California Housing Market Outlook


What is the outlook for Palos Verdes real estate? I attended a forecast meeting presented by Robert A. Kleinhenz, Ph.D., Deputy Chief Economist for the California Association of Realtors. There was good news and “other” news.

First the good news. Affordability for California is now at 60%; it was 23% in 2007. Interest rates are at historic lows and probably will remain at these levels through the beginning of next year. CAR’s California Housing Market Summary below indicates a forecast for 2009 of a 25% increase in number of sales and a 28% decrease in the median price.


Kleinhenz reminded us that the median price is directly affected (and skewed) by the number of low-end homes that have sold vs. the midrange and above (see chart below) that are lingering on the market as lenders continue to withhold jumbo loans from the market. The actual decrease in sales price in Palos Verdes is nowhere near the numbers above. Unfortunately, Kleinhenz did not have any numbers specific to the Palos Verdes Peninsula as they only report on cities with 30 or more sales per period. The best statistics for Palos Verdes are coming from TrendGraphics which can be accessed by clicking here or on the “Statistics” tab above.


Kleinhenz finished with the chart at the top indicating Callifornia real estate had a 11.3% annual rate of return when a home is sold after 5 years. “The buy and hold strategy does work in California,” he said. Entire presentation can be accessed by clicking here.

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