California's housing market will continue to improve into 2016, but a shortage of homes on the market and a crimp in housing affordability will persist as well, the California Association of Realtors said Thursday in its 2016 California Housing Market Forecast.
The association's forecast sees an increase in existing home sales of 6.3 percent next year, reaching 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold, a CAR statement said. Sales in 2015 also will be up — 6.3 percent from the 383,300 existing single-family homes sold in 2014.
"Solid job growth and favorable interest rates will drive a strong demand for housing next year," said CAR President Chris Kutzkey. "However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability.
"On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas," he said.
The average for 30-year fixed mortgage interest rates will rise only slightly to 4.5 percent but still remain at historically low levels, CAR said.
The California median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300. This is the slowest rate of price appreciation in five years.