CAR: Small sales gain, modest price increase in 2018
By Ron Trujillo / email@example.com
California’s booming housing market is expected to take a breather in 2018, as affordability and a critical shortage of homes will likely slow sales and price increases.
The state should eke out a small increase — about 1% — in existing home sales in 2018, a slight slowdown from the estimated 1.3% in 2017, compared to the previous year, according to the California Association of Realtors (CAR). Basically, next year’s sales, and the still relevant challenges, will feel much like 2017.
The healthy demand will continue, prompting higher prices and a lack of affordability, especially for first-time buyers in markets such as the Bay Area and Southern California. But even buyers in lower-priced inland areas — such as the Central Valley, Inland Empire and High Desert of Southern California, and Northern California — will also struggle with affordability issues.
“This year’s housing market can be told as a tale of two markets: the inventory constrained lower and the upper end that’s not inventory constrained,” says Leslie Appleton-Young, senior vice president and chief economist for CAR. “This trend is likely to continue into 2018 as active listings have declined across all price ranges for the past two years, but is most obvious at the lower end.”
The state’s median-home price, meaning half the homes sold for more, the other half for less, should increase about 4.2% to $561,000 in 2018. CAR estimates the state’s median-home price will jump 7.2% to $538,500 in 2017.
If the 4.2% projected gain becomes reality, it would be the smallest increase since 2011, when price dropped 6.2%. The $561,000 would be close, but not exceed the record price of $594,530 set in May 2007.
As always, affordability is the key to the housing market in the Golden State. And only 26% of households could buy the median-priced home in 2018, half the percentage in 2012. If interest rates increase more than expected, affordability will decline even more, real estate officials say.
Feature photo by Sundry Photography/Shutterstock