SANTA CLARA, Calif. — The state's housing market is expected to see another year of double-digit gains in price appreciation in 2005, but the pace of growth will be more sluggish than in the previous three years, a real estate industry group said Wednesday.
Even with slower appreciation, the median price of a resold single-family home in the state is projected to rise 15% to $522,930 next year, making it the fourth consecutive year of increases of 10% or more, according to the California Assn. of Realtors.
The number of single-family homes sold will decline about 2.5%, to 603,700, as mortgage rates move higher, said Leslie Appleton-Young, chief economist for the Realtors group, in her annual market forecast.
Meanwhile, 2004 is shaping up to be a hot year for California real estate, with the median home price projected to rise 22% from 2003 to $454,720, Appleton-Young said. Growing inventory, particularly in Southern California, is expected to push sales volume up 2.9%, compared with a 5.1% gain in 2003.
Appleton-Young said she had "under-predicted" the market before and that this year's home price appreciation rate could wind up above 25%. Last year, she projected that 2003's median price would increase 10%; it surged 18% to a record $372,720. (The median is the point at which half of homes sold for more and half for less.) The price and volume data are based on a sample of sales from the group's 90 local boards of Realtors.
"We didn't imagine that [mortgage] rates would stay as low as they have for as long as they have," she said. "That has changed the whole tenor of the market."
Appleton-Young and other economists talk of an inevitable rise in mortgage rates, which have hovered at or below 6% for two years, as the economy strengthens. The Realtors group is predicting that long-term, fixed-rate mortgages will reach 7% by this time next year.
Appleton-Young said she didn't see a scenario that would cause a double-digit downturn in prices or sales. The state's job growth rate will edge higher by 2%, she predicted, ensuring that demand for housing will continue to outpace supply.
Meanwhile, the percentage of Californians who can afford a median-priced home will fall to about 16% next year.