House Prices Forecast to Rise Just 5.2%

Next year will be better for home buyers – especially for renters trying to purchase a home – as galloping house prices slow to a walk, the California Association of Realtors chief economist said. 

Delivering her annual housing forecast, Realtor economist Leslie Appleton-Young predicted that the median price of a California house will rise a modest 5.2 percent in 2015. 

Sales are expected to climb 5.8 percent, after a drop of 8.2 percent this year. 

Considering that the number able to afford the typical home has dropped to 36 percent of California households this year (and to 20 percent of Orange County households), the slowdown in home-price gains could create opportunities for entry-level buyers, Appleton-Young said. 

“You’ve got investors leaving (the market), you’ve got moderation in prices, you’ve got more inventory and you’ve got a little bit more hospitable lending environment,” Appleton-Young said in a telephone conference call with reporters. 

“It might be a good pause for all the people who got a little bit exhausted by all the multiple offers and competition in the last couple of years.” 

In other news, Irvine-based CoreLogic reported that Orange County home prices were up 5.8 percent in the year ending in August, the smallest appreciation rate since late 2012. 

Highlights of the Realtor forecast include: 

• Interest rates for the traditional 30-year fixed-rate mortgage will rise only slightly to 4.5 percent, compared to this year’s average of 4.3 percent. 

• Only half of California houses sold this year got multiple offers, compared to seven out of 10 in 2013. 

• Distressed sales (foreclosures and sales “short” of the amount needed to pay off the mortgage) are down to 10 percent of all California transactions, while normal “equity sales” accounted for 90 percent of all deals. In Orange County, equity sales account for 95 percent of all deals. 

• Investors account for 15 percent of all California sales this year, down from 19 percent in 2013. 

• The median price of an existing Orange County house was up 5.2 percent year-over-year as of August, to $699,430. That’s a 58 percent increase from house prices at the bottom of the recession in January 2009. 

• Orange County house sales were down 13.2 percent as of August. 

“We are transitioning, obviously, into a slower price appreciation environment,” Appleton-Young said. “I don’t think it’s out of the question that within two years or so we could actually see some declines, some retreats, in terms of prices.”