B of A Predicts Home Prices in State to Rise 5% : Average Cost for 1986 Estimated to Be $123,700
Housing prices in California are expected to rise 5% this year, keeping the average home price in the state dramatically higher than the national average, Bank of America said Friday.
In its latest California housing outlook report, the bank said the average price for a California home will be $123,700 this year, up from $117,900 in 1985.
The 5% rise is the biggest year-to-year increase since 1981, when prices rose 8.2%.
Duane A. Paul, vice president and a senior economist at the bank, said the average price of a California home is 56% higher than the national average. But the difference is smaller than it was in 1980, when it was 62%.
In outlining highlights of the report at a news conference, Duane said falling interest rates will make 1986 a favorable year for the California real estate industry. Bank of America, for example, dropped its loan rate on home mortgages by 0.125% on Friday to 9.75% on 15-year fixed-rate loans and to 10% on 30-year fixed-rate loans.
240,000 Units Forecast
The bank is forecasting new housing and apartment starts in California at 240,000 units in 1986, up from its previous projection of 229,000 a month ago but virtually unchanged from last year’s actual figure of 241,000. The 1985 figure represented the highest annual level of new construction since 1977.
Paul said 55% of the new dwellings to be started this year will be single-family homes, compared to 45% last year.
Bank of America also predicted that 163,000 housing permits will be issued in the seven counties of Southern California, up slightly from last year’s 162,000. The seven counties--Los Angeles, Orange, Riverside, San Bernardino, Ventura, San Diego and Santa Barbara--account for 61% of the state’s housing activity.
Sales of existing homes throughout the state are expected to rise to 440,000 this year from 407,000, the highest sales total in California since 1980 and the third consecutive annual increase, the bank’s report said.
Realtors Report
Separately, the National Assn. of Realtors reported Friday that homes sold during March at an annualized rate of 3.23 million units, down 1.2% from February. The association said the decline was due to bad weather in the West and soft economies in Texas, Louisiana and Oklahoma.
But the seasonally adjusted annual rate remained above 3 million for the 12th straight month.
Falling interest rates spurred a $2,600 increase in the national median sale price of homes, which jumped to $80,000 last month, the Realtors said.
The median price of existing homes in March was up 7.2% from the $74,600 level of a year ago, the largest annual increase since May, 1981.
“Existing single-family home sales should pick up in the months ahead, making this the best year for the home resale market since 1979,” Clark E. Wallace, the association’s president, said in a statement.
