California’s housing market will continue to bounce back next year, with distressed homes playing a diminishing role in a real estate landscape that is slowly moving toward normalcy, according to a forecast to be released Tuesday.
The 2014 California Housing Market Forecast from the California Association of Realtors expects sales of existing, single-family homes to rise 3.2 percent next year, reaching 444,000 units.
However, 2013 sales will be down 2.1 percent from the previous year, the report says.
The Golden State’s median home price is forecast to rise 6 percent to $432,800 in 2014. That follows a projected 28 percent annual increase in 2013 to $408,600.
“The housing market has improved over the past year, and we expect this trend to continue into 2014,” CAR President Don Faught said in a statement. “As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines.”
The tight supply of homes has pushed up home prices by double digits, while limiting availability, especially to first-time home buyers, who often were squeezed out by all-cash buyers and investors, said Robert Kleinhenz, chief economist at the Kyser Center for Economic Research.
The increasing supply of homes for sale will ease the price increases while helping first-time home buyers make a deal, Kleinhenz said.
“That should ease the price gains,” Kleinhenz said. “So the CAR projection of a 6 percent increase is about double the long-run average, which seems like a conservative but very reasonable outlook.”
However, Kleinhenz said price increases could reach the teens.
“The supply of homes is going to increase, but I don’t think we’re going to have a balanced market yet in 2014,” Kleinhenz said.
Rising prices have put Realtor Caren Greenwood in an upbeat mood about the housing market.
“Things are picking up,” said Greenwood, of ERA Golden West Realty in San Pedro. “The market is strong and it’s not just strong at $400,000 and less. It’s strong up the line.”
CAR’s report also forecasts that the 30-year fixed mortgage interest rate will rise to 5.3 percent next year, still a historically low level. Currently, the rate has been around 4.2 percent.
Kleinhenz echoed the CAR forecast’s expectation that the overall economy will show improvement at about the same rate seen in the past few years.
Some of the wild cards for 2014 include federal, fiscal, monetary and housing policies as well as the housing supply and the Federal Reserve’s actions, said CAR Vice President and Chief Economist Leslie Appleton-Young in a statement.
Appleton-Young will discuss the forecast Thursday during her organization’s California Realtors Expo 2013, which runs from today through Thursday at the Long Beach Convention Center.
The nation’s largest state real estate trade show generally attracts nearly 8,000 attendees.
Seminars and presentations will touch on subjects including how demographic trends will impact the housing market as well as how public policy may impact the American dream of owning a home.
muhammed.el-hasan@daily breeze.com @dailybreezebiz on Twitter