California Housing Market Update Predictions

California Real Estate Market Update

It appears the housing market in California is improving and sales in March are showing a rise after several years of low sales.  It’s an anxious time for desperate buyers, but while inventory levels aren’t as bad as they have been, mortgage payments and future rates will dry up some demand.

But will that reduce prices as we enter the spring and summer buying season?  What’s most notable is the huge price gains in Silicon Valley, and in particular San Francisco, as you’ll note in CAR’s charts below.

California home sales fell by 8.2% YoY to 424,640 sales in February and were down 4.5% from January 2022. Home prices across the state rose to a median price of $771,270 in February.  CAR expects prices to rise given constrained housing supply.

Despite the decline of sales across California, housing demand is actually stronger than the pre-pandemic years when sales volumes were around 400,000.  On a positive note, as active listings climbed to their highest level in 3 months despite a slight decline month to month.  On a city to city basis, San Francisco and the Bay Area saw strong price increases in February. Napa, Orange and Ventura saw strong price rises.

There’s little doubt that buyer burnout will only have increased with only poor housing choices available, it’s little surprise search behavior is weaker now. California has lots its luster as the US premium housing market as demand shifts to Arizona, Texas and Florida.

Real Estate Marketing Packages:  California Realtors, are you looking to successfully launch your digital marketing campaign for the 2022 season?  See the real estate marketing package page for comprehensive service to help you gain a powerful visibility with buyers in San Francisco, San Diego, Los Angeles, Sacramento or Orange County.

Sales and Prices in February

California home prices fell to $771,270 in February, down from $798,440 in December and, down from September’s price of $808,890.   That price however is up 10.3% from last year.

California home price chart.
California home price chart. Screenshot courtesy of CAR.org
California home sales chart to February 2022.
California home sales chart to February 2022. Screenshot courtesy of CAR.org

Although it’s been a subdued market for some time, March latest reports shows the spring sales season might be growing and we could be headed out of the pandemic real estate period.

SFR home sales growth changes
SFR home sales growth changes. Screenshot courtesy of CAR.org

California New Home Listings

Realtors might believe listings will rise, but the stats suggest they’re only reducing more slowly. New home listings rose however in February to 16,522 units. Overall inventory rose just slightly to 2.1 months of supply which is much better than last October’s 1.8 month level.

California new home listings.
California new home listings. Screenshot courtesy of CAR.org

38 of 51 California counties saw a rise in prices with 24 setting new price records.  Only 3 suffered price declines.

California home sales and home prices February.
California home sales and home prices February. Screenshot courtesy of CAR.org

Mortgage Payments on the Rise

Mortgage payment growth is one of the most significant factors that may begin to ease demand. With Fed rates headed upward, this stat could be much more extreme in 2022.

Mortgage Payment increases threatening future sales
Mortgage Payment increases. Screenshot courtesy of CAR.org

Condos hit a new record price in February, up $110,000 year over year to $640,000.

California condo prices.
California condo prices. Screenshot courtesy of CAR.org

Housing Inventory Falling

California Housing Inventory.
California Housing Inventory. Screenshot courtesy of CAR.org.

Housing inventory continues its downward path falling to its lowest level in 4 months. California now has 1.8 months of home supply.

California Housing Market Forecast

A Fitch Ratings’ quarterly review of housing valuations) about the California Bubble watch suggests homes in the state right now are 10% to 14% too high. The report suggests the Federal Reserve’s meddling in bond markets is the force behind excessive house valuations.

With tapering of asset purchases, the pressure on prices would ease. And should mortgage rates 1 to 3% as predicted, further demand is taken away.

In its report, Fitch says ”If the 30-year mortgage rate increases to 4%, the ratio of mortgage payments to monthly income could rise to 19% — assuming home prices and monthly income remain constant at 2021’s levels. This would represent a record high since the financial crisis and a challenge for home price growth.”

NAR’s own 2022 California Economic and Housing Forecast released during the REimagine! Real EstateVirtual Conference & Expo predict sales to drop next year while prices will rise.

California housing price, sales, and affordability estimates.
Screenshot courtesy of Car.org. California housing price, sales, and affordability estimates.

Case for a Better 2022

  • covid cases are easing
  • job growth is improving
  • home prices rising reflecting strong interest
  • new home construction picking up
  • trend to moving away from CA is easing
  • high wage sectors have recovered
  • interest rates are still very low
  • first time buyer interest still high
  • 2nd/vacation home buying growing
  • homes sales growing faster in core cities

California Economic Outlook

California Economic outlook 2106 to 2022 predictions.
Screenshot courtesy of Car.org. California Economic outlook 2106 to 2022 predictions.

Best Performing Cities in California

Where to buy your next home in the Golden State? Homesnacks conducted an estimate based on about 5,000 population and growing, rising home prices, and within 20% of state price average. Here’s their best picks:

  1. Los Altos
  2. Aliso Viejo
  3. Los Altos Hills
  4. Pacific Grove
  5. Piedmont
  6. Tiburon
  7. Saratoga
  8. Belmont
  9. Cupertino
  10. Palos Verdes Estates

Realtors will need better strategies on how to get people to sell their homes.

If you’ve read the latest jobs report, and the US economic forecast, you can understand the transition all states are in, including California. Jobs are returning, but the best is still yet to come.

rom is $569,000 currently in March 2021. The averagehome rental in California is up to $2657 per month. Mortgage delinquency rate is very low at .6%.

Post Pandemic, if Fed stimulus is executed, and oil restrictions eased, we might see a return to the price growth typical before 2019. There is lots of demographic, wealth, return to work, and other factors that should help prices achieve another 5% growth.

California Home Price Growth 2017 to 2020 by County

California County Median Price June 2020 Median Price May 2020 Median Price 2017 3 year change
Alameda County $976,000 $955,000.00 $834,500.00 14.5%
Butte County $390,000 $362,000.00 $329,500.00 15.5%
Contra Costa County $750,500 $690,000.00 $570,750.00 24.0%
Fresno County $313,950 $295,000.00 $265,000.00 15.6%
Kern County $275,000 $270,000.00 $220,000.00 20.0%
Los Angeles County $610,260 $546,930.00 $581,000.00 4.8%
Madera County $300,000 $297,500.00 $240,500.00 19.8%
Marin County $1,490,000 $1,500,000.00 $1,015,000.00 31.9%
Merced County $300,000 $285,000.00 $275,000.00 8.3%
Monterey County $740,000 $650,000.00 $582,000.00 21.4%
Napa County $725,000 $672,500.00 $635,000.00 12.4%
Nevada County $433,750 $410,000.00 $400,000.00 7.8%
Orange County $870,000 $834,550.00 $708,500.00 18.6%
Placer County $515,000 $515,000.00 $485,000.00 5.8%
Riverside County $450,000 $434,480.00 $380,000.00 15.6%
Sacramento County $417,000 $395,000.00 $355,000.00 14.9%
San Bernardino $325,000 $320,000.00 $329,750.00 -1.5%
San Diego County $678,000 $655,000.00 $550,000.00 18.9%
San Francisco County $1,805,000 $1,627,500.00 $1,325,000.00 26.6%
San Joaquin County $415,000 $415,000.00 $386,500.00 6.9%
San Luis Obispo County $645,500 $632,500.00 $599,000.00 7.2%
San Mateo County $1,735,000 $1,650,000.00 $1,250,000.00 28.0%
Santa Barbara County $671,750 $637,500.00 $545,000.00 18.9%
Santa Clara County $1,382,000 $1,365,000.00 $1,000,000.00 27.6%
Santa Cruz County $905,000 $850,000.00 $727,000.00 19.7%
Shasta County $295,000 $297,000.00 $244,500.00 17.1%
Solano County $496,750 $482,000.00 $415,000.00 16.5%
Sonoma County $708,800 $675,000.00 $595,000.00 16.1%
Stanislaus County $355,000 $350,000.00 $300,050.00 15.5%
Tulane County $270,000 $255,250.00 $230,000.00 14.8%
Ventura County $700,000 $681,250.00 $575,000.00 17.9%
Yolo County $475,000 $443,000.00 $447,500.00 5.8%
Yuba County $328,950 $320,000.00 $298,250.00 21.3

See more on the Los Angeles housing report, San Francisco housing market report, San Diego housing market report and the Sacramento housing report.

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See more forecasts on the real estate housing market, and the latest home prices and sales trends for numerous major metros in California including San Diego, Los Angeles, San Francisco, and Sacramento.  See stats on other cities, including Denver, Dallas, New York, Boston, Atlanta and in the Florida housing market in Miami and Tampa.  Visit linkedin if you’re seeking advanced level SEO and real estate marketing services.

Rising mortgage rates, inflation, reduced housing supply and high home prices threaten the markets, it appears 2002’s real estate scene will stay strong. Realtors may want to build their presence this year as house prices decline in 2023. Lower prices will bring plenty of homes onto the market and boost your opportunities.

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