Housing Slows Due to Home Affordability

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USA, California, Venice Beach, aerial view of Venice Canals

10:00am

Following a dip in home sales in 2016, California’s housing market will post only a nominal increase in 2017 amid supply shortages and affordability constraints, the California Association of Realtors said today in its 2017 California Housing Market Forecast.

The forecast sees a modest increase in existing home sales of 1.4
percent next year to reach 413,000 units, up slightly from the projected 2016
sales figure of 407,300 homes sold. Sales in 2016 also will be virtually flat
at 407,300 existing single-family home sales, compared with the 408,800 pace of
homes sold in 2015, a statement said.

“Next year, California’s housing market will be driven by tight housing
supplies and the lowest housing affordability in six years,” said CAR
President Pat ‘Ziggy’ Zicarelli. “The market will experience regional
differences, with more affordable areas, such as the Inland Empire and Central
Valley, outperforming the urban coastal centers, where high home prices and a
limited availability of homes on the market will hamper sales.

As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as home buyers migrate to peripheral cities with more affordable options.”

The average for 30-year fixed mortgage interest rates will rise only
slightly to 4.0 percent in 2017, up from 3.6 percent in 2016, but will still
remain at historically low levels, CAR said.

The California median home price is forecast to increase 4.3 percent to
$525,600 in 2017, following a projected 6.2 percent increase in 2016 to
$503,900, representing the slowest rate of price appreciation in six years,
according to CAR.

“With the California economy continuing to outperform the nation, the
demand for housing will remain robust even with supply and affordability
constraints still very much in evidence. The net result will be California’s
housing market posting a modest increase in 2017,” said CAR. Vice President
and Chief Economist Leslie Appleton-Young.

“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.”

-from CNS

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