Forecast: Median home price in Calif. could fall for first time since 1996
October 10, 2007
LOS ANGELES – The annual median housing prices in California could fall next year for the first time since 1996, as unsold homes keep piling up and many buyers hold out for lower prices, a trade group said Wednesday.
The 2008 forecast released by the California Association of Realtors calls for the median price of a home in the state to decline 4 percent to $553,000, compared to the group’s projection for this year’s median sale price of $576,000.
If the drop occurs, it would mark the first annual decrease since 1996, when the median price fell by 0.5 percent from the previous year, according to the association.
The forecast also anticipates a statewide decline in sales of existing homes of another 9 percent to 334,500 units. The association said that would be an improvement over the projected drop of 23 percent this year, compared to 2006.
“It’s a moderation in the pace of decline, so from that perspective I guess it is positive, but we’re certainly getting to a relatively low level of sales,” said Leslie Appleton-Young, the association’s chief economist.
Stephen Levy, senior economist at the Center for Continuing Study of the California Economy, had a less optimistic outlook.
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He expects prices to drop between 10 percent and 15 percent overall and perhaps more in some markets.
The association forecast “conveys the wrong image to people about what’s going to happen in prices in their neighborhood from now on,” Levy said.
“It’s going to be more severe. I think that’s good. I think it’s better for us if we get through the correction faster,” he said.
California’s housing market has been stung by declining sales and lagging home values, particularly in inland areas where developers built new homes during the housing boom.
Mortgage lenders, meanwhile, have been struggling to find cash in the wake of rising delinquencies and foreclosures among financially strapped borrowers, especially those with subprime loans.
As a result, the mortgage industry has tightened lending standards, making it harder for homeowners to refinance or for new buyers to enter the market – exacerbating the slowdown in home sales.
The conditions are likely to persist into next year, stifling sales in California, the trade group warned.
“Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year,” said Collen Badagliacco, the trade group’s president.
Given the circumstances, homeowners contemplating a sale should think twice about putting their home on the market, said Appleton-Young.
“For sellers, because inventory is so much higher than it was a couple of years ago, the advice is don’t list your home for sale unless you’re really interested in selling your house,” Appleton-Young said.
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