California home prices and sales are projected to continue rising next year, but price gains will be much more modest than seen in the past year, according to the California Association of Realtors’ 2014 housing forecast.
The 2014 median house price house is projected to rise to $432,800 statewide, up 6 percent from this year’s projected all-year median of $408,600.
The median price of an existing single-family home was up 28.4 percent in the year ended in August and is projected to end the year up 28 percent from 2012 levels. But prices climbed dramatically this year due to a tight supply of homes for sale just as demand came roaring back and interest rates remained at historic lows.
The gains meant that more homeowners who owed more on their mortgages than their homes were worth were freed up to sell their homes.
“As the market continues to improve, more previously underwater homeowners will look toward selling, making housing inventory less scarce in 2014,” said association Chief Economist Leslie Appleton-Young. “As a result of these factors, we’ll see home price increases moderate from the double-digit increases we saw for much of this year to mid-single digits in most of the state.”
Realtor economists also project that home sales will rise 3.2 percent in 2014 to an annual total of 444,000 sales, the most sold in eight years. The 2013 sales tally is projected to fall about 2 percent short of 2012 levels.
Also on the increase: mortgage rates. The association predicted that interest on the traditional 30-year, fixed-rate mortgage will rise to 5.3 percent next year, up from an average of 4.1 percent in 2013.
For a median-priced home with a 20 percent down payment, that 1.2 percentage point gain amounts to a $236 increase in a monthly mortgage payment, or nearly $85,000 in increased interest over the life of the loan.
“The housing market has improved over the past year, and we expect this trend to continue into 2014,” said association President Don Faught. “As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines.”
Article courtesy of OC Register.
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