The California Associate of Realtors (C.A.R.) released its annual housing market forecast in October (“2016 California Housing Market Forecast“). White the forecast predicts mostly sunny skies with respect to the continually improving California housing market in 2016, there may be some persistent clouds due to shortage of homes on the market and lack of affordable housing.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said C.A.R. President Chris Kutzkey. “However, in regions where the inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability. On the other hand, demand in less expensive areas such as Solano County, the Central Valley and Riverside/ San Bernadino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas.” (C.A.R. Newsstand, October 8, 2015).

The C.A.R. forecast predicts a decrease in unemployment in the state, to 5.3% in 2016 from 6.3% in 2015, and an increase in median home price, from $476,300 in 2015 to $491,300 in 2016.

The average for 30-year, fixed mortgage interest rates will remain historically low, but will rise slightly to 4.5 percent.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” said C.A.R. Vice President adn Chief Economist Leslie Appleton-Young. “However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year. Additionally, as we see more sales shift to inland regions of the state, the change in mix of sales will keep increases in the statewide median price tempered.” (Id.).

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