End of inflation? Here’s when experts think gas, housing prices could stabilize in California
Housing prices won’t be going up as much. Gasoline prices could keep going down.
That’s the forecast in California from the experts as 2022 begins after a fall when inflation accelerated at its steepest pace in years.
“Home prices and rents have been rising, but more slowly in California than in the rest of the U.S.,” explained Jerry Nickelsburg, forecast director at UCLA’s Anderson School of Management.
Regarding gasoline, “in the very short term, the next couple weeks, I see a more downward direction,” said Patrick de Haan, head of petroleum analysis at Gas Buddy. Federal energy officials agreed.
Nationwide, prices have been going up at their fastest rate in 39 years. The Consumer Price Index, a broad measure of price changes, increased 6.8% in the 12 month period ending in November.
Overall, prices in California are expected to increase slightly less than the national average next year. This month’s UCLA Anderson forecast has the national Consumer Price Index up 4.3% next year, while California’s prices are up 4.1%.
One sour note: Prices are still likely to rise faster than they have in some time.
“Even if inflation is predicted to return to normal in a year, we are all going to experience higher prices and a decline in the goods and services that we’re able to purchase from our incomes until then,” said Mark Schniepp, director of the California Economic Forecast in Santa Barbara,
More affordable housing?
The California Association of Realtors forecast predicts the median price of home resales to rise an average of 5.2% next year, well below this year’s 20.3% increase. The Median 2022 price is forecast at $834,400, up from 2021’s $793,100.
Jordan Levine, the association’s vice president and chief economist, saw several reasons for the trends. Most notable is an anticipated increase in interest rates.
He expects an average mortgage interest rate of 3.1% early next year, rising to 3.8% by year’s end. The Federal Reserve last week took steps that could lead to three rate increases by the end of next year.
Other trends should help prices grow less frantically. Resales are projected to drop by 5.2% after increasing 6.8% this year. And there’s a trend among less wealthy people to move to less expensive areas, Levine said.
Much of the growth in housing prices this year has been at the very top end of the market. This summer, home prices at more than $2 million were up more than 300%. That’s calmed down to a 13% increase this fall.
The median home price in October was $798,440. While up 12.3% over the year, that amount was down 1.3% from September.
There are risks to the forecast. While most inflation forecasts see prices stabilizing somewhat by mid-year, Levine warned “there are going to be supply chain issues early in the year.”
Lower gasoline prices?
California has had consistently higher gasoline prices than the rest of the nation. On Thursday, its average per gallon price for regular gasoline was $4.65.8, according to AAA, more than 32 cents higher than runnerup Hawaii. The U.S. average was $3.29.3.
There are a host of reasons. California has the highest fuel taxes in the country, according to the American Petroleum Institute. As of July 1, the combined state and federal motor fuel taxes and fees paid in California was 85.38 cents per gallon. Next highest was Illinois at 77.56 cents. U.S. average was 56.59 cents per gallon.
Gasoline price trends are notoriously difficult to predict. A refinery shutdown, OPEC production decisions, a slower economy and other variables all can send prices up or down quickly.
Add to that the Covid omicron variant. At the moment, de Haan predicted, “Look for prices to continue slowly tapering statewide.That’s a trend that could continue into early January, especially as this omicron variant picks up steam.”
But after that, prices are expected to continue declining, said the federal Energy information Administration.
Its December forecast saw U.S. regular gasoline retail prices, which averaged $3.39 per gallon last month, drop to $3.01 next month and average $2,88 per gallon next year. Part of the reason is lower demand and increased production.
California could see the same drops, as the state’s prices for all sorts of goods and services will largely follow the nation.
“There’s really no intrinsic reason why the state’s general movement of prices would differ much from the nation’s,” said Schniepp.
This story was originally published December 27, 2021 at 5:00 AM with the headline "End of inflation? Here’s when experts think gas, housing prices could stabilize in California."
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