Rare 25-Acre Gated Mediterranean Compound in Beverly Hills. Photo via PRNewsFoto/Coldwell Banker Real Estate LLC.
Rare 25-Acre Gated Mediterranean Compound in Beverly Hills. Photo via PRNewsFoto/Coldwell Banker Real Estate LLC.

California’s housing market will continue to improve into 2016, but a shortage of homes on the market and a crimp in housing affordability will persist as well, the California Association of Realtors said Thursday in its 2016 California Housing Market Forecast.

The association’s forecast sees an increase in existing home sales of 6.3 percent next year, reaching 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold, a CAR statement said. Sales in 2015 also will be up — 6.3 percent from the 383,300 existing single-family homes sold in 2014.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said CAR President Chris Kutzkey. “However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability.

“On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas,” he said.

The average for 30-year fixed mortgage interest rates will rise only slightly to 4.5 percent but still remain at historically low levels, CAR said.

The California median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300. This is the slowest rate of price appreciation in five years.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” said CAR Vice President and Chief Economist Leslie Appleton-Young.

“However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year.”

CAR’s forecast projects growth in the U.S. Gross Domestic Product of 2.7 percent in 2016 after a projected gain of 2.4 percent in 2015. With nonfarm job growth of 2.3 percent in California, the state’s unemployment rate should decrease to 5.5 percent in 2016 from 6.3 percent in 2015 and 7.5 percent in 2014.

—City News Service

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