Will California Home Prices Drop in 2017, or Keep Rising?

Will home prices in California drop in 2017? Or will they continue to rise as they have over the last couple of years? Those are the questions we will address in today’s blog update.

Here’s the short answer: Statewide, California home prices are expected to continue rising in 2017, but less than they rose last year. They are not expected to drop — at least not at the state level.

At the city and county level, home price trends in California vary widely due to differences in local economies, supply and demand, etc. A few cities across the state could see a drop in home prices during 2017. Most will probably either remain level or rise to some degree. This is based on various economic forecasts, some of which are cited below.

Related: 3 California housing market predictions

Will California Home Prices Rise or Drop in 2017?

Home prices in many California cities and metro areas rose steadily over the last couple of years, outpacing the nation as a whole. According to the housing research team at Zillow, house values in the Golden State rose by 7% over the last 12 months (Feb. ’16 – Feb. ’17). That was slightly higher than the national average for the same 12-month period.

Looking forward, however, the economists at Zillow anticipate that California home prices will rise more slowly than the national average in 2017. For the next 12 months (through February 2018), they are predicting a gain of 2.5% for California house values, compared to 3.5% for the United States as a whole.

These predictions more closely match the historical average for home-price appreciation, going back decades. So maybe what we’re seeing here is a return to normalcy after a period of above-average gains.

In its 2017 housing market forecast for the state, the California Association of REALTORS® projected that the median home price statewide would rise by 4.6% in 2017, compared to a gain of 5.4% in 2016 and 6.6% in 2015. So here we have another voice joining the chorus and predicting that California home prices will rise in 2017.

So, getting back to the question at hand: Will California home prices drop in 2017, or keep rising through the end of the year? Many analysts and economists seem to agree that house values in California will continue to rise during 2017.

Forecasts Vary from One City to the Next

These are national forecasts and projections. At the local level, we could see some major differences from one city to the next.

For instance, consider the very different outlooks for Sacramento and San Francisco. Both Realtor.com and Zillow have predicted that Sacramento will be one of the hottest housing markets in 2017, with price growth well above the national average. Zillow has forecast a 6.1% increase for Sacramento house prices over the next 12 months.

Home values in San Francisco, on the other hand, are expected to remain level or rise only slightly during 2017.

This is why it’s so important for home buyers to conduct housing research at the local level. California is a large and economically diverse state. Real estate market conditions can vary widely from one city to the next, and especially from one region to the next (Southern vs. Northern California, inland vs. coastal cities, etc.).

The bottom line: Will California home prices rise or drop in 2017? Statewide, house values are expected to continue rising in 2017, as they did over the last couple of years. But we could see some big differences at the local level, as always. Home buyers should research housing trends in their city and county, to get a better picture of what’s happening locally.

Disclaimer: This article incorporates third-party data that are deemed reliable but not guaranteed. It also features forecasts and predictions from third parties not associated with our company. We have compiled this information as an educational service for our readers.