California Home Price Projections 2018 – 2019: Will San Jose Lead?

Recent home price projections for California’s major cities suggest that prices will continue to climb between now and the first part of 2019.

The San Jose real estate market is expected to “lead the charge” with a gain of around 6% over the next year or so. And that’s not surprising when you look at the huge home-price gains San Jose has posted over the last year.

Related: Buy now, or wait until 2019?

Big Home-Price Gains & Projections for San Jose, California

According to Lauren Bretz, a Zillow data scientist specializing in housing trends, the company is projecting that San Jose will be the hottest real estate market in the nation during 2018.

In a January blog post, she wrote:

“San Jose, Calif., tops the list of hottest markets for 2018. Home values in the Silicon Valley hub gained 17.4 percent over the past year – the fastest growth among the 50 largest metro areas – and it tops Zillow’s list of hot markets for 2018, as high-paying tech jobs continue to keep pace with climbing housing costs. San Jose’s median home value of $1.13 million is expected to grow by 8.9 percent this year, while its population and labor market remain robust.”

That’s a bolder projection than the company issued for other California cities. For example, they recently predicted that the median home value in San Francisco would rise by 4.5% over the next year. San Diego had a projection calling for 5% growth over the next year. Sacramento came in with a 6% year-over-year forecast, and Los Angeles was forecast at 2.9%.

Granted, these California home-price projections are the equivalent of an educated guess. The company employs a large team of economists and analysts. So it’s a highly educated guess — but still a guess. So we probably shouldn’t get too wrapped up in the exact numbers being projected here, but rather the broader outlook.

And that outlook can be summed up as follows:

• House prices in most cities across California are projected to continue rising throughout 2018, when measured year over year. The median home value for the state is expected to climb by around 3.7% over the next year, according to the source.
• San Jose is expected to see the biggest gain, with a one-year home price projection of 6.1%. (This prediction was issued in March 2018 and therefore extends into the first part of 2019.)
• Sacramento, California also had a strong projection. “Sacramento home values have gone up 10.1% over the past year and Zillow predicts they will rise 6.0% within the next year,” the company said in March.
• Looking back: House values in many California cities rose by double digits during 2017, with San Jose (again) leading the charge.

Tight Inventory Is Boosting Values

Inventory is partly why the San Jose real estate market is getting such bold projections through 2019. It’s a supply and demand thing, as usual. There’s a lot of demand for housing across Silicon Valley, thanks in part to the bustling job market and tech industry. But there aren’t enough homes listed for sale to meet that demand.

Consider the numbers. A “balanced” real estate market is said to have around five to six months worth of supply. In theory, that means it would take five to six months to sell all homes currently for sale, if no new properties came onto the market in the meantime.

In January 2018, San Jose reportedly had a meager 0.8-month supply of homes. That’s a very low level, and it has created seller’s-market conditions in the city.

While the inventory crunch is most pronounced in places like San Jose, it’s noticeable in other cities across California as well. When this article was published, in March 2018, most major cities in the state had less than a three-month supply of homes for sale. And this is partly why California real estate projections and predictions are calling for continued price increases throughout 2018 and into 2019.