California's 2007 Housing Forecast

Market to Slow Moderately in the New Year

The rate of home appreciation will post a modest decline in 2007 following several years of steep increases, while the sales pace will decrease as the market stabilizes throughout the year, according to the California Association of REALTORS 2007 Housing Market Forecast.

The median home price in California will decline 2 percent to $550,000 in 2007 compared with a projected median of $561,000 at the end of 2006.
Sales of existing homes are projected to decrease 7 percent to 447,500 units, compared with 481,200 units (projected) in 2006.

"The housing market clearly downshifted in 2006 from the record-setting sales and robust price gains of the last few years," said C.A.R. President Vince Malta.

"The residential real estate market in 2006 has been characterized by a gap between buyer and seller expectations. Sellers sensed that the peak of the market was approaching, yet still hoped to obtain the highest possible prices. Buyers' sense of urgency waned as the number of homes on the market grew and they took longer to identify and subsequently purchase a home.

"Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market - matching the differing expectations of buyers and sellers - will continue to be a factor as REALTORS help consumers navigate their way through a changing market. While projecting a modest decline in the median price of a home, C.A.R. notes that, over the long term, residential real estate in California has been, and will continue to be, a solid investment. Since 1968, the long-term average price appreciation has been 9.1 percent."

C.A.R. projects that 30 year fixed rate mortgages will average 6.7 percent in 2007 while 1-year adjustable rate mortgages will average 5.6 percent.

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