Sales to Drop, Prices Keep Rising Next Year
October 18, 2018
A combination of high home prices and eroding affordability is expected to cut into housing demand and contribute to a weaker housing market in 2019, and 2018 home sales will end this year by registering lower for the first time in four years, according to a housing and economic forecast released last week by the California Association of Realtors.
CAR’s “2019 California Housing Market Forecast” sees a modest decline in existing single-family home sales of 3.3 percent next year, to 396,800 units, down from the projected 2018 statewide sales figure of 410,460 at the end of year.
“While home prices are predicted to temper next year, interest rates will likely rise and compound housing affordability issues,” said CAR President Steve White. “Would-be buyers who are concerned that home prices may have peaked will wait on the sidelines until they have more clarity on where the housing market is headed. This could hold back housing demand and hamper home sales in 2019.”
The average for 30-year, fixed mortgage interest rates will rise to 5.2 percent in 2019, the forecast says, up from 4.7 percent in 2018 and 4.0 percent in 2017, but will still remain low by historical standards.
The California median home price is forecast to increase 3.1 percent to $593,450 in 2019, following a projected 7.0 percent increase in 2018 to $575,800.
“The surge in home prices over the past few years due to the housing supply shortage has finally taken a toll on the market,” said CAR Senior Vice President and Chief Economist Leslie Appleton-Young.
“Despite an improvement in supply conditions, there is a high level of uncertainty about the direction of the market that is affecting homebuying decisions,” she said. “This psychological effect is creating a mismatch in price expectations between buyers and sellers and will limit price growth in the upcoming year.”
Outmigration, which is a result of the state’s housing affordability issue, will also be a primary concern for the California housing market in 2019 as interest rates are expected to rise further next year. The high housing cost is driving Californians to leave their current county or even the state.
According to a related survey, CAR reports that 28 percent of homebuyers in the first eight months of this year moved out of the county in which they previously resided. The outmigration trend was the strongest in Southern California and the Bay Area, where housing was the least affordable, with 35 percent of homebuyers moving out because of affordability constraints.
Separately, realty web site Zillow.com reports that there were exactly 100 single-family homes, condos and townhomes for sale in Culver City at the start of this week. That was down from 107 a week earlier.
There were 233 homes for sale in Santa Monica, up from 222 the week before.