California home sales will increase next year and price gains will moderate as an inventory crunch loosens with more homes on the market, according to an industry forecast.
The California Assn. of Realtors forecasts sales to climb 3.2% in 2014, after falling 2.1% this year amid tight inventory that has helped drive prices rapidly higher.
“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,” association President Don Faught said in announcing the forecast, released Tuesday.
The Realtor group said it expects more sellers to put their houses on the market next year, after dramatic price gains this year helped erase their negative equity positions — meaning they no longer owe more on their mortgages than the houses are worth.
That should ease this year's rapid price gains, the trade group said. The dramatic increases have raised concerns that some markets — such as Los Angeles — have become overheated, although lately the froth has cooled, agents say.
The median home price is expected to be $408,600 by the end of this year, the association said — a 28% increase from 2012. Next year, the group forecasts the median to increase 6% to $432,800.
The Realtor association said the average rate on a 30-year fixed mortgage is expected to climb to 5.3% next year.
Mortgage rates have risen steadily since record lows in the spring, although they have fallen back after the Federal Reserve said it won’t, for the time being, cut back its massive stimulus program. Freddie Mac pegged average rates at 4.22% last week, the third straight week of declines.