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California Housing Market Report & Predictions 2020

December 21, 2019

California’s Housing Market Forecast

California real estate market retreated slightly during November. Our updated report covers important stats including home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, Statista, Zillow and more. And we’ll take a look at the forecast for 2020.

CAR reports a slight decrease in the home prices and sales during November. However, we are moving deep into the off season, and buyers simply aren’t as active despite low mortgage rates and the recent plateau in home prices.

This is the 5th straight month of sales above 400,000 units (seasonally adjusted). November’s sales totals fell 0.3% from the October sales numbers (404,240), yet this is up 5.6% from last November’s total sales of 381,690. Realtors feel it was a good second half of 2019.

The median home selling price across California was $589,770, a drop of 2.6 % from October yet it that is still up 6.4% from November 2018. Year to date sales were down 1.9% in November.

California Home Sales

California is still one of the better housing markets in the county. In the San Francisco Bay Area, home sales grew 4.6%. Sales outside San Francisco dropped 4.8%. Tehama had the biggest growth in sales at 69.2%.

Year over year, median home prices have risen significantly during a troubled economic period. Southern California had a 7.5% rise, the Central Valley up 6.3%, Central Coast up 3.3%, while the Bay Area had only a 2.2% rise. The Bay Area housing market’s lower yield reflects the uncertainty in the tech sector.

Los Angeles County has seen it’s prices rise 7.4% over the last 12 months, yet home prices fell $52,000 from October. San Diego county home prices rose 1.1% or $7000.

San Francisco County saw it’s hot sales numbers cool significantly in November, dropping 20%. Home prices there dropped $31,000 or 1.9% in November. Marin and Napa counties saw price reductions of 9% or more from October. Sales in NAPA plunged 39%.

The Real Story of California’s Real Estate Market

The real story of California’s housing market is a persistent lack of supply, something that may never be remedied. That means overall home prices and perhaps rent prices might persist high as well.

Active listings fell for the 5th straight month, down 22.5% from last November. This was the 3rd consecutive double-digit drop and the largest since April 2013. Unsold inventory index dropped from 3.7 last year to this November’s rate of 3.0.

The sales to price ratio stands at 98.4%, up.5% from last November. Days to sell dropped to 25 days (-3 days).

 A Paradox of Good and Bad

Given the low interest rates and corporate withdrawal of capital expenditures, it’s not surprising to see low job growth in tech, manufacturing and banking & finance.  Construction and administrative job growth was strong. Unemployment has fallen now to a record low 4.0%.

Yet homelessness and extreme housing costs are making life tougher for most Californians, particularly rental tenants.  Housing construction restrictions and other regulations are weighing very heavily on the quality of life in the Golden State and raising rent prices.

In what some expert economists forecast to be bearish times out west, it seems it’s going okay though.  If some projections of a growing US economy from 2020 onward come true, home prices may roar higher in 2020.

Housing Market Infographic courtesy of

November Employment Data was Excellent

Nationally, the jobless rate remained at a very low 3.6% while wages climbed 3%.  The California job market is still very good. Wells Fargo reports a gain of 23,000 jobs during October (up 1.8%) , and up 320,000 jobs over the past year.

California Association of Realtors believes low mortgage rates are the cause for this 3rd consecutive month of sales YoY, although prices over the last few months have remained the same.

Screen capture courtesy of

The California Association of Realtors reports that sales of home priced between $500k and $1 Million rose about 15.5% on average. Sales under $300k dropped strongly (-14.7%) and homes above $2 million dropped 3.2%. Condos prices rose to $473,000.

Screen Capture courtesy of

In CAR’s buyer survey, respondents who thought it was a good time to sell increased 4% to 51%.  Only 24% of buyers stated they felt it was a good time to buy, down only 1% from last year, despite lower rates. Prices, down payments, and selection are likely the key factors stopping buyers from buying homes.

Average mortgage payments dropped throughout the state from 7% to 11% over the last 12 months. That would seem to point to more affordability, but really it doesn’t come close. In the silicon valley region, homeless tech workers and homeless in general are huge problems. Apple, Google and Amazon have pledged billions to help out, but observers say that amount is negligible in the over priced California real estate market.

Will California Real Estate Recover in 2020?

Zillow says September’s median prices in California came in at $554,000 (which is up $4000 from October).  They had forecasted prices would only rise another $9k by next August.  If the economy should heat up, as some economists are now suggesting, it would create price growth of much more than $9,000.

Screen capture courtesy of

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Tight Rental Conditions and Rising Rents

Despite lower mortgage rates, and flat home prices, it is likely California rent prices will rise. Unlike those in the national housing picture, Californians have solved the buy vs rent home dilemma, by continuing with renting.  This is fueling a surge in build to rent developments.

Given the ultra-high real estate prices, first time buyers simply can’t come up with the downpayment or manage the lofty mortgage payments.  The rental market seems secure for landlords and investors. Rent grew slightly overall in the state.

Screen Capture courtesy of

The situation is different from cities such as Chicago, Denver, Phoenix, and Las Vegas, for instance, where lower prices and low mortgage rates make buying instead of renting a wiser choice.

Despite all the political turmoil, dour expert forecasts, and trade uncertainty, not much seems to get in the way of California’s immense economic machine. The Golden State is moving into the rank of 4th of world’s largest economies.  A record 18.7 million Californians are employed, wages are rising, and they’re ready to buy homes if they’re affordable.

The issue is buying power, high home prices, and the lack of available homes and apartments in California that makes the market so tough here. It’s the price of prosperity and regulations.  In some locales, $83,000 is considered the low income line.

Will US Economic Strength Persist?

It’s not all rosy, since some areas are suffering lower GDP,

California’s biggest local economies are continuing to struggle,” Carl Bialik, Yelp’s data science editor, said in a statement. “Construction limits and increasing rent are pushing consumers and workers farther from businesses, contributing to continued quarterly declines in some of the state’s biggest metro areas, with retail and restaurants taking the biggest hits.” — from Fox Business Report.

In this post, lets explore the main factors that will drive the California housing market for the years ahead.

California Dreamin

California is a special place to buy a home, live or even rent an apartment.  It’s this dynamic contrast of outrageous wealth, big population, big business, and government regulations that creates a complicated investment environment for multifamily investors.

Definitely wise to hire a Realtor. The questions many are still asking now is:

  1. will the housing market crash in California?
  2. is this is a good time to buy a home in Los Angeles, Riverside, Anaheim, or Bay Area?
  3. is this the right time to buy rental property?
  4. will interest rates go back up in a couple of years?
  5. are property management costs going to rise?
  6. which California cities produce the highest rental yields?
  7. is the Los Angeles real estate market overpriced?
  8. is the US economy really growing?
  9. why is there so much negative forecasting by some media?

Similar growth has occurred in New York, Phoenix, Las Vegas, Denver, and Seattle, but the CA cities of San Jose, San Francisco, Los Angeles, Oakland and San Diego have enjoyed unprecedented growth. House prices and multifamily prices have risen in California.

Please see our San Francisco housing market, San Jose housing market, Los Angeles housing market, San Diego housing market, Oakland housing market reports for insight into how the economy is affecting each metro market.


California property managers and income property investors should check out our posts on property management software, property management automation, on demand services, growth strategy, and property accounting software.  See our suite of property management solutions.

With the number of multifamily units being delivered, tax savings, and the millions still needed to be built, we know demand should never be a problem. What’s built will get occupied.

Is California’s Housing Market Good?

This epic report on the state of California’s housing market explores what’s happening. You’ll find some eye-opening insight, stats, videos, and opinions about housing in the booming Golden State economy.

Please share this material generously as you like and check out our US housing market report too.

Mortgage Payments Lower. Screen capture courtesy of

Key Factors in California’s Housing Market Growth

  1. high employment and rising wages create fuel rising home prices and rents
  2. demographics – lots of millennials buying and baby boomers selling
  3. interest rates continue low
  4. migration – slowed to keep prices stable
  5. cost of business – extremely high (would you like to see my San Francisco parking fee?)
  6. home prices – wickedly high and rising
  7. rent vs buy – renting is better right now, but for how long?
  8. multifamily new construction – total construction starts in 2019 were down 8%
  9. With taxes dropping, interest rates stable, wages rising, prices stable, mortgage requirements reasonable, and rising personal savings, why aren’t people buying? Simple, they’re hoping prices will plummet.

Keep Your Eye on the Economy

A number of big IPO’s in the tech sector this year suggest the economy isn’t doing badly. In fact, California’s gross domestic product rose by $127 billion from 2016 to 2017, surpassing $2.7 trillion. These charts below show the fundamentals and the forecast for 2019.

A Healthier California Market

There are more homes for sale and more buyers. After a strong lull, the upward march on California homes prices continues. The growth of active listings is slowing, and combined with lower new construction, we could forecast much higher home prices for summer 2020.

Screen capture courtesy of

We’re seeing interest and money shift away from the overheated markets into less expensive secondary markets…Even if we see some markets overheat and demand softens slightly, that doesn’t mean prices will go down” —  Javier Vivas, director of economic research at


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Beautiful La Jolla by the Sea – Prices continue to recover going into 2020

Affordability: Why It May Be Irrelevant Now

2020 sees battle lines being drawn between federal, state and local politicians, long time resident/owners, businesses, and the people moving here to work in California’s booming economy. It’s a battle over home prices, quality of life, pollution, lifestyle, commuting, taxes, and whether people’s dream of home ownership will ever be realized.

What Tough Issues Are Californians Struggling With?

Is the talk of general affordability dying out and replaced by a new scrutiny of what’s really causing the problem? As the stats below reveal, lower priced home sales have dried up and entry level is now in the $500k range on average.  In the major metros, it’s much, much higher.

Key Questions: Will property taxes become the bone of contention in this war? Would you be okay about higher property taxes? Will people push to repeal Proposition 13? Will a potential economic flat period continue to dry up building permits?  Will the Fed keep pushing rates up?


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NIMBY’s are Still Blocking Housing Development

California is unique, however what’s happening here is happening in other hot locales such as Florida, Texas, New York, Seattle, and other North American cities.

Not in My Backyard or NIMBY is a huge force in North American housing markets. With local governments and agencies unafraid of State fines for not opening up development, especially multifamily development, we’re headed for a drawn out battle. Taxes, mortgage rates, labor and materials shortages, and growing wages will increase pressure on these local governments/agencies bent on preventing development. Something’s gotta give.

And this state’s housing market dynamics are so complex, and political, that few real estate experts can reliably predict whether prices will rise and whether you should buy, or if this is the ideal time to sell your house.

Housing Crash Predictions?

Hoards of millennials, working poor, and homeless people are praying for a California housing market crash, but prices aren’t crashing.

With such strong demand driving the whole California housing market  it’s unlikely a crash will happen. In fact, with the extra economic activity spawned by housing construction and household formation, there is upward price pressure. And the US economy as a whole is booming and we could be looking at an even longer run of economic prosperity.

Why Are Home Prices so High in California?

Some suggest the current problem blocking new housing development is “urban containment policies”  and NIMBYism. They combine to make housing growth unwelcome. And with elections looming, politicians will be reluctant to push new controversial legislation that would open land development and thus alienate their voters.

California’s new earned income tax credit, rising wages and secure employment should boost demand in the lower price sectors through 2020, and without affordable housing growth, prices will likely rise. Some rental property investors are concerned about rent controls.

California’s Proposition tax laws enforce cheaper taxes for those who bought their properties long ago. Property owners pay taxes based on the base-year assessment value they purchased and not at not at current real market value. Any change to that tax law, would increase their property taxes considerably.

Battle Contestants: NIMBYs vs Anti-NIMBYs

The NIMBY’s (Not in my back yard) and YIMBY’s (Yes, in my back yard) are fighting it out to try to protect their positions on the future of California housing.  If development is stopped, home prices in California could become the states absolute number one problem, thus heating up what is an emotion-generating issue.

Add to this is the lack of land available, long commutes for workers, booming economy and spectre of inflation, rising wages and buyer expectations, increasing numbers of millennials wanting to buy, and you get the record high home and apartment rental prices in San Diego, Los Angeles, Orange County, San Jose, and San Francisco.

The resistance and political pressure is being increasingly seen in law suits, and feet dragging, and environmental roadblocks by local governments. Local governments don’t want further congestion, pollution, crime, higher taxes, and the destruction of their lifestyles.

Although construction is growing, it’s not enough to satisfy demand.

“The economists all cite the same reason: “As long as the economy keeps growing, that’s going to give a push to the housing market,” said Anil Puri, director of the Woods Center for Economic Analysis and Forecasting at Cal State Fullerton — from a report in the OCregister.

Big Cities and Big Prices

The demand has been strongest in the big metros of Los Angeles, San Diego, Orange County, San Francisco and the Bay Area. High prices have pushed workers inland to San Bernardino (7.9% forecast growth), Sacramento (5% growth forecast), Riverside (8.9% growth forecast), and other regions. Many hopeful buyers still can’t buy so they’re renting.

76% of the highest priced real estate markets are in California. Housing is heavily politicized due to the ongoing suffering of residents, tax base, excessive density, and congestion on the roads. And there’s a belief that politicians can make good changes. It’s hope vs NIMBYism.

California still has no rent price controls and bills to adopt price controls have failed. Given that the state wants to boost new housing construction, it can’t possibly introduce price controls. Smart investors would walk away.

Instead, California governor Jerry Brown pushed the largest collection of pro-housing legislation in recent memory, however he acknowledged that much more is needed.

Brown has had some strong words for Texas, and we wonder if this is resentment over businesses ditching California for the lower tax environment in Texas? Unfortunately, the governor’s legislation may add to the cost per unit of new housing and raise taxes.

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The Booming California Economy

California’s economy is in the midst of a 7 year economic expansion. The last 3 years have seen per capita income and employment growth of more than 3%. During the last quarter of 2017, California per capita income rose at a nationwide leading 4.6%.

Pay attention to these key projected figures. With Californians well fixed financially, they have more money to buy. Governments will have to raise mortgage rates, reduce tax benefits, and stiffen mortgage qualification rules to discourage them from becoming buyers. It’s like a war against anyone who wants to buy!

Graphic courtesy of DOT

Graphic courtesy of DOT

These two graphics below show that although the average per capita income is rising fast, it’s not keeping up with rises in house prices or rent prices.

Graph courtesy of St Louis Fed

And with permits dwindling, housing developers aren’t coming to the rescue

Graphic Above Courtesy of DOT

The Predictions and Forecasts for 2020

Top institutional forecasters might look at large array of data, trends, and financial factors, however price forecasts in California comes down to a strong economy, continuing low mortgage and interest rates, rising wages, and the political resistance at the local level (NIMBYs).

This Chart from CAR shows a forecast for sales in California for 2020:








SFH Resales (000s)







% Change







Median Price 







% Change







Housing Affordability Index*







30-Yr FRM








The housing squeeze is making rental income suites a popular option and many are even choosing to start property management businesses. The California rental housing market is hot in 2018 but is this the right time to buy rental properties?  However, from setting rental prices, to writing listing ads, to screening tenants to onboarding and communicating well with tenants, management and maintenance can be hard work.

That’s why smart landlords and property managers choose the best property management software to save time and keep tenants happy.  Learn more about landlords and property management goals for 2019/2020 in our new State of Property Management report.


Additional Housing and Property Management Topics:

See also: Property Management Software | Apartment Management SoftwareHousing Market Forecast 2020PM Software ComparisonRental Software | State of Property ManagementHawaii Housing Market Forecast | Denver Housing Forecast 2020Los Angeles Home Prices |   Los Angeles Apartment Prices | San Jose Housing MarketBest Property Management AppsProperty Accounting Solution | When is Best Time to Buy Property? | Buying Home vs RentingProperty Maintenance TipsRental Housing Market |  NAR Realtor ConferenceApartment Rental Prices |  Best Cities to buy Rental Property  | Property Management Solution | Tenant Screening | Cash Flow for Property Managers | How to Use Property Software | ManageCasa Cloud Based Property Software | LA Property Management Companies

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