WASHINGTON (AP) - The California Association of Realtors issued a somewhat sobering, but not devastating prediction of California's housing market in the coming year. In a nutshell, economic reality is catching up with the momentum of California's runaway home price.
From now until early spring, home buyers are in a good position, if they can get a home loan. The reality: ever higher home prices coupled with declining affordability thanks to higher interest rates are starting to erode the seller’s market.
"A leveling of the market, inventories increasing, homes are sitting on the market a little longer. It's more of a balanced market between the buyer and the seller," said Jeff Mann, owner/broker of Better Homes Realty in Antioch.
With 9 weeks left in the year, the California Association of Realtors says, for the first time in four years, 2018 California home sales will be lower and, with even higher interest rates expected, 2019 is looking to be weaker as well. Here are the real numbers: In 2017, California had 424,100 home sales. This year, the projection is 410,460 homes, a 3.2% decline.
Next year, home sales are expected to be 396,800, another 3.3% drop. Interest rates, though low by historical standards, have climbed from 4 percent last year, to 4.7% this year and are projected to go to 5.2% in 2019. "First time home buyers, with interest rates ticking up the way they have, less people quality to buy a home. But for the most part, if the homes are marketed well, the do sell," said Sam Benson is Managing Broker at Berkshire Hathaway in Benicia.
Despite all that, California's current median home price increased 7% from last year and is projected to increase another 3.1% next year to $593,450.
Jordan Levine is senior economist at the California Association of Realtors. "Not only are prices growing, they're growing faster than incomes and it's starting to get to the point where you take it together with the higher interest rates and a lot of folks simply can't afford to get into the market. Listings are up significantly and still we're not converting those into closed sales," said Mr. Levine. Another telltale sign: far fewer multiple offers. "We're starting to seem more active listings out there coming down," said Levine. In fact, 40% of all August listings involved a price reduction.
But, while there's a bit of a reckoning going on, it does not seem we're headed for a wreck.