Home Prices Expected to Rise but Sales to Slow
The California real estate market will dip slightly in 2002, but home prices should still reach record highs, according to an annual forecast released Wednesday by a state trade group.
The housing market--stalled in the weeks after the Sept. 11 terrorist attacks--has rebounded, according to the California Assn. of Realtors.
The median price of a single-family home in California will reach a record $279,920 in 2002, while sales will fall by 2% compared with 2001, according to the report released by CAR during its annual meeting in San Diego.
The availability of entry-level jobs and expectation of job growth next year will fuel the housing market, which is poised to post the fifth-strongest year on record, said CAR President Gary Thomas.
Southern California should lead the state in sales while the San Francisco Bay Area returns to relatively normal market conditions after the collapse of its dot-com economy.
CAR projects that the median price--or the amount at which half the homes sold for more and half sold for less--of a single-family home in the state will rise to $264,080 this year, up 8.5% from $243,390 in 2000.
Statewide sales of existing single-family homes will fall to 493,820 in 2002, down 2% from the projected 503,900 this year. Economists attribute next year’s decrease in sales--small compared with this year’s expected 5.9% decrease from 2000--to the continuing affordability gap, but say that low interest rates will keep the demand for housing strong.
Buyers at the moderate end of the market who haven’t made other investments are still active, said Leslie Appleton-Young, CAR’s chief economist. “Many households are not bemoaning their stock portfolios, and want to get into homes.”
It is less affordable to buy homes in California than in the rest of the nation, however. The nation’s projected increase of the median home price is 5.8% for this year, compared with California’s 6.4%.
Median home prices for the nation as a whole will hit $147,100 this year and rise 3.3% to $151,800 next year, according to the National Assn. of Realtors.
But that hasn’t dampened Southern California consumers’ appetite for home buying. Despite reports of a slumping economy and fears about the economic effect of a prolonged war on terrorism, the promise of a federal stimulus package and low interest rates will continue to bolster consumer confidence, Appleton-Young said.
“There are many mortgage products out there, so people can get into a house with little or no down,” Appleton-Young said. “Housing and real estate will be a favored sector because of the security and stability it provides.”
