January 22, 2006

2006 California Housing Forecast

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2006 California Housing Forecast

- by Jeff Hoffman

© Jeff Hoffman- All Rights reserved
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The market and economic conditions that gave rise to an outstanding 2005 performance will largely hold steady and contribute to another very good year in 2006, so says Robert A. Kleinhenz, cheif economist for the California Association of Realtors in this month's Special Housing Forcast Report within CAR magazine.

These conditions include:

• Steady but moderate economic growth accompanied by moderate growth in the labor market and low inflation.
• Rising but still very favorable interest rates along with innovations in real estate finance.
• Current and long-run demand forces continuing to encounter supply constraints.

Market Forces at Work

Current market conditions may be best explained by the unsold inventory index (the ratio of listings to sales. According to Kleinhenz "since the start of this decade, the unsold inventory index has never exceeded four months, and actually averaged less than three months from 2002 through 2004. This contributed to the torrid 20 percent average annual price appreciation that prevailed during that time. With the index improving to just over three months in 2005, increases in the statewide median price were more tempered at a mere 16 percent annually.

For 2006, inventories should remain in the same range as in 2005, but could easily head up if potential sellers decide they want to cash out and try to test the market. Still, inventory levels should remain low enough to contribute to further price appreciation in 2006."

In summary CAR is predicting a "cautiously optimistic" outlook for 2006. This outlook is based upon the prediction that the market will continue to be buoyed by repeat homebuyers using equity gains to trade up to or buy a second home. The market has yet to show signs of this as we approach the end of January, perhaps by mid to late March the writing will be on the wall for what kind of year we can expect.

Follow this link to read the entire article

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Jeff Hoffman is the President of Hoffman Realty Group, Inc. and has assisted in over 100 relocation transactions during his real estate career. He is the creator of a powerful home selling system designed for the home seller not the real estate agent. To learn more about his Smart Seller Home Selling System visit
www.SmartSellerListing.com

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