C.A.R. 2006 Housing Market Forecast

C.A.R. EXPECTS SLIGHT COOLING IN HOME SALES NEXT YEAR The rate of home price appreciation will moderate next year following four years of steep increases, while sales in 2006 will decline slightly from this year's record pace, according to C.A.R.'s "2006 Housing Market Forecast" released today. The forecast was presented during the C.A.R. Centennial REALTOR® EXPO, running from Sept. 20 - 22 at the San Diego Convention Center.

The median home price in California will increase 10 percent to $575,500 in
2006 compared with a projected median of $523,150 this year, while sales for
2006 are projected to reach 630,610 units, falling 2 percent compared with 2005. The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to C.A.R.
economists. California typically gains nearly 250,000 new households, yet only will build about 200,000 new housing units this year, creating a shortfall of about 50,000 units.

"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to homeownership will continue to push residents inland and even out of state."