How Will 2017 Pan Out For California’s Housing Market?


The housing market in California is anticipated to experience moderate gains in 2017, according to the California Association of Realtors (CAR).

California has already been experienced a housing affordability issue all throughout 2016, and real estate experts anticipate that the trend will continue well into 2017 as a result of a tight squeeze on housing inventory and soaring prices.

Late last year, CAR predicted that the Golden State would have to deal with inventory shortages and rising prices which would have a direct impact on housing affordability, which we now know was right on point.

Not only is the affordability issue in California expected to continue into 2017, it’s also presumed to get worse. It’s been a cause for concern among buyers and real estate professionals alike. Of course, sellers are reaping incredible financial rewards thanks to the hot market across the state, if they can find buyers who are willing and able to pay such high prices.

Despite such issues, the effects won’t necessarily be felt exactly the same way in every part of California. There will be regional differences. More affordable parts like the Central Valley will likely perform better than much more expensive centers like San Francisco. As such, more affordable regions will likely realize stronger sales while more expensive regions may go through a decline in sales as buyers on a budget look at more affordable alternatives.

The San Francisco Bay Area – the hottest real estate market in the state – is expected to experience bigger price increases of over 6% to $833,600 in 2017, yet sales will slow down as more buyers will look to more affordable areas to avoid the costs. Forecasted sales drops in San Fran for the new year are pegged at 5.6%.

According to CAR, existing home sales will increase at a modest 1.4% rate in 2017 to 413,000 units, which is up a little from 2016’s projected sales of 407,300 units.

Luckily, mortgage interest rates aren’t expected to skyrocket any time soon, but instead are expected to reach a reasonable 4% on a 30-year, fixed-rate mortgage in 2017. In addition, the pace of home price increases in California are expected to slow down a bit: the 2016 price increase projection was 6.2%, compared to a more modest 4.3% increase for 2017. That’s the slowest rate of increase in six years.

The overall US economy has improved in 2016 and is anticipated to continue on that path into 2017. California is faring even better in this department, yet only 29% of homebuyers in the state will be able to afford the expected $525,600 price tag for a median home in 2017, down from 34% during the first quarter of 2016. That number isn’t expected to get any better going into the new year.

Strong job growth and improved economy will play a role in demand and sales growth, but high prices and affordability crunches will continue to keep the pace somewhat slow. As a result, we can expect to see a slow increase in the California housing market in 2017.