By Gord Collins
July 11, 2019
California’s Housing Market Forecast
This report covers key housing market data including California home prices, sales, recent trends from CAR, NAR, Statista, Zillow and more, and predict what might be next for 2020.
Unlike many other US housing markets, California real estate prices have sagged, and the experts believe taxes and departing businesses are the reason.
Will California Bounce Back?
In a nutshell, California home sales had the smallest decline in 13 months. Sales according to CAR, rose about 4.6% in the 4ook to 749k price range. Home prices rose to a new median all time high of $611,190 which is which is $266,000 higher than the price of $245,230 ten years ago. California condo prices bounced back to $470,000.
Active listings had been strong the last year, yet May saw the lowest growth in a year. It seems those who would sell have sold their homes.
Zillow says May median prices came in at $547,700, and they forecast home prices will rise only about $1000 by next summer. Property managers and landlords will enjoy high occupancy rates and perhaps rising ROI if they use the right property management software and modern management strategy.
Tight Rental Conditions and Rising Rents
Despite lower mortgage rates, flat home prices, Zillow predicts California rent prices will rise. Unlike those in the national housing picture, Californians have solved the buy vs rent home dilemma, by continuing with renting. Given the ultra-high real estate prices, first time buyers simply can’t come up with the down payment or manage the lofty mortgage payments. The fact that mid-priced homes sold more in May, might show Millennials are buying.
The situation is different from cities such as Chicago, Denver, Phoenix, and Las Vegas, for instance, where lower prices and low mortgage rates make buying instead of renting a wiser choice.
Despite all the political turmoil, dour expert forecasts, and trade uncertainty, not much seems to get in the way of California’s immense economic machine. The Golden State is moving into the rank of 4th of world’s largest economies. A record 18.7 million Californians are employed, wages are rising, and they’re ready to buy homes if they’re affordable.
The issue is buying power, home prices and the lack of available homes and apartments in California that makes the market so tough here. It’s the price of prosperity and regulations
Will US Economic Strength Persist?
California GDP is strong, and consumers have lots of buying power with record low interest rates persisting. The case for lower prices by UCLA might be overstated. California home prices don’t slouch for long.
Currently in June, across most of the California housing market, active listings are growing, sales are flat, and prices are rising. Strangely, apartment rents in California are actually falling much to the chagrin of rental property managers.
In this post, let’s explore the main factors that will drive the California housing market for the years ahead.
California Dreamin
California is a special place to buy a home, live or even rent an apartment. It’s this dynamic pull of outrageous wealth and regulations that presents hazards for multifamily investors. Definitely wise to hire a Realtor. The questions many are asking this spring is:
- will there be a recession?
- is this is a good time to buy a home in Los Angeles, Riverside, Anaheim, or Bay Area?
- is this the right time to buy rental property?
- is the Los Angeles housing market going to crash?
- which California cities produce the highest rental yields?
- is the Los Angeles real estate market overpriced?
- is the US economy really growing?
- why is there so much negative forecasting by some media?
Buyers are nervous yet the stats below show they are buying. And if there were more affordable properties available, the real estate market would be very hot. Okay enough chit chat let’s get the to May California real estate stats.
Similar growth has occurred in New York, Phoenix, Las Vegas, Denver, and Seattle, but the CA cities of San Jose, San Francisco, Los Angeles, Oakland and San Diego have enjoyed unprecedented growth. House prices and multifamily prices have risen in California.
Please see our San Francisco housing market, San Jose housing market, Los Angeles housing market, San Diego housing market, Oakland housing market reports for insight into how the economy is affecting each metro market.
California property managers and income property investors should check out our posts on property management software, cloud platforms, property management automation, on demand services, growth strategy, and property accounting software. See out suite of property management solutions.
With the number of multifamily units being delivered, tax savings, and the millions still needed to be built, we know demand should never be a problem. What’s built will get occupied.
Is California’s Housing Market Good?
This epic report on the state of California’s housing market explores what’s happening. You’ll find some eye-opening insight, stats, videos, and opinions about housing in the booming Golden State economy. Please share this material generously as you like and check out our US housing market report too.
GDP, Wages, Mortgage Rates, Jobs, and Home Prices
The economy is solid, expected to dip slightly in 2020, with a upward push in 2021. With continued low mortgage rates, financing a home or a rental property purchase becomes more feasible. Luxury homes are sitting on the market longer, yet low priced properties get bought quickly.
California’s economy grew 4.7% in the 12 months ended in February compared to the national rate of 2.8%. It could grow at a 2.55% pace in the next six months — faster than the national 1.59 – report from Mercury News.
With interest rates fears gone and strong US economic growth, negative forecasts don’t hold a lot of water.
Key Factors in California’s Housing Market Growth
- high employment and rising wages create fuel rising home prices
2. demographics – lots of millennials buying and baby-boomers selling
3. interest rates – on decline?
4. migration – slowed to keep prices stable
5. cost of business – extremely high (would you like to see my San Francisco parking fee?)
6. home prices – wickedly high and rising
7. rent vs buy – renting is better right now, but for how long?
8. multifamily new construction – total construction starts in 2019 are down 8%
9. taxation and tax savings – much better this year
With taxes dropping, interest rates stable, wages rising, prices stable, mortgage requirements reasonable, and rising personal savings, why aren’t people buying? Simple, they’re hoping prices will plummet.
Keep Your Eye on the Economy
A number of big IPO’s in the tech sector this year suggest the economy isn’t doing badly. In fact, California’s gross domestic product rose by $127 billion from 2016 to 2017, surpassing $2.7 trillion. These charts below show the fundamentals and the forecast for 2019.
Which Cities Had Strongest Price Rises Last Month?
Home Prices during April:
- Santa Barbara +37%
- Monterrey +3.6%
- Alameda +3.2%
- Marin +3.8%
- Contra Costa +5.4%
- Los Angeles +3.5%
- San Diego +4.0%
Prognosis Positive
Zillow suggests prices will grow a further 5.7% over the next 12 months. CAR expects the average home price to increase 3.1% to $593,450 in 2019, following a projected 7% over 2018 to $575,800.
This telling chart above from First Tuesday, shows us how much potential is still in this housing market. Home sales were phenomenal in 2004/2005, and total home sales in US (green line) reached near 77,000 homes in June of 2004.
It suggests that housing sales are still being suppressed right across the country. A re-ignited housing market could add immeasurably to the economy. New home related accessory sales such as furniture, appliances, etc could add to GDP (American made) in 2019 and 2020.
A Healthier California Market
There are more homes for sale and more buyers. After a strong lull, the upward march on California homes prices continues. The growth of active listings is slowing, and combined with lower new construction, we could forecast much higher home prices for summer 2019.
California Housing Market Update
Greater Los Angeles home prices rose 3.8% in April to an average of $536,450, up about r$19,000 from April 2019, and $19k from April last year. Bay Area home prices rose 5.1% to $988,000 MTM but are down about 2.2% from 12 months ago. Marin County (+3.8%), Contra Costa (+5.4%) and San Francisco County (.3%) were notable changes. (Car.org stats).
Condo/townhome sales were up 2.1 in the Bay area in April to an average price of $730,000 which is $40,000 lower than last April. The average condo price plummeted in Napa (-15.9%) and jumped $50k MoM in San Bernardino.
Single family home prices in Los Angeles dropped 4.3% to $541,390. Sales dropped by 2.5%. Orange County saw its condos price rise 3.7%.
Sacramento was a bright spot with sales up 5.5% and average price up $20000 to $385,000. San Mateo however suffered a .6% price drop, or down 9.5% YoY.
Single detached home prices rose to $649,000 in San Diego which is up 4% or $26,000 from March. In Orange County, home prices rose 1.9% to $4,000 to $$825,000 up $53,000 since January’s number of $792,500.
Up in San Francisco, prices fell $5000 to a new average of $1,632,500, yet up from $1,505,000 in February, and home prices in Santa Clara 1.2% to $1,315,000.
Over in Contra Costa, house prices rose 5.4% to $679,000.
Zillow’s predictions are strong. They forecast San Jose Prices to rise 19.25 over the next 12 months. Even if you don’t believe the Zestimate, it is a positive sign for the market in California. Sometimes, we have to keep our eye on the long-term prognosis.
