California Association of Realtors economists expect a 23 percent decline in sales of previously owned single-family homes this year, with the median price rising 3.5 percent.
In 2008, the median price is expected to drop 4 percent statewide, with sales falling 9 percent compared to 2007. The statewide median price is expected to be $576,000 this year and $553,000 in 2008, according to the trade group’s latest housing market forecast released this week.
“Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year,” said Colleen Badagliacco, association president, in a statement.
“Sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase.”
And Leslie Appleton-Young, chief economist and vice president for the association, said in a statement, “Geographically, more affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large number of new homes coming onto the market in recent years. Higher-priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles and Orange counties, will react more to affordability constraints.”
High-cost markets with median prices over $1 million “will show less stress,” Appleton-Young also stated. “The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new-home developments where price-cutting has been even more severe.”
The association expects 367,500 sales of previously owned single-family homes this year, compared with 477,500 last year, and also predicts 334,500 sales in 2008. That compares to a peak of 625,000 sales in 2005.
The last time sales fell below 2007’s projected 367,500 units was in 1995, when there were 342,540 sales. Sales last fell below 2008’s 334,500-unit forecast in 1985, at 328,270 units, the group also reported. The last time the statewide median price declined was in 1996, when it dropped 0.5 percent. And the statewide median last fell more than 4 percent in 1993, when it dropped 4.5 percent compared to the previous year.
Regionally, the association reported a 15.9 percent peak-to-trough decline in the median home price for the Northern California region through August 2007 — the price peak was $440,420 in August 2005 and the association is forecasting a median price of $370,390 in August 2007.
The association also reported a 15.7 percent peak-to-trough drop in the Sacramento region, followed by the Central Valley region at 14.8 percent, the High Desert region at 14.2 percent and the Riverside-San Bernardino region at 9.2 percent.
No peak-to-trough declines were reported in the Monterey and Los Angeles regions.
Source: California Association of Realtors
