California home sales will stay sluggish next year as the market continues to struggle with a weak economy and large numbers of distressed properties.
Home sales will climb a mere 2 percent in 2011 after a projected drop of 10 percent this year, the California Association of Realtors forecast Monday. The median price also is expected to rise 2 percent next year to $312,500.
In many geographical areas around the state, prices have increased from the lows of 2009, the group’s economists said. But they discouraged expectations of significant price appreciation anytime soon.
“It’s going to be a three-to-five-year window to work through this,” said Leslie Appleton-Young, the association’s chief economist.
She ruled out a double-dip in prices. Instead, she said, “I think we’re still in that flat horizontal section of a “U.”
Appleton-Young also suggested that while the overall median price will see a slight rise, owners of more expensive homes could see “continued softness” in demand, resulting in a possible decline in prices.
The state is projected to end this year with sales of 492,000 existing single-family homes, compared to 546,500 sales in 2009. There were 625,000 homes sold in 2005.
For 2010, the median price is forecast to increase almost 12 percent to $306,500.
“California’s housing market will see small increases in both home sales and the median price in 2011 as the housing market and general economy struggle to find their sea legs,” Realtor Association President Steve Goddard said in a press release. “The minor improvement in the housing market next year will be driven by the slow pace of recovery in the economy and modest job growth. Distressed properties will figure prominently in the market next year, but we also expect to see discretionary sellers play a larger role,” he said.
For Sonoma County, year-to-date single-family sales as of August were down almost 7 percent. The year-to-date median price was up 8 percent to $355,000, compared to 2009.
Appleton-Young said the U.S. economy will continue a “tepid recovery,” with some improvement in the state economy.
“We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures,” she said. However, the association warned that unemployment may remain above 10 percent for the next few years.
The association reports the same differences seen locally between the starter-home and higher-end market segments. Under $500,000, the market has been driven by distressed property sales and limited inventory, while sales of more-expensive homes have been more sluggish. The association blames that partly on “restricted financing.” Local agents and brokers have said the large numbers of homeowners without equity and the sluggish job market have resulted in fewer “move-up” buyers seeking more expensive homes.
“A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end,” said Appleton-Young. “There’s some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but we do not anticipate that lenders will flood the market with distressed properties,” she said.
— Robert Digitale