With the new year just around the corner, now would be a good time to take stock of what the housing market might be like in 2017. The California Association of Realtors has done exactly that with the release of their 2017 Housing Market Forecast, which takes into account multiple economic factors.
Association President Path “Ziggy” Zicarelli sees the lowest housing affordability in years, driven by tight housing supplies. But this might work in your favor if you’re looking for a new home in the Central Valley.
• Urban coastal areas, such as the San Francisco Bay Area, will see sales decline as home buyers migrate to more affordable areas, such as the Central Valley, which is predicted to outperform the more expensive markets.
• Kings County is considered the most affordable county in California, where 56 percent of the population is able to buy a median priced home. This compares to the 57 percent nationwide.
• Tulare County is the 7th most affordable county, with 50 percent affordability.
• Compare these amounts to San Francisco, the least affordable county, where only 13 percent can buy a home.
Supply will still be low. Many long-time homeowners, such as baby boomers, are not moving as much as they used to. They currently enjoy low mortgage rates and lower property taxes and may be hit with capital gains tax if they sell, since their homes have appreciated astronomically. So, many are staying to take advantage of the large equity in their homes by remodeling. Many homeowners are not planning on selling their homes during retirement. We could be heading for a European model of home ownership where children inherit the properties of their parents.
At the same time, many millennials are now finally leaving the nest, having found steady jobs, amassed some savings, and paid off some student debt. They are increasing demand on an already limited supply.
As for home prices, the California median home price will rise by 4.3 percent to $525,600 in 2017, compared to a 3.6 percent increase in 2016 to $503,900:
• The average 30-year fixed-mortgage rate should increase only slightly to 4.0 percent in 2017, up from 3.6 percent in 2016.
• The number of single-family home resales will increase to 413,000 in 2017, compared to 407,300 in 2016.
• The Central Valley will see a slight drop in resales to 2.2 percent for 2017, compared to 3.7 percent in 2016. Media price for the Central Valley in 2017 will be $294,600 up 4.1 percent, compared to $283,000 in 2016, a change of 6.6 percent.
• Despite these increases, houses are still more affordable in the Central Valley than they were during the peak of the market. For example, in June 2016, median home prices in Tulare Country were $211,820, a drop of 21.5 percent compared to the Dec 2005 high of $269,710. In Kings County, the June 2016 price of $211,110 is a drop of 21.2 percent from the Mar 2006 high of $268,050.
If you want to know more about home prices, or want to check out our homes for sale in the Central Valley, please contact us.