Higher home prices. Weaker demand. Fewer sales. More traffic.
Economists for the California Association of Realtors on Thursday offered a somber forecast for the state housing market in 2019, expecting rising interest rates and a lack of affordable housing to push more prospective buyers out of the market.
“Home ownership is becoming a luxury good in California,” said CAR chief economist Leslie Appleton-Young. Across the Bay Area, the strong economy coupled with a lack of new housing has led to record prices. “There is no quick fix.”
California continues to be among the least affordable states in the nation for housing. Nationally, about 53 percent of families can afford mortgage payments on a median-priced home in their community. Just 1 in 4 Californians can afford to purchase a home.
In Alameda and Santa Clara counties, only 16 percent of residents can afford the typical home, while 14 percent of residents in San Francisco and San Mateo counties can handle the steep mortgage payments.
The residential market seems to be nearing a peak, Appleton-Young said, although the association expects California home prices to climb 3.1 percent next year. Total sales are expected to dip slightly, despite a growing workforce.
The expectations mean a continued windfall for Bay Area homeowners, while renters and lower-income workers scramble for affordable housing options. The median sale price for the nine-county region peaked in April, with sales of existing homes hitting $935,000, according to CoreLogic.
Median sale prices in the Bay Area have climbed, year-over-year, every month since April 2012. The historic run has given long-time homeowners spectacular returns, while forcing home searchers out of the market and sometimes the region.
As workers move into more affordable, outlying counties, congestion on the roads will increase, said association senior economist Jordan Levine.
He expects the pool of home buyers to dip as many Bay Area residents are priced out of the market. But, he added, “demand is not going to disappear.”
The statewide survey expects continued pressure on the housing market. Interest rates have climbed this year, reaching 4.6 percent last month for a 30-year-fixed rate loan, according to Freddie Mac, adding to monthly costs.
Although the market still favors sellers, economists also see signs it has begun to turn. About 40 percent of recent real estate listings have dropped prices this year, and homes have begun to spend a few more days on the market.