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California Housing Market Report & Predictions

January 10, 2022

California Housing Market

There’s little stopping the California market from staying hot in December. Although house prices in the Golden State simmers of late, condo prices are soaring. With inventory and new listings plummeting, we have to believe prices can only go up when the economy returns full tilt after the Omicron slow down.

CAR Realtors Expectations this week. Screenshot courtesy of CAR.org

December’s stats may mirror November’s since California Realtors are reporting inventory drops, fewer listings and closings and fewer expect rises in prices or listings.

Even though mortgage rates are already on the rise, buyers are out hungry to win their dream home before mortgage rates get out of hand. Will mortgage rates crash this housing market? Check out more on the rental market report.

The Mortgage Bankers Association (MBA) predicts purchase mortgages will set a record at $1.61 trillion this year.  That’s $0.1 trillion higher than the previous mortgage record set back in 2005. New mortgage originations for home purchases are forecast to reach $2.32 trillion, less than the$2.63 trillion purchased in 2020, yet is the 3rd highest total in US history.

Inventory shortages are severe and immigration will likely put even more pressure on home prices and increase demand for new mortgages. Although interest rates are set to rise, there is a question mark about political consequences and economic slow down.  If more stimulus is delivered (countering slowdown) then the housing market may be protected.

California Exodus Pushing Prices up Elsewhere?

California is being blamed for fast rising housing prices in other states such as Utah and Idaho. An exodus of people and businesses might sound threatening but it may be that this state’s housing market is invincible. People want to live or rent in California. There’s always buyers. If high taxes, regulations, fires, floods, and high prices can’t scare buyers away, what could?

California Home Sales and Prices for November. Screenshot courtesy of Car.org

We’ve got 8 graphics below courtesy of CAR’s November report that say everything about this real estate market.

Home Sales Up but Prices Sliding

November’s stats show sales actually increased, and demand is pushing into the condo market. In the central valley, it takes only 9 days to sell a home. Active home listings plummeted in November setting up perhaps more price pressure in December or post-Omicron.

Sales of homes increased at the fastest pace in 7 months putting more pressure on the low level of inventory. The Central coast saw the largest price increase of 3.9% while Bay Area homes are up 18% year over year.

Conversely, Los Angeles home prices dropped 9.4% from October (-$80,000) and sales declined by 9%. House prices in San Mateo rose a surprising 34.7% year over year. Home prices in the Santa Clara/San Jose area rose more than 4% vs October, gaining another $67,000 on average.

Any prices increases likely would encourage some owners to hang onto their properties for further price escalations. Home Sales have outpaced new listings, another indicator that prices may rise. Supply in the Bay Area fell hard (-42%) and in Southern California (-24%). Reduced price listings are falling as more sellers realize they can get their sales price.

California Home Sales in November. Screenshot courtesy of CAR.org

 

California Home Prices Timeline. Screenshot courtesy of CAR.org

CAR’s Jordan Levine, in the latest CAR report says sales have stabilized and are actually outperforming pre-pandemic sales levels. This might tell us the obvious, that ultra-high home prices and lack of supply are the issue in California’s housing market.

 

What single decision will change results for California property managers in 2022? It’s the first word you’ll see on This Page.

 

 

Inventory of California homes dipped again and active inventory took a decided downturn at -18.3%.

California Home Inventory.

California Home Inventory. Screenshot courtesy of CAR.org

It took one more day to sell a home, from average of 11 days from 10 last month.

Condo prices hit a record height in November, climbing 2% or $15,000.  That price is up 19.2% in the last 12 months, and up 200% in the last ten years.

California Condo Townhome Prices. Screenshot courtesy of CAR.org

California New Home Listings.

California New Home Listings. Screenshot courtesy of CAR.org

Mortgage Payments in California, Median Price Comparison.

Mortgage Payments in California, Median Price Comparison. Screenshot courtesy of CAR.org

Home List Prices versus sales price in California.

Home List Prices versus sales price in California. Screenshot courtesy of CAR.org

 

California’s Regional Markets Seeing Drops Too

In the LA Metro region, single detached homes sold for about $5000 less than October, yet that is still up almost $90,000 from last October. You might understand why homeowners have held out for a higher price. A 14.3% gain is attractive.

California condos sold for $15,000 more in November vs October to a new median price of $620,000 which is up 19.2% from last November. Sales of condos slipped 4.4% perhaps due to decreasing inventory.

On the Central Coast, condo prices increased $85,000 or 12.9% and condo prices in the far north grew $35,000 or 15.9% in November.  Sales dropped as inventory has dwindled.

In all regions, house prices are still significantly higher year over year. House prices across Southern California as a whole fell by $5,000 on average or .7% vs September. Sellers are still receiving 14% more than last October.

Southern California Housing Stats. Screenshot courtesy of CAR.org

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. That’s a drop in the bucket of course, versus what’s needed in the state, particularly with economic recover continuing. 

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 satiate demand for houses or rentals.  No matter how much housing is built, it will be sought by buyers or renters. Advancing age, retirement, 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.

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.

In fact, mortgage rates are much improved versus last October.  Rates for 30-year, fixed-mortgages averaged 3.07 percent in October, up from 2.85 last October.  And the five-year, adjustable mortgage rate average 2.54% in October compared to 2.89% twelve months ago.

Will California’s Recovery Outpace the Nation in 2022?

California seemed to fare worst during the pandemic, but will its rebound lead the nation?

The state has finally seen an easing of the Delta Covid Variant, which took hold last year about this same time. New concerns about the Omicron variant are concerning, but experts believe current vaccinations should protect, and one vaccine company said it could create a protective vaccine against Omicron within 3 months.

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.

Forecast from California Realtors

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 — the trends and which way they’re headed.

There is not strong downward indicators thus homeowners don’t feel the need to unload their properties.

Realtors are still decidedly pessimistic in October 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 numbers are 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 October

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.

Screenshot courtesy of CAR. California state housing market report for October 2021.

California state housing market report for September 2021.

California state housing market report for September 2021. Screenshot courtesy of Car.org.

 

The momentum in the last few months is dramatic:

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.

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.

Top California Cities.

Screenshot courtesy of Redfin. Top California Cities.

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 rose to 3.07 in October, up from 2.90 percent in September, and up from 2.89% last September 2020. The 5-year, ARM mortgage interest rate rose to 2.54% versus  2.45% in September.

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.

Condo Report for California Regions

Condo prices in the big metros declined while in the Central Valley, they rose. The month to month trend is strongly downward.

 

Trending Topics on Social Media

 

California Rental Housing Market

The pandemic resulted in a large number of residents exiting California,  and many vacating apartments in the major metros. Not surprisingly, one and two bedroom rent prices have dropped. while rent drops year to year are well down from the beginning of the pandemic, month to month drops have flattened or are beginning to reverse.

A Zumper report shows the California one bedroom median rent was $1,762 in June. Let’s review Zumper’s findings.

Pos.CityPriceM/M %Y/Y %PriceM/M %Y/Y %
1San Francisco, CA$2,6500.00%-24.30%$3,5000.00%-22.90%
3San Jose, CA$2,100-3.70%-17.60%$2,650-1.10%-12.50%
6Oakland, CA$1,930-3.50%-19.60%$2,480-0.80%-17.10%
8San Diego, CA$1,800-1.10%0.00%$2,4000.00%0.00%
9Santa Ana, CA$1,7000.00%0.60%$2,3800.40%8.70%
10Anaheim, CA$1,6900.60%2.40%$2,0301.50%2.00%
12Long Beach, CA$1,6000.00%0.60%$2,0100.50%0.50%
22Sacramento, CA$1,420-0.70%9.20%$1,770-2.70%14.90%

California Rent Prices by City

Rent prices in California Cities. Screenshot courtesy of Zumper.

California renters have asked “will rent prices drop?” and it appears they have.  In the Bay area especially, rent prices have fallen significantly.

Rent price drops across California cities, 2021. Screenshot courtesy of Zumper.

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.

Relocating to New Cities for Safety, Room and Improved Lifestyle

CAR’s forecast report shows the reasons people are relocating and buying, See some of that info below.

Sales and especially prices for condos in NAPA have rocketed (condo prices, see below, shot up almost 30% and sales rose 33% over February number). Condo prices in Shasta were up 81% over February and in Monterrey, were up 48%.

Although apartment rent prices are heading downward in the Bay Area as vacancy rates climb, other housing markets in the state are thriving. The demand is for single-family houses.  It may be that when the pandemic is over, both the big cities and the rural regions will have evolved considerably.

 

 

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Home listings continue to plummet which means price pressures could be intense as stimulus money arrives and the recovery begins.  New funds would certainly help save landlords and the rental market, and support suburban housing markets around San Diego, Los Angeles, and San Francisco. See more on the Bay Area rental market.

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.

California Realtor’s Survey

The latest survey of Realtors shows fewer are withdrawing offer, more are listing new properties, and are not optimistic about sales or prices.

California Housing Market Forecast

C.A.R. Predicted More Home Sales and Higher Prices for 2021: Leslie Appleton-Young delivered her updated California housing market forecast for 2021.  She expected sales to continue to improve through 2021. The prediction is based on growing buyer demand that’s pushed California’s median price above $700,000 and low inventories that will cause price increases. As know now, sales have declined.

California’s weekly showings index rose to 182.3% higher than it was in September of 2019.  Mortgage rates have dropped back down and purchase applications rose 24.2% on an annual basis last week.

Screenshot courtesy of CAR.org and their 2021 Market Forecast.

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GDP Forecasts are All over the Place

US real GDP growth was down -4.8% in the first quarter. Of course job losses have been significant, and there is doubt as to how quickly workers will be back on the job, and how many won’t be hired back. The good news is a big decline in new unemployment claims. Unemployment will be the heaviest weight, perhaps eliminating new young buyers from the market.

US major banks have reported wildly different views about GDP over the next 6 months and in 2021 (4.8% to 30% range for 5th quarter growth outlook).

 

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 California’s Rental Market

Zumper reported that all west coast rental markets were trending downward. Their survey found 67% of renter respondents were financially impacted from the pandemic. Of those impacted, 35% lost their job or received a pay cut.

Learn more stats and forecasts/predictions regarding the rental market.

California Economic Forecast

Car predicts a J-shaped economic recovery extending over the next 12 months. Of course this trend will affect home prices in the coming 6 months.

Infographic courtesy of CAR.org.

Small Towns and Cities Seeing More Interest

With workers trying work at home arrangements,we may see more workers able to move away from high rent neighborhoods, perhaps even out of California. Employers are more accepting of the need to work at home, and one major real estate service CEO (Redfin) reported that demand in smaller cities is higher than in major cities.

The expected strong pickup in interest in homes for sale lately within San Diego, Oakland, San Francisco, and Los Angeles is a little shaky, however the trend is visible.  

Booming Online Software Solutions

Realtors and property management pros are already testing out online maintenance scheduling and rent payment solutions.  ManageCasa’s state of the art property management software integrates the global payment leader’s platform is the industry model.  This might be the right time to make a platform switch. Check out online payments now.

 

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This updated report covers important stats including home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, NAHB, Statista, Zillow and more. For national home price tends see the US housing market.

The key story with Los Angeles, San Francisco, San Jose, Santa Clara, San Diego, Orange County, Riverside, San Bernardino, etc. is the lack of listings.

 

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Read more Housing and Property Management Topics:

See also: Housing Market | Rental Property | Property Management Software | Housing Market ForecastHOA SoftwareApartment Management SoftwareHousing Market Forecast 2022 | Reduce Property TaxHawaii Real Estate Forecast | Los Angeles Home Prices |  San Diego Housing Market |  Property Management Companies

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