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If there’s any state in the US that has experienced a sizzling hot real estate market over the recent past, it’s California.
2015 was a stellar year that brought significant growth and milestones in California’s housing’s recovery. The Golden State saw a hefty 6.3% increase in existing homes sales and a 15% growth in new-home sales in 2015 over the year before, and the California Association of Realtors (CAR) anticipates the same forecasted increase for this year over last.
That makes 2015 the best year in real estate in California in over 8 years.
Last year saw a new record for the median price of homes at $489,560 – that’s the highest it’s been since November 2007. Yet while median prices in California increased 6.5% in 2015 from the year before, they are expected to slow somewhat to a 3.2% increase this year. That’s the slowest increase in home prices over the last five years, which is an invitation for buyers to swoop in.
The number of first-time home buyers – namely, Millennials – increased by 12% in 2015. In fact, the new-home market has grown largely because builders are continually responding to stronger demand from these entry-level buyers.
California continues to top the charts in the US when it comes to economic and job growth. Nearly 3 million jobs were created last year, and the unemployment rates in the state are on the decline, going from 7.5% in 2014 to 6.3% last year. These numbers are expected to continue to drop down to 5.5% in 2016.
As employment growth continues, affordability follows, which favors buying over renting for qualified borrowers.
Real estate action is shifting inland as inventory in coastal areas is still slim, and prices remain extremely high and out of reach for many home buyers. Real estate prices should ease up somewhat with this continued activity, making it more feasible and affordable for buyers to get into the market.
The average American consumer is crawling out of the hole from the financial crisis of 2008, and is experiencing a strengthening in spending power.
Mortgage rates are still at extreme lows, but are steadily on the increase, particularly after the Fed announced a rate increase back in December 2015. The average 30-year fixed mortgage interest rate currently sits at 3.75%, and is expected to hit 4.5%. While that’s still somewhat low, locking in a mortgage sooner rather than later can shave thousands of dollars off the term of a mortgage loan before rates creep up.
Distressed sales dropped by 19% as foreclosures and short sales shrunk. In fact, homes in foreclosure accounted for 1.1% of all financed properties, the lowest level it’s been since late 2007.
As strong as 2015 has been for the California housing market, 2016 is poised to be an opportune time for buyers to get into the market as mortgage rates increase and housing affordability remains strong.