Painting by local Santa Barbara artist Chris Potter
Forecast: California Home Prices to Grow by 10 Percent Through 2018
California home prices rose by 5.8 percent year over year in May and are projected to grow by 9.7 percent by next spring. U.S. rents rose by 3.1 percent on an annual basis in May, further eroding affordability. Although home values throughout most of California are currently considered normal, most are projected to be overvalued by 2022.
Golden State homes should appreciate at almost double the national rate by next spring, though price growth and increasing rental costs do not bode well for affordability. CoreLogic’s latest Home Price Insights report says that U.S. home prices rose by 6.6 percent from May 2016 to May 2017. California home prices grew by 5.8 percent in that time period.
Single-family rent inflation grew by 3.1 percent year over year in May, a reflection of constrained housing inventory and yet another obstacle for those hoping to enter the housing market while mortgage rates remain historically low. Housing affordability is already a national problem, dropping to a near nine-year low in the second quarter, according to a recent report from ATTOM Data Solutions. That analysis said that home prices grew faster than wages on an annual basis in 87 percent of U.S. housing markets
California’s affordability problem is unlikely to improve in the coming year if CoreLogic’s forecast is accurate. The HPI calls for 9.7 percent home price appreciation through May 2018, compared with 5.3 percent appreciation nationwide.
