing Market Forecast.
The forecast by Los Angeles-based CAR envisions 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, a CAR statement said.
Sales in 2014 will be down 8.2 percent from the 414,300 existing single-family homes sold in 2013.
“Stringent underwriting guidelines and double-digit home price increases over the past two years have significantly impacted housing affordability in California, forcing some buyers to delay their home purchase,” said CAR President Kevin Brown. “However, next year, home price gains will slow, allowing would-be buyers who have been saving for a down payment to be in a better financial position to make a home purchase.”
CAR projects growth in the U.S. Gross Domestic Product of 3 percent in 2015, following 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.
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, according to the CAR statement.
The California median home price is forecast to increase 5.2 percent to $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 Vice President 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.”
The state will continue to see a bifurcated market, with the San Francisco Bay Area outperforming other regions, thanks to a more vigorous job market and tighter housing supply, according to CAR.