California Real Estate Market Forecast
August 2022 saw buyers jump back into the California housing market to capitalize on some lower mortgage rates, however with the Fed rate hike, that brief interest rate respite may have ended.
The demand raised sales and home prices temporarily, however pending sales are down 39.1% from last year. The Golden state earns its reputation as one of the most unusual housing markets.
Active listings rose a little, yet new listings kept on declining in August. New data from September show closed sales trending down again. With higher mortgage rates coming, we’d expect prices to see a steeper decline. Trouble with the stock market, jobs reports, and corporate earnings in September could send home prices tumbling.
Existing, single-family home sales rose a strong 6.1% to 313,540 in August yet this is still 24.4% down from August 2021. Median house prices rose .7% to $839,460 and that was up 1.4% from August 2021. Sales of luxury homes above $2 million enjoyed a resurgence. Condo prices saw a drop of $20,000 from July and month to month sales rose 9.6% although is still down 28.6% from 12 months ago. Prices of condos in Santa Barbara and NAPA bucked the downward trend with a sizable gain.
The number of homes discounted for sale rose to 60% and the median discount climbed to close to 6%.
“Active listings have passed their annual peak, and while homes are taking slightly longer to sell, the share of homes seeing price reductions has also stabilized to near pre-pandemic levels.” said C.A.R. President Otto Catrina.
CA is a state of desperate buyers who are now wondering how high rent prices might rise, while anxious about a possible recession. That recession, if it happens, would like lead to much lower home prices in 2023, and if rates peak and begin tracking downward, means some who have cash might find a home in 2023. First time home buyers are facing a tough environment. Mortgage payments in California are up 29% year over year, even though prices only rose 1.4%.
Southern California home prices actually rose while sales have plummeted 28.8% year over year. In the LA metro region, home prices dropped $15000 on average, while in the Bay Area, homeowners lost $50,000 in value during August despite a 10% rise in price.
CAR’s most recent report from September, shows Realtor’s aren’t particularly optimistic about next month. And CAR’s consumer sentiment survey showed their attitude is improved about 6 points.
California has lots its luster as the US premium housing market as demand shifts to Arizona, Texas and Florida. A strong exodus from the high cost state is at least helping to temper demand and prices here.
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Sales and Prices in August
Home prices moderated in many counties, however overall prices rose from July’s numbers. The Far North, Central Valley, and the San Francisco Bay Area saw the biggest price declines. Alameda, Monterrey, Santa Clara, Kern, Tehama, Humboldt, and Sutter countries had significant price declines year over year. Mariposa and Lassen saw drops of 23% to 25% YoY.
Homes sales enjoyed a 6% jump during the month and prices rose above $300k on average.
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.
38 of 51 California counties saw a rise in prices with 24 setting new price records. Only 3 suffered price declines.
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.
Condos hit a new record price in February, up $110,000 year over year to $640,000.
Housing Inventory Falling
Inventory slipped in August.
Housing inventory continues its downward path falling to its lowest level in 4 months. California now has 2.9 months of home supply giving buyers a better selection than they’ve had in the last 2 years.
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.
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
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:
- Los Altos
- Aliso Viejo
- Los Altos Hills
- Pacific Grove
- Palos Verdes Estates
Realtors will need better strategies on how to get people to sell their homes.
rom is $569,000 currently in March 2021. The average home 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|
|Contra Costa County||$750,500||$690,000.00||$570,750.00||24.0%|
|Los Angeles County||$610,260||$546,930.00||$581,000.00||4.8%|
|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%|
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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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