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Why You Should Buy into California’s Real Estate Market


To buy or not to buy, that is the question. Enough ambivalence: Buy!

California continues to lead the nation in both economic and job growth. The state’s housing market remains strong, and will continue to increase in overall strength. Let’s look at the numbers.

C.A.R. forecasts an increase of 6.3% in existing home sales, reaching 433,000 units. This is the same percent of increase 2015 saw over 2014. C.A.R. also projects the U.S. Gross Domestic Product to grow 2.7%, after a 2.4% gain in 2015. California’s unemployment rate has decreased from 7.5% in 2014, 6.3% in 2015 and should reach 5.5% in 2016. The 2015 California median home price rose 6.5% and should lower to 3.2% increases in 2016, which is the slowest rate of price appreciation in over five years. Home purchases are also moving inland, as coastal prices continue to stay sky high and inventory is very limited. This will likely temper California’s comparatively high home prices.

Globally, we see a little bit of economic slowdown, financial market volatility and a fairly uniform belief that interest rates will rise. The average 30-year fixed mortgage interest rates will rise to 4.5%, higher than last year, but still at historically low levels.

Furthermore, foreclosure inventory dropped 23.8% in December compared to a year earlier. There were about 433,000 foreclosed homes, which represents 1.1% of all mortgaged homes, down from 1.5% in December 2014, and the lowest level since November 2007. Overall, year-long foreclosures is at the lowest number since 2006, before the crash. However, California should be cautious with some of it’s very highly priced housing markets, such as San Francisco. These high-priced housing markets rose more than 62% above the post crisis low of 2012, but median income has only risen by about 44%. These prices in certain locations with be unsupportable by the majority of buyer’s incomes, which could lead to a correction in housing values.

With foreign investors continuing to invest and consumers constantly moving to the state, there is a lot of reason to feel confident buying real estate in California. With so many attractions and opportunity, the state will continue to provide a large demand for housing, as you can see with the increase in construction. Interest rates are still at historical lows, they are only going to increase from here, so what are you waiting for?

Kellie S. Chan, A California Realtor speaks English, Khmer, Vietnamese, and Thai

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