Here are the most common questions we Realtors are asked:

“How’s the market?”

“Is now a good time to buy/sell?”

We are certainly experts in our local market, and can explain current conditions and historical trends, but it’s forecasting the future that gets tricky!  If only we had a crystal ball.  We don’t, but in our world, the closest thing is Leslie Appleton-Young, the Chief Economist for the California Association of Realtors (C.A.R.).  Late each fall, she releases her market recap and forecast for the upcoming year.  She is always spot on in explaining current market conditions, and while she can’t predict the future, she is certainly analyzing state, national and global data to arrive at her predictions for next year’s housing market.

Last year, C.A.R. (California Association of Realtors) had predicted that mortgage interest rates in would rise to 4.5% in 2016.  That certainly didn’t happen.  In fact, rates in 2016 dropped from an average of 3.9% in 2015 to an average of 3.6% in 2016.  Needless to say, C.A.R. had some explaining to do!  Economic constraints, lack of home affordability, and fewer mortgages being originated (less re-financing and flat sales volume) kept rates low.  Back in the fall when C.A.R released their 2017 forecast, Ms. Young predicted rates would rise to an average of 4.0%.  Looks like she will be spot on, perhaps just sooner then she predicted as rates jumped up over 4% immediately following the election.   As of today, rates seem to be settled at about 4% and likely won’t change dramatically this year.

Ms. Young and C.A.R. are predicting a very modest increase in home sales in 2017 – an increase of 1.4% compared to a .4% decline in homes sale in 2016, coming off a 6.8% increase in homes sales in 2015.  So why the lack of growth in the housing market?  The simple answer is lack of inventory, particularly in the entry level market, and lack of affordability.  New homes aren’t keeping up with population and job growth, so we have a shortage of housing.  In fact, more than half of the homes hitting the market in California are receiving multiple offers. 

One would think that if supply is low and demand is high, prices should be rising.  And they are, but only modestly:  up 6.2% in 2015, 6.2% in 2016 and C.A.R. is predicting a 4.3% rise in median homes prices in 2017.   Why aren’t prices rising at a faster rate if there is so much pent up demand?  The simple answer is affordability.  Only 31% of Californians can afford a median priced home.  For comparison, 57% of Americans can afford the nationwide median priced home.  As a result, Californian’s are staying in their homes longer than ever before and permits being pulled to remodel and add-on are at all time highs.  More single family homes are non-owner occupied and rents are soaring.

The 2017 housing market, should see some appreciation in home prices and interest rates.  If you’d like current valuation on your home or want to discuss buying or investing in Real Estate, call us.  We would love to help!