California Home Gains Forecast to Run at Least 2 More Years
California home prices should continue to rise in the next two years, extending the state’s housing gains to a six-year winning streak, according to a new forecast by Wells Fargo Bank.
Bank economists see the CoreLogic median selling price for the state finishing 2015 up 6.5 percent vs. a year ago; then rising 5.8 percent next year and up 5.5 percent in 2017. This index rose 13.4 percent in 2012, 20.5 percent in 2013 and 7.6 percent last year.
“Modestly higher interest rates should not present much of a direct challenge for the state, but with home prices rising and mortgage markets far less flexible than in the past, home sales might come under pressure if mortgage rates rise too quickly. That does not appear to be an immediate risk,” the forecast says. “Interest rates look like they will remain low for even longer than thought previously, which should allow the housing recovery to gain further momentum.”
Pushing home prices higher is the fact that California’s economy is outperforming the nation.
“We look for the Golden State to again add close to a half million net new jobs this year, which is a pace 1.5 times that of the nation as whole,” says the forecast. “Stronger growth is creating some strains, however. About 20 percent of the state’s new jobs have been created in the high-paying technology and life sciences industry.
“Hiring has also picked up in other higher-paying sectors, including construction, manufacturing, health care and logistics,” the report continues. “California, however, has also added plenty of lower-paying jobs as well, and many of these low-paying jobs are being created in the same geographic areas where higher-paying jobs are being added. These wage discrepancies have made finding affordable housing an even greater challenge than in the past.”
The California Association of Realtors last week predicted that the median price of a California existing, detached house will rise 3.2 percent to $491,300 in 2016. Its house price index rose 9.8 percent in 2014 and 6.5 percent so far this year.
