According to the latest report issued by the California Association of Realtors released on September 29, 2016, the California housing market should see moderate gains in 2017 despite the limited number of available homes and rising prices. In fact, the current market is tighter and more expensive than it has been in the past six years.
Sales of Single Family Homes to Increase
According to the report, the sale of single-family homes is expected to increase by up to 1.4 percent in 2017. Currently, the sale of single-family homes makes up approximately 68 percent of all homes sold in the state. The report estimates sales will increase to 413,000 homes in 2017. This might surprise many in the real estate industry as sales in 2016 have actually experienced a drop with projections showing that 2016 sales may indicate a 0.4 percent drop ending in the region of 407,300 sales by the end of the year.
Along with lagging sales this year, the California Association of Realtors report shows that the median price of houses (the mid-point price of all single home sales) for 2017 is expected to show is the smallest gain in the past six years. This year the median price is only expected to rise by 4.3 percent to approximately $525,600, not what most realtors would consider a booming housing market.
In comparison to the predictions for 2017, the median house prices for 2016 are expected to show a significantly higher increase of 6.2 percent. This means that the average selling price for a single-family home in the state of California is expected to sit at approximately $503,900 by the end of the year.
Strong Sales Activity to be Tempered
According to Leslie Appleton-Young, Chief Economist for the California Association of Realtors, ” The net result will be California’s housing market posting a modest increase in 2017. The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”
With an outlook, such as this, Californians can expect to find a significant decrease in the affordability of housing in the local market as increases in housing prices are expected to continue to outpace pay raises and increases in income. The report goes on to say that only 29 percent of home buyers in California will be in a position to buy a median priced single-family home in 2017. In 2011-2012 this number was in the 50 percent range, showing how rapidly the affordable housing market in California has shrunk.
In Southern California, housing sales are expected to be similar to last year with only a 0.4 percent increase for 2016 and 0.7 in 2017. But at the same time, housing prices are expected to show a 5.4 percent increase by the end of 2016 and 3.2 percent in 2017. Those interested in a single-family home in Southern California can expect to see median home prices in the range of $501,500 in 2017. However, in the San Francisco Bay Area, an area that has long been the hottest market in the state, prices are expected to continue increasing, but sales are expected to decrease by 6.4 percent for 2016 and 5.6 percent in 2017. Median home prices in the Bay Area are expected to reach $833,600 in 2017.