The state’s housing market will continue to improve in 2014, with sales shifting toward primary home buyers and both sales and home prices posting further gains, according to a recent California Association of Realtors (CAR) “2014 California Housing Market Forecast.”
The forecast expects sales to rise 3.2 percent next year to reach 444,000 units, up from the projected 2013 sales figure of 430,300 homes sold. Sales in 2013 will be down 2.1 percent from the 439,400 existing, single-family homes sold in 2012.
“As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines,” said CAR President Don Faught.
CAR Vice President and Chief Economist Leslie Appleton-Young, who delivered the forecast last week at the California Realtor Expo 2013 in Long Beach, projected a growth in the U.S. Gross Domestic Product of 2.8 percent in 2014, after a projected gain of 1.8 percent this year.
She described growth this year as being moderate, but consistently positive. She indicated the country needs at least a 3 percent growth rate to be on the road to full recovery.
With nonfarm job growth of 1.9 percent in California, the state’s unemployment rate should decrease to 8.3 percent in 2014, down from 9 percent in 2013 and 10.5 percent in 2012.
The average for 30-year fixed mortgage interest rates will rise to 5.3 percent, but will still remain at historically low levels.
The California median home price is forecast to increase 6 percent to $432,800 in 2014, following a projected 28-percent increase in 2013 to $408,600.
Appleton-Young noted that 2014 will see “a continuation of slow recovery and continued strength in the housing sector.”
She added that the housing sector has been the “engine of growth” for the economy.
Wild cards for 2014 include federal, fiscal, monetary and housing policies – such as the mortgage interest deduction and mortgage finance reform – as well as housing supply and the actions of the Federal Reserve, which will ensure a higher rate environment.