It’s that time of year, and high-profile prognosticators are breaking out their crystal balls to come up with their California 2019 real estate forecast. For the past couple of years or so, I’ve given you a blow-by-blow video of Leslie Appleton-Young’s California market forecast (Leslie is the Chief Economist of the California Association of REALTORS, aka C.A.R.). This year, though, I’m going to skip that and instead give you just C.A.R.’s forecast highlights, and a round-up of other California real estate forecasts for 2019 as well.
But let’s start with C.A.R.’s 2019 California real estate forecast…you can get it right from the California Association of REALTORS web site, from their October 11th presentation to REALTOR members. Also, I do have a copy of Leslie’s slides from the presentation she made to the Santa Clara County Association of REALTORS on November 16th, 2018 – if you want to download the slide deck as a PDF, you can do so using this link.
In a nutshell, here’s what Leslie and the folks at C.A.R. are predicting for the 2019 California real estate market:
A combination of high home prices and eroding affordability is expected to cut into housing demand and contribute to a weaker housing market in 2019, and 2018 home sales will register lower for the first time in four years…
In essence, the message from C.A.R. is that the California real estate market in 2019 can be characterized as changing “from great to good.” I’ll break out a few key predictions for you.
California Association of REALTORS 2019 Forecast
- California Homes sold in 2019: 371,100 (down 6.9% vs. 2018)
- Median Price: down 0.2% in 2019
- California Unemployment at 4.3% (unchanged from 2018)
- Real Disposable Income up 3.0%
- 30 Year Fixed Rate Mortgage at 5.2%
Yes, you saw that right – C.A.R. now predicts that the California median home price will drop 0.2% in 2019, to $574,500 (from $575,500 in 2018). This is interesting because a month prior, at the C.A.R. conference in San Diego, Leslie had forecasted an increase of 3.1% in median home price for 2019. I did reach out to C.A.R. for an explanation, and received this reply:
Yes, we made some changes to our forecast and the presentation that Leslie did on November 16 had the most updated numbers. When we presented the forecast at the C.A.R. annual meeting in early October, we only had data through August 2018. The market changed more rapidly since then, which prompted us to revise our original forecast presented at the annual meeting. We believe the pull-back in housing demand will be worse than previously thought for the rest of the year and next year, which will lead to a sales drop of 6.9% and a price decline of 0.2% in 2019.
Most of Leslie’s yearly market report and forecast is actually a presentation on what’s going on with the California housing market and economy in the here-and-now. Here’s some key numbers she’s looking at:
- Unemployment Rate by County:
- Santa Clara County has just 2.4% unemployment
- Monterey County has just 3.9% unemployment
- Santa Cruz County has just 3.5% unemployment
- San Mateo County has just 2.1% unemployment
- California Employment is now at an all-time high
- Consumer Confidence is at 18-year high
- Bay Area has $80K per-capita GDP, highest in USA
- Only 78% of people think now is a good time to buy
- Bay Area Home Sales down 3% year over Year
- Number of Homes Sold is Declining
- Days on Market is Rising (homes taking longer to sell)
National Association of REALTORS 2019 Real Estate Forecast
Lawrence Yun, the Chief Economist for the National Association of REALTORS (N.A.R.), also made a forecast for the national real estate market in 2019 at the N.A.R. Annual conference in Boston in November. I wasn’t able to get a copy of the slide deck used by Mr. Yun, I’ve just had to piece together a few highlights from my notes and from around the web:
- The national median home price is expected to rise 3.1% to $266,800 in 2019.
- In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase.
- Housing Starts to Rise 8% in 2019
According to Yun:
Most states are reporting stable or strong market conditions, housing starts are under-producing instead of over-producing and we are seeing historically low foreclosure levels, indicating that people are living within their means and not purchasing homes they cannot afford. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust.
And, this choice little nugget:
Home price appreciation will slow down – the days of easy price gains are coming to an end…
Fannie Mae’s 2019 National Real Estate Market Forecast
- Forecast 2.3% increase in home prices
- 1.2% increase in existing home sales
Come 2019 … we expect the fiscal boost to fade, and we adjusted our forecast lower accordingly…We also note mounting downside risks to our projections, including growth-constraining protectionist trade policies and rising oil prices, among others. Meanwhile, housing’s upward grind should continue, despite a lackluster first quarter. We expect home sales to post modest gains both this year and next, as prices rise and affordability declines amid low for-sale inventory.
Zillow Local Market California Forecasts for 2019
I don’t put much stock into Zillow’s Zestimates, but they do vacuum up a whole lot of data and I think their aggregated numbers are somewhat reliable. I’m not sure I believe these particular numbers though, given what we’re seeing in the local housing market and the predictions from N.A.R., C.A.R., etc., but here goes:
- Santa Clara County: +12.9% 1-Year Forecast
- Santa Cruz County: +7.0% 1-Year Forecast
- San Mateo County: +7.3% 1-Year Forecast
- Monterey County: +8.0% 1-Year Forecast
Who knows what the future will bring? It’s impossible to say, of course, but at the very least it seems certain that the real estate market in 2019 will be substantially less favorable to sellers than it was in 2018 (as I predicted in March of this year). However, the way it appears to me now is that whatever momentum the housing still market has (and make no mistake, this is not yet a weak housing market) will continue to weaken as time passes – until eventually, inevitably, the market begins a full-scale retreat. Whether that happens in 2019, 2020, or later remains to be seen.
Few people are able to plan the sale of the home to coincide with what they feel will be a market peak – which is why in good markets, and in bad, the number of home sales does not fluctuate all that much. By and large, people buy and sell homes according to their life’s needs. However, if you do have the ability to be flexible and strategic with choosing the time to sell your home, it seems clear that selling sooner rather than later is a smarter move to make.