2015 Market Overview

2015 Market Overview

Regional Housing Market at a Glance The California housing market did not end the year with a bang, but it provided some optimism for the upcoming year. Sales of existing single-family home increased on a year-over-year basis for the first time since July 2013. The statewide median price continued to increase on a year-over-year basis, albeit the rate of growth was the slowest since February 2012. The rate of increase was significantly lower than what was observed in the early part of 2014. For the year as a whole, home sales declined 7.6 percent from 2013, with equity sales gaining 3.2 percent from the previous year, but distressed sales dropping 52.7 percent due partly to the lack of housing supply. The statewide median home price for 2014 increased 9.8 percent from 2013, and it was the first time in three years that the California housing market had an annual increase of less than 10 percent. The statewide median price should continue to grow in 2015 but is expected to increase only moderately in the upcoming year. Regionally, the housing market in the Bay Area continued to outperform the rest of the state. While sales activities for 2014 dipped from 2013, the annual decline for the region was relatively mild when compared to other parts of California. In fact, the annual sales growth rate for the Bay Area has been better than other regions in California for the last three years due primarily to strong economic growth in the area. Sales activities, however, continued to be constrained by tight housing supply in the area. Since the beginning of 2011, inventory has been declining steadily from more than six months to less than two months in December 2014. As a result of the imbalance between supply and demand, the regional median home price experienced a double-digit increase for the third year in a row since 2012. Compared to the Bay Area, the housing market in the Central Valley region has not been performing as well. With sales falling more rapidly in the distressed market, the Central Valley region – which has a bigger proportion of its sales being distressed properties than other regions in California, took a hard hit in recent years with sales declining consecutively for three years since 2012. The regional median price, nevertheless, improved in each of the last three years, and grew 14 percent annually in 2014. The level of inventory in the region also increased on a year-over-year basis by 12.5 percent in December 2014. Sales activity in Southern California was also sluggish in 2014, especially in Orange County and San Diego, which declined more than 10 percent individually. Overall, sales in the region decreased 8.9 percent in 2014 from the previous year. On a more positive note, the regional median price increased 9.6 percent in 2014 from the previous year, after a surge of 23.3 percent in 2013. The appreciation in home prices was attributed partly to the continued tight supply of inventory. While the inventory level remained at level below the norm, it increased 9.4 percent from the previous year in December 2014, and has been improving on a year-over-year basis since October 2013.