LOS ANGELES—The single-family housing market is set for a strong 2017 after an dip earlier this year, according to experts at the California Association of Realtors, who released their 2017 forecast yesterday at the annual C.A.R. EXPO in Long Beach. C.A.R. VP and chief economist Leslie Appleton-Young gave her forecast during lunch, saying that she expects nominal increase in home sales next year as supply and affordability issues continue to impede growth.
Despite these challenges, strong demand will continue to fuel the market. “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 Appleton-Young. In fact, housing sales picked up in August, with increased closed transactions.
Appleton-Young expects a 1.4% increase in home sales next year, or 413,000 homes sold. That is an increase over the last two years, with 407,300 homes sold this year and 408,800 homes sold in 2015. While there continue to be supply and affordability issues, these will also serve as drivers for the next year to produce the nominal increase in home sales. “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.”
Increases in interest rates will contribute to the affordability issues. The forecast estimates that 30-year fixed mortgage interest rates will increase to 4%, up from an average of 3.6% this year. Even with the increase, however, these are historically low interest rates. Median home prices will increase 4.3%, bringing the median home price to $525,600.
In addition to growth in home sales, Appleton-Young also expects domestic GDP to grow 2.2% next year, compared to a 1.5% increase this year. In California, the employment rate will also continue to decline, dropping to 5.3% in 2017 from 5.5% this year and 6.2% in 2015.
LOS ANGELES—The single-family housing market is set for a strong 2017 after an dip earlier this year, according to experts at the California Association of Realtors, who released their 2017 forecast yesterday at the annual C.A.R. EXPO in Long Beach. C.A.R. VP and chief economist Leslie Appleton-Young gave her forecast during lunch, saying that she expects nominal increase in home sales next year as supply and affordability issues continue to impede growth.
Despite these challenges, strong demand will continue to fuel the market. “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 Appleton-Young. In fact, housing sales picked up in August, with increased closed transactions.
Appleton-Young expects a 1.4% increase in home sales next year, or 413,000 homes sold. That is an increase over the last two years, with 407,300 homes sold this year and 408,800 homes sold in 2015. While there continue to be supply and affordability issues, these will also serve as drivers for the next year to produce the nominal increase in home sales. “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.”
Increases in interest rates will contribute to the affordability issues. The forecast estimates that 30-year fixed mortgage interest rates will increase to 4%, up from an average of 3.6% this year. Even with the increase, however, these are historically low interest rates. Median home prices will increase 4.3%, bringing the median home price to $525,600.
In addition to growth in home sales, Appleton-Young also expects domestic GDP to grow 2.2% next year, compared to a 1.5% increase this year. In California, the employment rate will also continue to decline, dropping to 5.3% in 2017 from 5.5% this year and 6.2% in 2015.
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