California Homes Prices Forecasted to Rise 23%

March 23rd, 2011, OC Register

Beacon Economics has an updated housing forecast out for California – and it’s pretty optimistic: The real estate forecast calls for average home gains of 0.6% this year; 3.2% next year; 5.4% in 2013; 6.7% in 2014; and 7.8% in 2015. All told, Beacon is basically projecting that California home prices will jump 23% in five years ($57,800) – from a typical selling price of $256,136 in 2010 to $323,368 in 2015. Depending on one’s view, that projected 2015 pricing would be equal to the highest since 2008, back at early 2004 levels – or still 38% off the 2007 peak.

Jordan Levine, research manager at Beacon Economics, says the optimism is driven by “rising employment and incomes, which we project to grow by between 4% and 6% on the income side and 2% to 3% on the employment side.”

He adds: “We also have some pent-up demand for homes due to such slow household formation during the downturn. Our calculations show that we are currently only building 1 home for every 9-plus new residents over the past year, so that will begin to put upward pressure on the market as the economy begins to heal. Additionally, many of the homes currently being sold are distressed properties, so as the mix changes to slightly better and non-distressed properties, the median sale price will also increase. So, the short answer is that this is being driven in part by a healing economy and partly a shifting mix away from as many distressed homes as we move out into the future.”

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