Low interest rates will help spur California’s housing market, but problems concerning affordability will prevent a more vibrant growth, according to a new report from the California Association of Realtors (CAR).
The newly published "2020 California Housing Market Forecast" predicts a 0.8 percent uptick in existing single-family home sales to reach 393,500 units, up from the projected 2019 sales figure of 390,200. The 2019 figure was 3.1 percent lower compared with the pace of 402,800 homes sold in 2018. On the price side, CAR forecasts the state’s median home price will rise 2.5 percent to $607,900 in 2020, following a projected 4.1 percent increase from last year to $593,200 in 2019.
CAR also projects a 1.6 percent growth in the U.S. gross domestic product in 2020, after a projected gain of 2.2 percent in 2019, with California's 2020 non-farm job growth rate at 1.0 percent, down from a projected 1.5 percent in 2019. CAR forecasted the state's unemployment rate will rise to 4.5 percent in 2020 from 2019's 4.3 projected figure, while the average for 30-year, fixed mortgage interest rates will drop to 3.7 percent in 2020, down from 3.9 percent in 2019 and 4.5 percent in 2018.
Back in Q1 of 2019, 32 percent of California households were able to afford the purchase of a $545,820 median-priced home, according CAR.
"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 CAR 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."