California’s economy is expected to grow and bring forward a strong housing demand in 2018, according to the California Association of Realtors. The housing market will keep growing, albeit at a slower pace, the slowdown being attributed to the supply challenges that will carry on in the next year, as per the report.
Median home prices in California are estimated to rise 4.2% in 2018 to $561,000—a percentage well below the projected 7.2% increase in 2017 to $538,500.
The Association predicts a slight increase of 1.0% in existing single-family home sales, and a total of 426,200 units sold in 2018. The estimated figure for 2018 marks a small uptick from this year’s sales projection of 421,900 units, and not enough to satisfy the strong housing demand, especially in the lower-end segment.
C.A.R. predicts an increase in U.S. GDP of 2.3% in 2018, roughly on par with the projected gain of 2.1% in 2017. California’s unemployment rate is expected to drop to 4.6% next year, after resting at 4.8% in 2017 and 5.5% in 2016.
Mortgage interest rates will remain low in California, even if the 2018 forecast predicts an increase of 4.3%, up from 4.0% in 2017 and 3.6% in 2016.
C.A.R. President Geoff McIntosh said that the “solid job growth” will create a demand for housing in 2018, “however, a persistent shortage of homes for sale and increasing home prices will dictate the market, as housing affordability diminishes for buyers struggling to get into the market.”
Moreover, the limited supply has been “the new ‘norm’ for the past few years,” according to Leslie Appleton-Young, C.A.R senior vice president & chief economist. Appleton-Young foresees that the 2018 housing market will be a “tale of two markets – the inventory constrained lower end and the upper end that’s non-inventory constrained.” It is thus very likely that 2018 sales growth will remain low, while prices will be driven up by a competitive market.