Slow Recovery in Housing Market Projected for 2011

The tepid economic recovery is expected to result in a decline in California home sales for 2010, however home sales will likely edge up slightly in 2011, according to a new report by the California Association of Realtors. The 2011 California Housing Market Forecast, released Oct. 4, projects California home sales for 2010 will decline 10 percent from the 2009 sales figure of 546,500 homes sold. Sales in 2011 are projected to increase slightly by 2 percent to 502,000 units compared with the projected 492,000 units in 2010. Median home price in California will climb 11.5 percent in 2010 to $306,500 and increase another 2 percent in 2011 to $312,500, according to the forecast. “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,” said C.A.R. President Steve Goddard. “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. The segment of the market under $500,000 has been driven by distressed sales, while higher-priced areas of the state have been constrained by restricted financing options, and increasingly have experienced an increase in the number of distressed properties, said Goddard. Sales in the low end have been constrained by a lack of inventory, putting upward pressure on prices. C.A.R. Vice President and Chief Economist Leslie Appleton-Young said there’s some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but they do not anticipate that lenders will flood the market with distressed properties. “What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy,” Appleton-Young said.