Housing and Economic Forecast

California home prices likewise reached new heights in 2005, with an estimated annual median of $523,100, up 16% from the prior record of $451,000, which was set in 2004. Again, to gain some long-term perspective, the 2005 median was nearly triple the 1995 median of $178,200.
So the question is, are we in for another good year or will the naysayers of years past finally be right after so many years of being wrong? The answer: The market and economic conditions that gave rise to an outstanding 2005 performance will largely hold steady and contribute to another very good year.
These conditions include:
-Steady but moderate economic growth accompanied by moderate growth in the labor market and low inflation.
-Rising but still favorable interest rates along with innovations in real estate finance.
-Current and long-run demand forces continuing to encounter supply constraints.

Robert A. Kleinhenz, Ph.D.