We are well past the midpoint of 2017, which means that some California home buyers are already looking ahead to 2018. And many share the same questions: What will the real estate market be like? Will I pay more if I buy a home in California in 2018 versus 2017. Here are some recent trends and predictions to give you some more insight into these questions.
You should never buy a house until you’re fully ready to do so. You have to be “all in” to make this kind of commitment. And that means doing extensive research, budgeting and planning.
With that being said, those who buy a home in California in 2018 could very well encounter higher housing costs. That’s because prices are expected to rise — or rather continue rising — over the coming months. A recent forecast predicted that mortgage rates would go up as well.
Let’s start with home prices, since that’s the biggest consideration for those planning to buy a house in California 2018.
Will California Home Prices Be Higher in 2018?
According to the real estate information company Zillow, the median home value in California rose by 7.5% over the last 12 months (July 2016 – July 2017).
That’s the statewide average. In specific cities and metro areas, home prices may have risen more or less than that. For example, San Diego reportedly saw an 8.3% increase in home prices over the last year.
The bottom line here is that house values have risen steadily across the state, over the last year. And this will affect those who choose to buy a home in California in 2017 or 2018. Especially if prices continue rising, as they are expected to do.
Looking ahead, the company’s economists expect home prices in California to rise by another 2.8% over the next 12 months. This forecast was issued in July 2017, so it extends into the summer of 2018. Here again, their forecasts for individual cities vary based on local real estate market conditions. But for most cities across the state, economists expect somewhere between 2% and 3% growth over the next year.
Granted, these are just predictions. They’re the equivalent of an educated guess. So you probably shouldn’t use them for financial planning purposes. It’s just another point to consider.
Buyers Might Encounter Higher Mortgage Rates Ahead
Rising home values are an important factor for those buying a home in California in 2018. But for the majority of buyers, there is another important consideration as well. And that’s mortgage rates. The question is, will rates rise between now and 2018?
Again, no one can make such predictions with 100% accuracy. But the general outlook among industry watchers is that mortgage rates in California and nationwide will creep upward over the coming months.
For example, in its latest long-range finance forecast, the Mortgage Bankers Association predicted that the average rate for a 30-year mortgage loan would rise to 4.4% by the fourth quarter of this year. (It was hovering just below 4.0% when this article was published.) Beyond that, they expect 30-year mortgage rates to climb above 5% by around the middle of 2018.
So here we have two predictions that are relevant to those who plan to buy a house in California in 2018. If these projections prove to be accurate, those who postpone their purchases until later this year or early next could encounter higher home prices and borrowing costs.
Renting Versus Buying a House in California
California renters who are thinking of purchasing a house must also consider the cost of buying a home versus renting. We covered this topic in the past from a couple different angles.
Home buyers are often able to stabilize their monthly housing payments, by using a mortgage loan with a fixed interest rate. In contrast, rental costs in California have been rising steadily and may continue to do so. So you have a better degree of control when you buy a house with a fixed mortgage.
Earlier this year, we also did a monthly cost comparison between renting and buying a home in California. The gist of that analysis was that many people could own a house with only a minor increase in their monthly housing costs. In some cases, the costs of renting and buying were about the same.
Of course this all varies by location. So you have to do a cost analysis based on local market conditions and rent prices where you live and/or where you plan to buy. The point is, buying a home in California might be more advantageous than you realize.