California Housing Market Report & Predictions
California Housing Market
The California Association of Realtors reported single-family home sales rose 5.6% to 438,190 transactions in September vs August. This was the largest jump in sales since August 2020. Sales of condos declined.
The median price for all home types sold in September dropped 2.3% to $808,890, although remaining 13.5% above September 2020. Is the CA residential market ready to surge in 2022? For buyers and renters, the outlook may be for higher prices, as some cities are already seeing rent growth.
CARs president Dave Walsh believes sales and prices will moderate as we move into fall. As prices fall, with low mortgage rates, homebuyers should become more interested. Forecasts from UCLA show new home construction might hit 130,000 units in 2022 and near 140,000 new homes in 2023. 10,000 new homes per month should elevate residential sales.
California’s current governor just signed in new bills to allow $22 billion in housing construction to create an estimated 84,000 units according to the California Comeback Plan.
Demand for California Property Never Ceases
There might be one key fact that is inescapable in the California housing market that separates it from other states housing markets (except Florida and Texas). That is that everyone would like to live in California. California Realtors know this. Demand will never cease unless prices rise very steeply. Even then, people from all over the world want to live in this incredible region.
More housing may not necessarily satiated demand for houses or rentals. No matter how much housing is built, it will be sought by buyers or renters. Another cold winter with high heating prices will encourage yet another wave of migrants from the north. And with open borders, immigrants will pour into the California market which creates positive growth for property managers and landlords.
Demand between markets in the state show shifting populations, and in September demand for rentals in Orange County boomed. Californian renters want to know when rent prices will fall. With the recovery kicking into higher gear, rent prices looks to grow faster than housing prices (IMO).
CAR stats show lower income Californians were hurt by the pandemic and aren’t participating in the recovery as yet. Will 2022 bring conditions that allow them to take out mortgages for home purchases or is the state settling into a period of renting?
2022 California Housing Market Forecast
CAR just released its own outlook on the state’s housing market for the year 2022. They forecast fewer sales and a price rise of 5.2% in 2022.
In that release, they state, “The baseline scenario of C.A.R.’s “2022 California Housing Market Forecast” sees a decline in existing single-family home sales of 5.2 percent next year to reach 416,800 units, down from the projected 2021 sales figure of 439,800. The California median home price is forecast to rise 5.2 percent to $834,400 in 2022, following a projected 20.3 percent increase to $793,100 in 2021 from $659,400 in 2020.”
The report suggest job growth will be solid at 5.2% and non farm job growth will be up 4.6% next year. Combined with continued low mortgage rates, it doesn’t seem to back up the moderate forecast.
Will California’s Recovery Outpace the Nation in 2022?
While the US economy and the US housing market recovers as a whole, there are still questions about California’s own recovery. The fact that Covid 19 is releasing its grip on the state will allow full reopening despite a large number of unvaccinated people. Infection, ICU, and death rates are falling.
Interest in homebuying in California has been very subdued for many months, likely due to the sheer cost of buying. The US housing market as a whole is pressured by a lack of inventory and this will affect homebuying decisions by Americans and from foreign home buyers and investors. Rental investors will be exerting their influence on the market too.
National rent growth is up strongly 11% to 13% yet lagging considerably in California. However, rent growth in California is still rising well in San Diego, Orange County, Fresno, Bakersfield, Anaheim, and Los Angeles. Given the prices, it is a challenging market for rental property investors.
There are a few graphics from CAR’s new report that best reflect the new state of residential real estate across California. Those are active listings and sales price. Sales in all regions are well down year to date compared to 2020.
The charts below help to us a broader understanding of where the California housing market is right now, and how far it is from recovering. Supply is a big issue as the recovery quickens after the pandemic. The neglect and over regulation of this state’s housing market could cripple economic growth by scaring off workers who can’t find a place to live and increasing inflation again to make life in California’s big cities difficult.
2020 was a very strange year which means the sales/price/listings comparison might not be too relevant, especially as we head toward 2022. Of greater interest to California home buyers is price changes monthly. And in September, home prices fell except in most parts of the Bay Area, yet sales have slipped too.
October Forecast from California Realtors
October is seeing the same sales and price trends. Realtors are decidedly pessimistic about sales and prices going forward.
Home sales are flat throughout 2021. The scarcity of listings is continuing and with material and labor shortages, housing construction is disappointing. With the economy recovering and back to work routines returning, demand for housing in the large metros will increase. That will likely push home prices well up in 2022.
Enjoy all of the stats provided by the California Association of Realtors below. You should compare them with stats provided by Zillow and Redfin for further insights.
California Homes Prices and Sales September
Despite the drop during September, California homes prices remain elevated above 2020 which was a hot period for house sales. As the economic situation brightens heading toward 2022, we’re keeping an eye one condo sales and apartment rental prices for landlords and property managers.
Selling prices vs listing prices have begun to moderate significantly too, however the Bay Area sees prices holding the most. List price growth has been dropping fast since last spring, but it’s unclear why given demand is strong. Price growth is still fairly however, just not what it was last spring when home sellers were commanding big asking prices.
Covid 19, fiscal crisis, drought, inflation, heat wave, forest fires and more cooled the pace of the California housing market. Demand however remains strong and more buyers are chasing fewer homes. We’d expect sales to continue their usual downward path into the winter season this time around.
Sales growth normally recedes in the fall months, but this fall season, the decline is much steeper. Pending sales have been dropping by double digits since June, except in the luxury home market where sales are actually growing. Pending sales of condos and townhomes have continued to drop as well even as prices have hit $600k statewide. The pace of price growth in the condo/townhome segment however is slowing of late.
Condo prices rose in San Francisco, San Bernardino, Riverside and Fresno. Sales of condos dropped strongly month to month in almost every county except San Bernardino. Napa saw month to month sales drop of 40%.
New listings suffered its first double-digit decline since February and sales are outpacing new listings by 2700 units. The Bay Area suffered the steepest decline in new listings in September, down 19.8% YoY.
Statewide sales-price-to-list-price ratio is 101.9% slightly down from last month at 102.8% yet still up from 100% even last August 2020.
Redfin’s Latest Report for October
Redfin in its August report said home prices in California rose 14.2% year-over-year in August, slight less than August. They report the number of homes sold fell 3.2% and the number of homes for sale fell 28.2%. They say homes selling above list price rose 15% year over year yet 10.3% of homes are selling at a discount.
Sales Momentum Keeps Falling
“While home sales at the lower end of the market are underperforming due to a lack of supply and the economic uncertainty induced by the COVID resurgence, the higher-priced segments continue to see double-digit sales growth that’s keeping the overall market from moderating too fast,” said C.A.R. Vice President and Chief Economist Jordan Levine.
Mortgage Rates and Applications
Freddie Mac reported the 30-year, fixed-mortgage interest rate averaged 2.90 percent in September, up from 2.89% last September 2020. The 5-year, ARM mortgage interest rate averaged 2.45% vs 2.98% 12 months earlier.
Mortgage payment price growth is a concern for the market, as inflation increases and further rate hikes for 2022 were announced this week. Mortgage applications had declined 17 straight months. Of course, affordable housing supply and rising home prices are likely the main reason for that.
California real estate is always a hot topic. Find out more about rental property investment is wise and how property management software is providing the foundation for profitable rental portfolios.
Read more on the San Francisco Market, San Diego market, and Los Angeles market.
Please note that CAR designates the Los Angeles Metropolitan Area as a 5- region that includes Los Angeles, Orange, Riverside , San Bernardino , and Ventura. The Bay Area includes: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma. And the Inland Empire includes Riverside and San Bernardino counties.
Is it a Good Time to Buy a Home in California?
According to C.A.R.’s monthly Consumer Housing Sentiment Index, in April, 59% of consumers said it was a good time to sell, up from 55% the previous. Only about 25% feel it is a good time to buy a home, unchanged from last year.
Certainly, the vaccinations will free up many older California residents perhaps to sell their homes at record prices. However, homeowners may be very cautious about relinquishing their valuable property when moving is difficult and costly, and homes are very hard to find. Without certain places to go, listings don’t grow as expected.
It’s absolutely the biggest seller’s market ever across California. And perhaps more so for the pandemic destination cities within the state.
The top challenge to the housing market in CA now as the coming end of pandemic stimulus payments to homeowners, renters, and small businesses. The end of the eviction moratorium could throw a large number of homes onto the market as owners can’t meet their mortgage obligations. The state’s unemployment rate improved to 7.9% in May but remains one of the highest unemployment rates in the nation.
Will California’s Home Prices Continue to Rise into 2022?
A lot of buyers are asking whether home prices will rise or fall? Renters are wondering if rent prices will fall? High demand, low mortgage rates, and low inventory will likely skew homes and condo prices higher. The trend is here and the return of buyers is here. A number of factors are contributing to California’s positive sales stats:
desire to live away from the city in suburbs and rural regions and willingness top pay top dollar for homes
record-low mortgage rates
moving to regions (pandemic destination) that offer more room perhaps with an office or garden
wealthy buyers have the funds ready
“Low rates and tight housing inventory are contributing factors to the statewide median price setting a new record high three months in a row from June to August. A change in the mix of sales is another variable that keeps pushing median prices higher, as sales growth of higher-priced properties continued to outpace their more affordable counterparts,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young.
Source: @ManageCasa