The organizations just-released "2011 California Housing Market Forecast" predicts that home sales in the state for 2010 will show a decline of 10% from the 2009 sales figure of 546,500 homes sold. Sales in 2011 are projected to increase a lackluster 2% to 502,000 units compared with 492,000 units (projected) in 2010.
After two consecutive years of record-setting price declines, the median home price in California will climb 11.5% in 2010 to $306,500 and increase another 2% in 2011 to $312,500, according to the forecast.
"California's housing market will see small increases in both home sales and the median price in 2011 as the housing market and general economy struggle to find their sea legs," said CAR President Steve Goddard. "The minor improvement in the housing market next year will be driven by the slow pace of recovery in the economy and modest job growth. Distressed properties will figure prominently in the market next year, but we also expect to see discretionary sellers play a larger role," he said.
"As the U.S. economy continues its tepid recovery, we'll see some improvement in California's economy," said CAR Vice President and Chief Economist Leslie Appleton-Young. "We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures," she said.
"The situation in the California housing market continues to be a tale of two housing markets," said Goddard.
The segment of the market under $500,000 has been driven by distressed sales, while higher-priced areas of the state have been constrained by restricted financing options, and increasingly have experienced an increase in the number of distressed properties, according to Goddard. Sales in the low end have been constrained by a lack of inventory, putting upward pressure on prices. Multiple offers on lower-end homes have been very common.
"A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end," said Appleton-Young. "There's some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but we do not anticipate that lenders will flood the market with distressed properties," she said.
"The wild cards for 2011 include federal housing policies, actions of 'underwater' homeowners and the strength of the economic recovery," said Appleton-Young. "What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy."