California house sales, prices to keep rising

Home sales in California are projected to rise for the third year in a row thru 2013, climbing to the highest level in four years, the California Association of Realtors said in a housing market forecast released today.
 
Meanwhile, prices are expected to hit the highest level in five years after rising for a second year in a row.

“The housing market momentum which began earlier this year will continue into 2013,” said Leslie Appleton-Young, the association’s chief economist.

“Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price-range homes.”

Specifically, the CAR 2013 outlook predicts that:

• The number of existing single-family homes resold in the state will total 530,000, a 1.3 percent increase from this year’s projected tally of 523,300 house sales. That would be the highest number of sales since 2009, when 546,900 houses were sold statewide.
• The median price of an existing California house – or price at the midpoint of all sales – will rise to $335,000, up 5.7 percent from this year’s projected median price of $317,000. That would be the highest median since prices peaked at $560,300 in 2007.

If next year’s forecast is accurate, house sales will be up 53 percent from California’s sales bottom in 2007, but still will be 15 percent below the market peak of 625,000 transactions in 2005.

The median price would be up 22 percent from the price bottom of $275,000 in 2009. But the median price would remain 40 percent below 2007’s price peak.

The CAR forecast has had a spotty track record, with the median price forecast coming within five percentage points of actual prices just once in the past seven years.

The sales outlook came within five percentage points just twice in the past seven years, but that was in the last two forecasts.

Still, state Realtors are confident that the market rebound will go on.
“The market has improved moderately over the past year, and we expect that to continue into 2013,” a CAR statement quoted association President LeFrancis Arnold as saying.
“Sales would be even higher if inventory were less constrained in REO-dominated markets, particularly in the Central Valley and Inland Empire, where there is an extreme shortage of available homes.”

CAR’s outlook also calls for mortgage interest rates to end six years of declines, climbing slightly to 4 percent for a 30-year, fixed rate mortgage. Although that’s up from this year’s projected rates of 3.8 percent, it’s still well below rates for the previous seven years.
The one-year adjustable-mortgage rate is expected to hold steady at a record low of 2.8 percent.
The forecast predicts further that:

• California employment will increase 1.6 percent next year, lowering the state’s jobless rate to 9.9 percent (down from 10.7 percent this year).
• The U.S. Gross Domestic Product will rise to 2.3 percent next year, vs. a gain of 2 percent in 2012.

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