2018 HOUSING MARKET IN REVIEW
In California, in 2018, for the first time in four years, home sales ended at a lower level. The economic forecast by the California Association of Realtors (C.A.R.) predicts that in 2019, single family home sales will decline approximately 3.3 percent.
In San Diego home prices were consistently up in most markets in 2018 but at reduced levels compared to recent years. High demand for homes fueled price increases, but evidence is mounting that inventory will improve in 2019. This may apply some downward pressure on prices for home buyers. A fourth interest rate hike by the Federal Reserve in 2018 spooked the stock market to close out the year. The Fed has indicated that the number of rate increases in 2019 will be halved.
Closed Sales decreased 22.9 percent for Detached homes and 42.9 percent for Attached homes.
The Median Sales Price was up 5.8 percent to $725,000 for Detached homes but decreased 6.7 percent to $418,250 for Attached homes.
Days on Market increased 25.0 percent for Detached homes and 50.0 percent for Attached homes. Supply increased 43.8 percent for Detached homes and 100.0 percent for Attached homes.
Unemployment rates remained remarkably low again in 2018, and wages continued to improve for many U.S. households. It is generally good for all parties involved in real estate transactions when wages grow, but the percentage of increase, on average, has not kept pace with home price increases. This created an affordability crux in the second half of 2018. Housing affordability will remain an important storyline in 2019.
2019 HOUSING MARKET FORECAST
As mentioned in the 2018 recap above, C.A.R. has predicted a slower housing market in California in 2019.
Here are some of the indicators to watch for:
Higher Interest Rates
While sales are projected to decline next year in California, the cause behind this trend will not be higher prices. According to the forecast, the median home price in California will increase only 3.1 percent to $593,450 in 2019, compared to a projected seven percent increase in 2018. C.A.R. estimates that home prices will temper in 2019, however interest rates could go up, which will compound housing affordability challenges. The C.A.R. forecast shows that in 2019, the average interest rate for a 30-year fixed home loan will increase to approximately 5.2%, against an average rate of 4.7% in 2018.
Drop in Existing Home Sales
Existing homes sales are predicted to decline in 2019. These estimates from C.A.R. mark a significant shift from the hot demand the housing market in California experienced in the past four years. That period witnessed consistent rise in demand and price gains driven by bidding wars. However, things have changed in 2018, and the declining trends are likely to continue in 2019.
Price Reduction Predicted
C.A.R.’s chief economist and senior VP, Leslie Appleton-Young said that the rise in home prices over the last few years occurred due to a shortage of housing supply. This trend shifted at the end of 2018 and although California is not yet fully a buyer’s market, the trends are pointing in that direction.
If you have questions about the market in your specific area, please email me or call 619-888-2117. 📲