Buyers and sellers alike know that the California housing market has heated up, and now the California Association of Realtors projects that the trend will continue upward into 2014.
In its latest forecast, CAR predicts primary home buyers will make a comeback after a period of tough competition with investors for what has been a limited supply of homes on the market.
"We've come up against an exceptionally low-inventory situation in California for at least the last year and half, and it has started to take a bite out of sales" said Leslie Appleton-Young, CAR's chief economist. She said the market is still "robust" but that there's been a 2.1% drop in the number of homes sold this year over last year due to limited supply.
But two trends are changing that.
One is a rapid rise in home values. Appleton-Young said that's lifting many underwater homeowners who still owe more in mortgage payments than their homes are worth. Higher prices are providing them with the opportunity to sell. Appleton-Young says that's beginning to boost the number of real estate listings.
The second, according to Appleton-Young, is a shift in investor behavior. For the past three or four years, investors have bought homes and rented them out. Now, they're starting to "flip" the houses, in other words buying, fixing and putting them back on the market more frequently.
Appleton-Young's forecast projects home sales to reach 430,300 units in California this year and rise 3.2% next year to reach 444,000 units. The median price of a California home will also increase, according to the forecast: 28% this year over last year to $408,600, and then another 6% in 2014 to $432,800.
Appleton-Young also said the dynamics of today's housing market are different from earlier years when those without adequate income were buying homes they couldn't afford.
It's a lot harder to get a home loan today, she explained.
"The underwriting that goes into loan origination today does not look anything like the underwriting that we had in 2003-2006, where if you essentially had a pulse, you could get a loan," Appleton-Young said.