Despite positive job growth and a strong overall economy, California’s housing market is showing signs of weakness and may cool further through the rest of the year and into 2020, according to the latest UCLA Anderson Forecast.
Jerry Nickelsburg, adjunct professor at UCLA and director of the Anderson School of Management’s forecast, says that the forecast has revised its predictions on housing starts in 2019 and 2020 downward based on “our national forecast for slowing economic growth, continued discussion on when the next recession will be, and the Fed indicating that the peak of the interest rate cycle could be near.” However, a recovery in building is anticipated starting in 2021.
The economist said the impact of the cooling is even being felt in the Central Valley of California, where home sales have fallen by more than 10 percent.
In Southern California and the San Francisco Bay Area, home sales fell to an 11-year low in January, according to CoreLogic. The analytics provider reported sales have fallen on a year-over-year basis in the Bay Area the past eight consecutive months, while in Southern California sales have fallen on a year-over-year basis in the last six consecutive months.
…At the same time, the nation’s most populous state continues to suffer from a chronic housing shortage. “Home prices are falling in California as is the level of building,” Nickelsburg wrote. He said one possible explanation is “higher mortgage interest rates are depressing prices but not the underlying demand.”
Another possibility behind the housing slowdown is prices are “so expensive that everyone (well a lot of everyone) is leaving,” the economist added.
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