The up-and-down rollercoaster ride that California home sales and prices have been on for the last several years could finally even out in 2010, although the state will continue to have a bifurcated housing market, the California Association of Realtors said today.
The "new normal" for California housing markets — brisk sales and lean inventory on the low end, coupled with continued roadblocks to closing deals on the high end — could produce a slight increase in the state’s median home price, even as sales cool down a bit, CAR said.
In its 2010 forecast, CAR projects the state’s median home price will rise 3.3 percent next year to $280,000, even though sales of existing homes are expected to decrease by 2.3 percent, to 527,500 units.
After double-digit declines in sales in 2006 and 2007 — followed by double-digit increases in 2008 and 2009 — CAR sees sales moderating to "a more sustainable pace" in 2010.
During the boom, sales of existing homes peaked at 625,000 in 2004 and 2005, and bottomed out at 346,900 in 2007. The median home price has also been on a rollercoaster ride, peaking at $560,300 in 2007 and falling to a projected $271,000 this year.
"Housing in California has become a tale of two markets," CAR President James Liptak said in a press release. "The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of homebuyers to secure financing as well as their concerns about where prices are headed."
CAR expects demand for low-end properties from first-time buyers will continue throughout next year, but it remains to be seen whether discretionary sellers return to the market by the second half of 2010, the group said. …CONTINUED
CAR chief economist Leslie Appleton-Young expects distressed properties will account for nearly one-third of sales next year and that inventory will be "relatively lean" — under six months of supply in the off-season, and about four months during the peak season.
"Although it appears at this time that lenders are closely monitoring the flow of distressed properties onto the market, there could be an exertion of downward pressure on home prices should a heavier-than-expected wave of foreclosures come to market next year," she said.
"The wild cards for 2010 include foreclosures, loan resets, the labor market, the California budget crisis, and the actions of the federal government," Appleton-Young said.
Like other real estate industry groups, CAR is calling on Congress to not only extend but expand the $8,000 first-time homebuyer tax credit that’s scheduled to expire Nov. 30.
Liptak said 2009 presented a unique opportunity for first-time homebuyers, who were helped not only by the tax credit but more affordable home prices and interest rates at near historic lows.
CAR is forecasting that the 30-year fixed-rate mortgage will average 5.6 percent next year, up from 5.2 percent this year, and that rates on one-year adjustable-rate mortgage (ARM) loans will increase to 5.2 percent, up from an average of 4.8 percent this year.
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