Taking a look back at how the 2019 California housing market transpired, it wasn't too far from what was projected. Prices were expected to increase 3.1% but they increased by 4.1%. Now with 2019 behind us I wanted to look at the 2020 projections. These are statewide projections and real estate is generally very local in terms of pricing so this can't be relied upon as a specific report for your area or neighborhood. This is just a general snapshot, so take it for what it is worth. Also, data from this report was compiled in September, 2019 so the numbers for 2019 are simply projections for how the year was supposed to turn out, four months prior to its completion (info for this blog, including any quotations, have been taken from the California Association of Realtors 2020 Housing Market Forecast).
The 2020 forecast calls for a small 0.8% uptick in the number of units sold compared to 2019. The projections for 2019 were that 390,200 units would be moved. The 2020 forecast calls for 393,500 housing units expected to change hands statewide. 2019 saw a 3.1% decrease in units sold as compared to 2018. The 2020 expected median sale price in CA is $607,900, which is a 2.5% increase over 2019. 2019 saw an uptick in pricing of 4.1%. So in summary, slightly more homes will change hands in 2020 and home values are expected to increase at a rate of about 60% of what they increased last year. So prices are cooling off with a very slight bump up in the number of homes sold.
I'm not exactly sure how the home buyers and sellers will feel about the 2020 market vs. the 2019 market. Will the 2.5% increase in values make it feel like the market is cooling? It is certainly cooling off from the 4.1% growth in 2019 but its "cooling" in an upward fashion. Even with the slight uptick in the number of transactions, the market should remain a sellers market due to the 2.5% increase in values. The 0.8% uptick in the number of transactions isn't enough to create a buyers market, especially with values increasing. Another thing to look out for is if local and state government put any new restrictions and or fees on new construction. With more red tape there could be fewer homes for sale which would definitely keep the market in the sellers corner for 2020.
But getting back to the 2020 forecast put out by the California Association of Realtors, let's go over some of the other factors weighing in on the California housing market in 2020.
"With interest rates expected to remain near three-year lows, buyers have more purchasing power than in years past, but they may be reluctant to get off the sidelines because of economic and market uncertainties," said C.A.R. President Jared Martin. "Additionally, an affordability crunch will cut into demand in some regions such as the Bay Area, where affordability is significantly below state and national levels. These factors together will subdue sales growth next year."
One thing that home buyers will be able to take advantage of in 2020 is low interest rates. C.A.R. is projecting 30 year fixed mortgage rates to hit 3.7%. We have not seen interest rates that low since 2016 when they hit 3.6%. So expect homeowners to be refinancing again and for buyers to be wanting to lock in on historically low interest rates.
"California's housing market will be challenged by changing migration patterns as buyers search for more affordable housing markets, particularly by first-time buyers, who are the hardest hit, moving out of state," said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. "With California's job and population growth rates tapering, the state's affordability crisis is having a negative impact on the state economically as we lose the workers we need most such as service and construction workers, and teachers."
The article goes on to state that it was projected in 2019 that 30% of the home sellers said they would purchase their next home out of state. People are being squeezed out of this market in CA. and are searching for greener and cheaper pastures in other states.
Something that we'll all be watching is how the 2020 POTUS elections affect the stock market and the housing economy. That could be somewhat of an X factor in the 2020 projections. In summary, the sky is not falling, home prices are not falling. If you need a seasoned Realtor in the Fresno and Clovis market give me a call, Jason Nenadov at 559-246-8991. To view homes for sale in real time in Clovis CA., click here.
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