Home Prices Expected to Rise
California’s housing prices are likely to continue their double-digit climb in 2004, even as the pace of growth slows for a second straight year, according to an industry forecast released Thursday.
The California Assn. of Realtors predicts that the median price of an existing single-family home statewide will jump by 13% in 2004 to $414,100 -- up from a projected $366,450 this year.
For the record:
12:00 a.m. Oct. 4, 2003 For The Record
Los Angeles Times Saturday October 04, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 61 words Type of Material: Correction
Housing prices -- An article in Friday’s Business section about a forecast from the California Assn. of Realtors misstated the number of years that prices for single-family homes statewide had appreciated by double digits. The trade group’s prediction of a 13% increase in the median home price for 2004 would mark the third straight year of double-digit increases, not the fourth.
Such an increase would mark the fourth straight year of double-digit appreciation. Nonetheless, that would be off increases of 19% in 2002 and 16% expected this year.
“This is telling us that we’re moving back toward a more normal market,” said Jim Hamilton, president-elect of the statewide group. “The bottom line is that the median price will continue to increase but at a lesser rate.”
Leslie Appleton-Young, the association’s chief economist, said the forecast assumed a very mild economic recovery, with anemic job and income growth. Still, she noted that the tight supply of homes for sale, coupled with the growing population and demand for housing, would keep prices growing briskly in California.
Indeed, given the shrinking inventory of homes, the association anticipates a 4.5% drop in the number of single-family homes sold next year -- to 548,500 units, from a record 574,300 expected for 2003.
Mortgage rates “were so low that people were chasing a limited number of houses,” Appleton-Young said. “As rates go up, and it becomes more expensive to purchase, some of that [activity] is going to fall off.”
Although rates remain higher than the 40-year lows hit earlier this year, they have eased in recent weeks. The average 30-year fixed mortgage rate fell this week for a fourth straight week, down to 5.77% from 5.98% the week before, mortgage giant Freddie Mac said Thursday.
Appleton-Young is expecting 30-year mortgage rates to average 6.6% next year.
Meanwhile, the state is expected to add 193,400 housing units, including apartments, next year, said Ben Bartolotto, research director of the Burbank-based Construction Industry Research Board.
That would mark a 3.5% increase from the 186,800 units expected this year. Even so, experts say 250,000 new units are needed to keep pace with population growth and demand.
The shortfall means more upward pressure on home prices, which in turn spells more trouble for cash-strapped residents looking for affordable homes.
Consumers, however, are expected to get some help from Freddie Mac and Fannie Mae, which could raise limits on home loans they help finance. Fannie and Freddie periodically increase the limit on loans they can buy and guarantee, giving more borrowers access to the lower loan rates that typically result in mortgages that these agencies can purchase.
Last year, the loan limit was raised to $322,700 from $300,700.
