12/26/2012
What’s in store for the California’s
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 2011, and
sales of new homes are up 25 percent
from the year before. The median price
of new and existing homes nationally is also up
over 11% from a year ago. New residential
construction is soaring; since September 2011,
single-family housing starts have increased 43 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. The result of the low inventory is reflected
in the soaring home prices in many areas of San Diego.
Given the relatively solid 2012 housing trends, what is
California’s 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, California’s 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.
*Source, California Assoc. of Realtors
