California’s Real Estate Market Cooling

Home prices increased more than 6 percent nationally last year, with lower-priced homes seeing some of the largest gains. This was bad news for entry-level buyers who couldn’t afford the higher prices.

In the costliest markets, like California, where the median home price was around $530,000 in 2018, about 70 percent of residents couldn’t afford to buy a home. However, California’s market is starting to cool as are some of the least affordable areas on the West Coast. The rest of the country is expected to see a slowdown, as well, to around 4 percent.

However, that’s not enough of a drop to cause a big change in the market this season, McBride says. Instead of waiting for the market to take a plunge, people who are serious about buying a home should financially prepare themselves now.

“Price dynamics will differ by market, but most markets are unlikely to see significant price erosion this year – they just won’t see significant price appreciation either,” McBride says. “The right time to buy a house is when you are financially prepared to do so, your life circumstances are supportive of buying, and you find the right home at the right price. Waiting can help build a better financial foundation but offers no guarantees of future market conditions.”

For many homebuyers, 2019 might prove to be a better year for buying.

Last year, buyers in many areas faced significant roadblocks to homeownership, such as a severe inventory shortage, home price growth at twice the rate of income growth and increasing mortgage rates. The situation isn’t expected to drastically change this year, but it’s getting better.

Most experts predict housing starts to increase by around 2.5 percent. Although those are modest gains, when coupled with a strong job market and increasing wages, buyers will have a little more momentum going into the buying season.

“This is going to be a pretty good spring, we’re seeing growth relative to last year in home sales. Not a blowout year, but increasing by a couple of percent relative to where they were last year,” says Michael Fratantoni, Mortgage Banker Association chief economist.

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