Real Estate Information

2020 California Housing Forecast

September 26, 2019

C.A.R. releases its 2020 California Housing Market Forecast



Economic uncertainty and affordability issues to subdue California home sales

LOS ANGELES (Sept. 26) – Low mortgage interest rates will support California’s housing market in 2020 but economic uncertainty and affordability issues will mute sales growth, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

“With interest rates expected to remain near three-year lows, buyers have more purchasing power than in years past, but they may be reluctant to get off the sidelines because of economic and market uncertainties,” said C.A.R. President Jared Martin.

“Additionally, an affordability crunch will cut into demand in some regions such as the Bay Area, where affordability is significantly below state and national levels. These factors together will subdue sales growth next year.”

C.A.R.’s forecast projects growth in the U.S. gross domestic product of 1.6 percent in 2020, after a projected gain of 2.2 percent in 2019. With California’s 2020 nonfarm job growth rate at 1.0 percent, down from a projected 1.5 percent in 2019, the state’s unemployment rate will tick up to 4.5 percent in 2020 from 2019’s 4.3 projected figure.

The average for 30-year, fixed mortgage interest rates will dip to 3.7 percent in 2020, down from 3.9 percent in 2019 and 4.5 percent in 2018 and will remain low by historical standards.

“California’s housing market will be challenged by changing migration patterns as buyers search for more affordable housing markets, particularly by first-time buyers, who are the hardest hit, moving out of state,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “With California’s job and population growth rates tapering, the state’s affordability crisis is having a negative impact on the state economically as we lose the workers we need most such as service and construction workers, and teachers.”

In fact, according to C.A.R.’s 2019 State of the Housing Market Study, nearly a third (30 percent) of those sellers who planned on repurchasing said that they will buy their next home in another state outside of California — the highest level since 2005.

Older generations were more likely to buy outside of California as 37 percent of baby boomers and silent generation planned on repurchasing in another state, but only 30 percent of Millennial sellers planned to do the same

California housing seen cooling further going into 2020: UCLA forecast

Published March 13, 2019 by Jeff Daniels

KEY POINTS

While job growth and the California economy remain strong, weakness is apparent in the state’s housing market and it is likely to cool further going into 2020, says the latest UCLA Anderson Forecast.

The housing slowdown could put a damper on Democratic Gov. Gavin Newsom’s plans to step up the pace of new homes built to help ease the state’s housing shortage.

The director of the forecast says home prices are falling in many major markets of the Golden State, calling the decline “widespread and substantial.”

LOS ANGELES — While job growth and the California economy remain strong, weakness is apparent in the state’s housing market and it is likely to cool further going into 2020, according to the latest UCLA Anderson Forecast, released Wednesday.

“The housing markets are softening in California, and it’s not just the tony neighborhoods of San Francisco, Silicon Valley and West LA,” said Jerry Nickelsburg, an adjunct professor at UCLA and director of the Anderson School of Management’s forecast. “This is a statewide phenomenon.”

The economist said anticipated demand for housing throughout the state has been lacking despite the strength of the state’s overall economy and positive trends in the job market.

Nickelsburg said the slowdown in the state’s housing market also has implications for the California economy going forward. In addition, the housing slowdown could put a damper on Democratic Gov. Gavin Newsom’s plans to step up the pace of new homes built to help ease the state’s housing shortage.

“With our national forecast for slowing economic growth, continued discussion on when the next recession will be, and the Fed indicating that the peak of the interest rate cycle could be near, we now expect weaker housing markets into 2020,” Nickelsburg wrote in the forecast report. “As a consequence, our forecast for housing starts in 2019 and 2020 has been revised downward, with a recovery in building beginning in 2021.”

While the housing market is slowing, the state’s job growth remains strong, according to the forecast. It said California’s average unemployment rate is expected to rise to an average of 4.5 percent in 2019 with slower national economic growth, and then at a pace of 4.3 percent in 2020 and 2021.

California added the highest number of construction jobs nationally between January 2018 and 2019, according to the Associated General Contractors of America. The state added 28,500 jobs, or an increase of 3.4 percent during the period.

Meantime, Nickelsburg said home prices are falling in many major markets of the Golden State, calling the decline “widespread and substantial.”

The economist said the impact of the cooling is even being felt in the Central Valley of California, where home sales have fallen by more than 10 percent.

In Southern California and the San Francisco Bay Area, home sales fell to an 11-year low in January, according to CoreLogic. The analytics provider reported sales have fallen on a year-over-year basis in the Bay Area the past eight consecutive months, while in Southern California sales have fallen on a year-over-year basis in the last six consecutive months.

At the same time, the nation’s most populous state continues to suffer from a chronic housing shortage.

“Home prices are falling in California as is the level of building,” Nickelsburg wrote. He said one possible explanation is “higher mortgage interest rates are depressing prices but not the underlying demand.”

Another possibility behind the housing slowdown is prices are “so expensive that everyone (well a lot of everyone) is leaving,” the economist added.

Newsom, who assumed the governorship in January, this week announced an updated plan to ease the state’s “housing cost crisis.” The Democrat proposed a $1.75 billion housing package, including $1 billion in loans and tax incentives to spur low-, mixed- and middle-income housing production.

The governor wants to build 3.5 million new housing units in the state by 2025, or an average of about 500,000 a year. But there were only about 120,000 new homes built in 2018.

Newsom is pressing cities and counties to meet those ambitious housing expansion targets. Some of the steps are controversial, such as threatening to take away transportation funds from cities that fail to meet targets.

CALIFORNIA ASSOCIATION OF REALTORS | June Home Sales and Price Report

California home sales retreat in June, but 2019 housing market outlook revised upward, C.A.R. reports

– Existing, single-family home sales totaled 389,690 in June on a seasonally adjusted annualized rate, down 4.2 percent from May and down 5.1 percent from June 2018.

– June’s statewide median home price was $611,420, virtually unchanged from May and up 1.4 percent from June 2018.

– Year-to-date statewide home sales were down 5.9 percent in June.

– C.A.R.’s 2019 California housing market forecast was revised upward to 385,460 single-family home sales and a median price of $593,000.


LOS ANGELES (July 17) – After rebounding in May, California home sales fell below the benchmark 400,000 level in June as sales declined from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. 

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 389,690 units in June, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2019 if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

June’s sales figure was down 4.2 percent from the 406,960 level in May and down 5.1 percent from home sales in June 2018 of 410,800. Sales fell below the 400,000 benchmark again after rebounding in May. Sales have been under the benchmark for 10 of the past 11 months.

“With softer price growth and interest rates at the lowest levels in nearly three years, monthly mortgage payments on a median-priced home have fallen for four straight months. This allows homebuyers to save hundreds of dollars a month on the same home or to potentially consider a slightly more expensive home for the same monthly cost,” said C.A.R. President Jared Martin. “Combined with the long-term benefits of homeownership on personal wealth and quality of life, 2019 is a good time to purchase a home for the long haul.” 

While the median price set another record in June, the increase was tempered. June’s median price was $611,420, essentially unchanged from $611,190 in May and up 1.4 percent from $602,770 in June 2018.

“With low rates supporting sales and elevating home prices in the last few months, the market outlook has shown some improvement since the first quarter,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “As such, we have revised our 2019 forecast upward for home sales to reach 385,460 and for the median price to hit $593,000, from the previous forecast of 375,100 and $568,800, respectively.”       

Other key points from C.A.R.’s June 2019 resale housing report include:

  • At the regional level, sales fell from a year ago in all major regions on a non-seasonally adjusted annual basis, with the Central Valley recording the largest drop at 9.4 percent. Sales fell 8.8 percent in the San Francisco Bay Area and 8.4 percent in the Los Angeles Metro region. The Central Coast region experienced a 6.4 percent decline, while the Inland Empire recorded a 5.2 percent decrease.
  • In the San Francisco Bay Area, only Napa County recorded a non-seasonally adjusted annual sales increase at 19.2 percent, while sales were essentially flat in Sonoma County. The seven remaining counties experienced declines ranging from the low single-digits in Marin to a 21 percent dip in San Francisco.
  • Home sales in Southern California were down 9.1 percent, with every county outside of Ventura (0.6 percent) posting declines. Los Angeles (-12.6 percent), San Diego (-12.5 percent), Orange (-7.6 percent) and San Bernardino (-7.2 percent), and Riverside (-4.0 percent) counties all recorded sales declines. 
  • At the regional level, median home prices were up from a year ago in all major regions except for the San Francisco Bay Area, which saw an 8.1 percent decline. Only San Francisco County recorded a solid 8.8 percent year-over-year price increase, while elsewhere in the nine-county region, prices followed the statewide trend of cooling price growth.
  • In Southern California, only Ventura County experienced a year-over-year price decline. Other counties in the region recorded annual price growth ranging from 0.8 percent in Orange County to 5.7 percent in San Bernardino.
  • Median prices improved from the prior year in all Central Valley region counties, even as the region posted the weakest sales.
  • Active listings, which have been decelerating since December 2018, grew 2.4 percent from a year ago — the smallest increase since April 2018.
  • The number of homes available for sale has moderated significantly, suggesting that market is getting back toward being more balanced between supply and demand — but inventory remains relatively tight from a historical perspective. The Unsold Inventory Index (UII), which is a ratio of inventory over sales, was 3.4 months in June, up from 3.2 months in May and up from 3.0 months in June 2018. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate.
  • The median number of days it took to sell a California single-family home increased in June. Time on market inched up from 18 days in May to 19 days in June. It took a median number of 15 days to sell a home in June 2018.
  • C.A.R.’s statewide sales-price-to-list-price ratio* was 99.2 percent in June 2019 compared to 100 percent in June 2018.
  • The average statewide price per square foot** for an existing, single-family home statewide reached $292 in June 2019 and was $290 in June 2018.
  • The 30-year, fixed-mortgage interest rate averaged 3.8 percent in June, down from 4.57 percent in June 2018, according to Freddie Mac. The five-year, adjustable mortgage interest rate was an average of 3.48 percent, compared to 3.82 percent in June 2018.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.