Whats in store for the Californias housing market in 2013?

The recent positive headlines on the real estate market show that housing has finally turned the corner. Nationally home sales are up 11.0 percent over that of last year, even the sales of new homes are up 25 percent from the year before, and the median price is up 11.7 percent. The median price of existing homes nationally is also up 11.3 percent from a year ago. New residential construction is soaring; since September 2011, single-family housing starts have increased 43 percent, and apartment construction has increased 19 percent. In California housing fundamentals seem strong as well. Existing home sales are up 5.9 percent for the year, while prices posted a 19.5 percent jump. Non-distressed sales continue trending higher, currently at 63 percent of all sales, as compared to 30 percent in early 2009. Distressed sales, on the other hand, dropped from 60 percent in 2009 to 37 percent. Increasing home prices have certainly created a sense of urgency among buyers causing many listings to have multiple offers and to close above the listing prices. Significantly low inventory constrained sales for most of 2012. In September, the unsold inventory index reached 3.2 months, less than half of the historical average of 7 months. The REO inventory is even lower, at 1.8 months, and less than a month in some areas, like the Orange County. The result of the low inventory is reflected in the soaring home prices, particularly in the Bay area, where employment growth has fared better than the rest of the state.

Given relatively solid 2012 housing trends, what is Californias housing market in for in 2013? As Figure 1 summarizes, housing market is expected to continue improving, albeit slower than what was seen in 2012. There are several reasons for the cautious optimism. Growth in home sales, forecasted to increase by 1.3 percent, is expected to continue being constrained by low inventory. Additionally, inventory will remain low across all price ranges. Although the foreclosure pipeline does exist, foreclosure inventory is expected to continue trickling down rather slowly, and certainly not in a wave flooding the market. Meanwhile, sellers are still waiting on the sidelines, as 29 percent remain under water. Because of the lack of inventory, prices are expected to show healthy gains next year. The median price of existing single-family homes in California is expected to increase 5.7 percent to $335,000. What is much less certain is the future of mortgage financing. While mortgage rates are expected to remain at record low levels, further tightening of lending standards appears inevitable, especially given the set of standards which are supposed to take effect in January and are intended to prevent risky mortgage lending. All things considered, Californias housing market is expected to have another positive year. It does not appear that there is a lack of demand, particularly given the pent-up demand that has accumulated over the past few years. As for supply, increasing prices will lure sellers looking to upgrade while also helping those with negative equity to gain some equity back.

Brought to you by:

Joy Bowles REALTOR RE/MAX Gold Cameron Park 3317 Coach Ln Ste 500 Cameron Park, CA 95682

Office: 530-676-8600 Cellular: 530-391-1574

joydbowles@gmail.com DRE License: 01902169

Email: