What's the 2013 Prediction for California Home Prices?

The PITI is based on the prevailing median price in the
2nd Quarter 2012. The PITI is calculated based on an
 underlying effective FRM interest rate of 3.92%,
 a 20% downpayment,
and corresponding loan amount.
The monthly rent is derived from
RealFacts Q2 2012 estimates for a
3bd 2ba average asking rent.
The California Association of Realtors annual conference was held earlier this month in Anaheim.  The 2013 Forecast extensively covered all phases of the residential market, with a total of 136 PowerPoint slides as part of CAR economist Leslie Appleton-Young's annual presentation. 

At the closing section, Market Opportunities for 2013, four points were made:  1) Home prices are rising, but still very attractive; 2) Look for return on interest for investment opportunities; 3) interest rates are at historic lows; and finally, 4) first-time buyers: rent v. buy?  Do The Math!.

The current story for many buyers and sellers has twists and turns all along the road, but it's still a time to not be passed up!

For California, the median price of a single family home is projected to rise in 2013 from $317,000 at the end of 2012 up to $335,000 in 2013.  At this point, buyers are more optimistic than sellers about future home prices:  49% of sellers think prices will go down in one year, and 9% of sellers think they will go up.  But while 49% of buyers think prices will stay flat, 25% of buyers think prices will go up.  And those buyers are probably going to be right--last year the projected price increase for 2012 was for a 1.7% increase, but the current projected actual increase by the end of 2012 is 10.9% increase.
Median home price for So Cal Counties
The median home price in Los Angeles County went up over 10% from August 2011 to August 2012, with REO sales making up only 12% and short sales making up 24% of the total sales in August 2012.

Part of the twist in the road for sellers is that 29% of California borrowers are "underwater" in their home value--and that can make it tough to move on for those not willing to do a short sale.  For sellers who need to do a short sale, the good news is that foreclosure sale cancellations by the banks have increased phenomenally compared to one year ago, because loan modifications and short sales have greatly increased their share of the distressed property market, as banks are take stronger steps to avoid increasing their inventory.   Inventory in general is in very tight supply, and there are extremely low levels of active listings throughout the state, with 2.1 months' supply of equity inventory and even less for REO and short sale listings ( “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.). 

This low inventory issue is one of the things driving price upwards, and helping some sellers get back into an equity position.  Classified as an "urban myth" is the story that there will be lots of foreclosures hitting the market after the election.  Not so.   According to Foreclosure Radar, more foreclosures were cancelled in a 6-month period than REO properties and 3rd party investor sales combined, due to previously mentioned short sales and loan modifications. 
Buyers have more stringent loan qualification to meet as conventional loan FICO scores are asking for 720 and 740 FICOs, with a concurrent rise in VA and FHA loans in the market because they are easier for some buyers to obtain.  Because of this, more sellers are receptive to FHA offers in some cases--unless of course, it's an offer from an all cash buyer.  Nevertheless, it is not the time to sit back because there is opportunity for those who persevere!
So remember, home prices may be rising in California, but they are still very attractive!

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