California homeowners have reason for optimism about home values. The California Association of Realtors expects a 4.2 percent rise in home values for 2018. If this prediction comes to fruition, California’s mean home price will rise to $561,020, exceeding the 2007, pre-housing crash peak of $560,270, though 2007 would remain higher with inflation taken into consideration.
The big mystery
Many people expected more of a surge in California’s home prices and sales. Because of the rapid rise in wages driven by California’s tech boom, more market activity seems reasonable. As Jeff Collins writes in the Orange County Register, the lower-than-expected activity can be traced to California’s limited supply of homes, especially on the entry-level end of the spectrum. Many of California’s newer residents and potential home buyers are Millennials. They may have a great pay package, but with so few entry-level homes on the market, prices for those homes have remained stratospheric, keeping them out of the market. Also, California’s rise in prices still exceeds the rate that new buyers are able to save for a down payment, creating a further barrier of entry. With the market so competitive, many residents continue renting or even move out of state.
The market still has legs
Collins also writes that 9 out of 10 economists the Register Star polled believe that California home prices will continue on the uptrend, Your text to link…. Though low affordability will somewhat hold back prices, demand still outweighs supply. Cutthroat bidding wars are still in the cards. The California housing market has increased for seven straight years, and the consensus is that it will continue, though at a slower rate because of the high prices.
Economists also predict rents will remain high. Rental vacancy rates will remain near record lows, making it even harder for those Millennials to save for that dream home. However, buyers will continue to find a way into the market, be it through borrowing the down payment from family, finding low down payment options, or using a big work bonus, especially for those employed by the tech high flyers.
Despite the cost, California remains one of the most desirable places in America. Its culture, coastline, natural beauty, and incredible tech economy continue to attract new residents in droves. The consensus amongst economists is that this California housing boom has several more years to run.