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Top 3 California Real Estate Market Predictions for 2017

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It’s October, and that means a lot of California home buyers are looking ahead to next year. And many are wondering the same thing: What will the California real estate market be like in 2017? And, more to the point, how will it affect me as a home buyer?

Fortunately, there’s an outpouring of California housing market predictions and forecasts right now. It happens every year around this time, as analysts and economists assess current market conditions in order to make predictions about future conditions.

As a service to our readers, we have compiled some of these forecasts and predictions for the California real estate market in 2017.

Three California Real Estate Market Predictions for 2017

Home prices will rise more slowly in 2017, compared to the last couple of years. Housing inventory will remain tight in many local markets, particularly those located along the coast. Mortgage rates will inch upward during 2017, but will stay at their historically low levels in the short term. Here’s more information about these and other California real estate market predictions for 2017.

Prediction #1: Housing supply will remain tight in many local markets.

Over the past couple of years, there has been a shortage of homes for sale in many of California’s local real estate markets. This came at a time when housing demand was rising. Strong demand and limited supply pushed home prices north and created “sellers’ market” conditions all across the Golden State.

While demand has softened a bit since then, supply is still constrained in many cities. The California Association of Realtors (C.A.R.) recently issued a 2017 housing forecast for the state. One of their California real estate market predictions had to do with supply. In a related press release, C.A.R. President Pat Zicarelli stated:

“Next year [in 2017], California’s housing market will be driven by tight housing supplies and the lowest housing affordability in six years. The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales.”

He also predicted a continuation of a real estate market trend we’re seeing right now. Priced out of the expensive San Francisco real estate market, some people will “migrate to peripheral cities” that offer more affordable homes. This could lead to a drop in San Francisco home values, according to Zicarelli.

Prediction #2: We could see smaller home-price gains in 2017, compared to 2016.

Real estate market predictions for other California cities hint at a 2017 slowdown as well. In San Diego, for example, Zillow has predicted a home-price increase of 1.7% over the next 12 months, compared to a gain of 4% over the last year or so. A similar forecast was issued for Los Angeles. Prices in L.A. rose 6.9% over the last year, but are forecast to rise by just 1.3% over the next year.

This could be viewed as a much-needed market correction. Many economists agree that a slowdown in home-price appreciation in California — and in the Bay Area in particular — is a good thing. It’s a return to sustainable growth, which is good for long-term market stability.

Statewide, the median home price in California is predicted to rise 4.3% in 2017 to land at $525,600. This would follow a 6.2% increase during 2016. The 2017 prediction of 4.3% represents the slowest rate of home-price appreciation in six years, according to C.A.R.

Prediction #3: Mortgage rates could stay below 4% through the first quarter of 2017.

This is a real estate market prediction for California, and the nation as a whole. It comes from the Mortgage Bankers Association (MBA). In September, the MBA predicted a slight increase in mortgage rates through the end of this year.

Their economic research team expects the average rate for a 30-year year home loan to reach 3.7% by the end of 2016, and to continue rising gradually throughout 2017.

Here is their quarterly forecast for 30-year loan rates, issued in September:

  • Q1 2017: 3.9%
  • Q2 2017: 4.1%
  • Q3 2017: 4.3%
  • Q4 2017: 4.4%

Forecasts for Individual Cities and Metros

The predictions above apply to the state as a whole. Elsewhere on our website, you’ll find housing market forecasts for individual cities and metro areas across California. Here are some city-specific reports for 2017:

Fresno Housing Market Forecast
Fresno is expected to see a healthy level of home-value appreciation during 2017, according to the real estate research team at Zillow. As a result, buyers who postpone their purchases will likely end up paying more for a home.

Oakland Housing Market Forecast
Home prices in Oakland rose steadily, and significantly, over the last couple of years. But analysts and economists are predicting a bit of a cool-down in 2017, at least where house values are concerned. This report has all the details.

Sacramento Housing Market Forecast
Could Sacramento, California be one of the hottest real estate markets of 2017? The analysts at seem to think so. They ranked it #4 on their list of top ten markets to watch next year. The company expects house prices to rise by around 7% in 2017, compared to 2016.

San Diego Housing Market Forecast
In San Diego, high-end homes are taking a long time to sell, while demand is strongest at the lower end of the pricing spectrum. Overall, the real estate market is cooling and could experience smaller price gains in 2017 than in 2016, according to analysts.

San Jose Housing Market Forecast
According to an August 2016 report by the National Association of Realtors, San Jose was the most expensive real estate market in the country, with a median price over $1 million. But in 2017, experts are predicting that home values will level off.

Disclaimer: This article includes California real estate market predictions and forecasts for 2017. Projections and commentary were provided by third parties not associated with our company. Readers should view these housing predictions as an educated guess, not facts or assertions.

Mike Trejo

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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