Improving Equity and Fewer Investors will Drive California Home Sales in 2014

Home ownership is expected to be key to the California real estate marketrnover the next year.  The 2014 California HousingrnMarket Forecast” released today said that the diminishing importance ofrndistressed home sales and a shift from investors toward primary home buyersrnwill bode well for both sales and home prices in 2014.</p

The Forecast, released by thernCalifornia Association of Realtors® (C.A.R.) sees home sales rising by 3.2rnpercent in 2014 to 440,000.  Sales in 2013rnare projected at 420,300, down 2.1 percent from the 439,400 existingrnsingle-family homes sold in 2012.</p

“The housing market has improved over the past year, and we expect thisrntrend to continue into 2014,” said C.A.R. President Don Faught.  “As the economyrnenters the fourth year of a modest recovery, we expect to see a strong demandrnfor homeownership, as buyers who may have been competing with investors andrnfacing an extreme shortage of available housing return from the sidelines.”</p

Home prices are projected to grow by 6 percent in 2014, moderating from thernsoaring 28 percent price increase expected by the end of this year and an 11.6rnpercent gain in 2012.  This would bringrnthe median home price in the state to 408,600 by the end of this year andrn$432,800 in 2014.   </p

“We’ve seen a marked improvement in housing market conditions in a year withrnthe distressed market shrinking from one in three sales a year ago to less thanrnone in five in recent months, thanks primarily to sharp gains in home prices,”rnsaid C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “Asrnthe market continues to improve, more previously underwater homeowners willrnlook toward selling, making housing inventory less scarce in 2014.  As arnresult of these factors, we’ll see home price increases moderate from therndouble-digit increases we saw for much of this year to mid-single digits inrnmost of the state.”</p

C.A.R. also forecasts a growth in the U.S. Gross Domestic Product of 2.8rnpercent in 2014, following an expected 1.8 percent gain in 2013.   Nonfarm jobs will grow by 1.9 percent inrnCalifornia, and the state’s unemployment rate should decrease from 9 percent torn8.3 percent.  The average for 30-yearrnfixed mortgage interest rates will rise to 5.3 percent but will still remain atrnhistorically low levels.</p

Appleton-Young said “The wildcards for 2014 include federal, fiscal,rnmonetary and housing policies – such as the mortgage interest deduction andrnmortgage finance reform – as well as housing supply and the actions of thernFederal Reserve, which will ensure a higher rate environment.”

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