The California Association of Realtors predicts 2017 is going to be a good year for the state’s inland markets as those on the coast get less and less affordable.
The trade group’s 2017 Housing Market Forecast, released Thursday, anticipates that the number of homes sold statewide will rise slightly between this year and next. But economists believe soaring prices in Los Angeles, San Diego and San Francisco could slow sales there, while the relatively affordable Inland Empire and Central Valley will see more activity.
“Job creation, low interest rates, the availability of low-down-payment mortgages… all make it a little more attractive and a little easier for first-time homebuyers to realize that demand. They can’t always do it in the urban coastal area, which is slowing, but they can do it in the Inland Empire, the Central Valley and Northern California,” said Leslie Appleton-Young, CAR’s chief economist and vice president. “In general, the migration pattern fits hand-to-glove the housing affordability pattern and the creation of jobs.”
Since 2014, when foreclosures and real-estate-owned sales returned to their historical levels, prices have risen steadily but inventory has remained tight as construction lags and homeowners stay in their homes longer. According to CAR, sales were effectively flat from 2015 to 2016. Median prices statewide rose 6.2 percent over the same period. In 2017, the group predicts a 4.3 percent rise in prices statewide and a continued drop in affordability.
Although interest rates remain historically low, 31 percent of Californians could currently afford to purchase a home at California’s median price — $526,000 through the first seven months of 2016 — according to the forecast. In 2012, 50 percent could afford homes.
And Appleton-Young estimated that 400,000 to 700,000 single-family homes were purchased by investors during the recession and are now occupied by renters instead of owners, taking even more inventory off the market.
“The impact on first-time homebuyers has been really dramatic,” Appleton-Young said, pointing out that first-time buyers have comprised just 29 percent of all buyers in 2016. Over the last 30 years, the average has been about 38 percent. “Even with this amazing rate environment, with jobs coming back, household formation, first-time buyers are still having a very tough time.”
In the Coachella Valley, median home prices have hovered around $295,000 for the last two years. Sales numbers ebb and flow seasonally, as does inventory, but agents generally consider the market healthy.
“I wasn’t surprised by any of (the forecast),” said Jim Webb, president of the Palm Springs Regional Association of Realtors. “It’s kind of the status quo. The biggest issue is housing affordability.”
Webb said he hasn’t seen any evidence of buyers pushed out of coastal markets looking for Coachella Valley homes instead.
Lucio Bernal, a Palm Springs real estate agent with Berkshire Hathaway HomeServices, said when he sees coastal buyers active in the Palm Springs area, they’re usually thinking ahead to retirement. He thinks the region’s low prices continue to encourage buyers to act fast.
“A lot of the consumers that I see are coming from L.A., San Diego, those markets, but it’s not just second homes, It’s future, near retirement homes,” Bernal said. “I think the feeling of most of our immediate markets, San Francisco, Seattle, anyone who has a direct flight to the Palm Springs area, still sees Palm Springs as affordable to where they would rather buy now, with the anticipation that by the time they retire, those values will increase.”
But like markets across the state, he cautioned, demand outpaces the number of available homes in the desert.