How Is The Housing Market In California Right Now?
Monthly and annual home price growth accelerated in August in the California housing market. For the first time in five months, California house sales also increased in August. It was mainly due to a window of opportunity generated by a temporary decline in mortgage rates that created a little more favorable lending climate, according to C.A.R.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 313,540 in August. August’s sales pace was up 6.1 percent from 295,460 in July and down 24.4 percent from a year ago when 414,860 homes were sold on an annualized basis.
California home prices stabilized in August, with the statewide median price increasing both monthly and yearly, but at a slower-than-2% rate. The statewide median price increased 0.7 percent in August to $839,460, up from $833,910 in July and up 1.4 percent from $827,940 in August of last year.
<<<Also Read: Will the US Housing Market Crash? >>>
The price increase was the smallest in more than two years. The nominal price increase was attributed in part to a shift in the sales mix in August. The August statewide median price increased slightly by 0.7 percent from July, with sales in the million-dollar price segment increasing 6.8 percent from the previous month.
“It’s encouraging to see that August’s sales pace rebounded above an annualized 300,000 units sold,” said C.A.R. Vice President and Chief Economist Jordan Levine. “Although we do not expect a rapid bounce-back because the Fed is expected to continue raising interest rates to get inflation under control, the monthly increase in closed and pending sales suggests that the market may have already priced in most of the rate increases to date. Still, buyers will continue to grapple with rising costs of borrowing, which will keep home sales below the 350,000 annualized pace for the remainder of the year.”
Looking at the current market shift, C.A.R. has reduced its 2022 housing prediction, projecting 380,630 existing single-family house sales in 2022, a 14.4 percent decrease from the 444,520 units sold in 2021. The most recent forecast is a decrease from the expectation of 416,810 units sold in October 2021.
Despite a slower growth rate in the year's second half, the California median home price is expected to rise 9.7 percent to $863,390 in 2022, representing a significant increase from the yearly median of $786,750 in 2021. The latest statewide median price projection is higher than the estimated price of $834,440 in October. According to C.A.R., the average 30-year fixed mortgage interest rate will climb to between 6.25 percent and 6.5 percent by the end of 2022, averaging 5.2 percent for the year.
Weekly Real Estate Trends and Forecast in California [September, 19 2022]
Existing single-family home sales in California rebound amid a temporary rate cut: The fact that August home sales surpassed 300,000 units is significant. Although we do not expect a rapid recovery because the Fed is expected to continue raising rates to control inflation, the monthly increase in closed and pending sales suggests that the market has already priced in the majority of the rate increases to date. Nonetheless, buyers will continue to face rising borrowing costs, keeping home sales below 350,000 for the rest of the year.
In the latest weekly data released by C.A.R., 18.7 percent of realtors think sales will increase and 3.2 percent think that prices will increase in the coming weeks. According to Freddie Mac’s weekly survey, the 30-year fixed-rate mortgage averaged 6.02% as of September 15. That is more than 316 basis points higher than what it was a year ago at this time when it averaged 2.86% – more than double. The increase in rates will continue to weigh on homebuyer demand in the coming months, as evidenced by the most recent decline in mortgage applications.
In Q2-2022, California housing affordability hit a 15-year low. As home prices hit a record high in the second quarter of this year, mortgage interest rates doubled. This has hurt California's housing affordability. In the second quarter of 2022, 16% of California households could afford the $883,370 median-priced home, down from 24% the previous quarter and 23% the same quarter last year. A minimum annual income of $199,200 was needed to afford a 30-year fixed-rate mortgage at 5.39%. Second-quarter 2022 housing affordability fell nationwide.
Is the Housing Market Cooling Off in California?
The California housing market sizzled last year to break all records. It was a hot seller’s real estate market. According to Zillow, at the state level, California’s housing market remains the most valuable in the country, with a total value of $9.24 trillion as of last December, accounting for more than a fifth – 21.3 percent – of the national total. However, California’s overall value growth of $1.38 trillion in 2021 represents only “20.1 percent” of the overall national growth of $6.9 trillion – somewhat “underperforming” by about -5.5 percent relative to its total weight, particularly given the extreme growth seen in other states.
Here's a rundown of the California housing market demand for the week ending September 17, 2022.
California Active & Closed Median Home Prices Trends
- Existing SFR Active Listings = 47,000
- Year-to-Year Existing SFR Active Listings Growth = 21.8%
- Median New Listing Price = $750,000
- Year-to-Year New Existing SFR Median List Price Growth = 7.2%
- Month-to-Month New Existing SFR Median List Price Growth = 0.1%
- Median New Listing Prices Per Sq. Ft. = $421
- Existing SFR Median Closed Prices = $750,000
- Year-Over-Year Existing SFR Median Closed Price Growth = 2.7%
- Month-to-Month New Existing SFR Median Closed Price Growth = 1.4%
California Housing Market Competitiveness
- % of Active Listings w/Reduced Price = 43.2%
- Median Reduction on Reduced-Price Listings % = -5.4%
- % of Sales Closed Below List Price = 61%
- Median Reduction on Reduced-Price Sales % = -5.8%
- % of Homes Closed Above List Price = 29%
- Median Overage on Homes Closing Above List = 2.9%
- Median Days on Market for Closed Sales = 25
- Median Days on Market for Active/Unsold Homes = 44
The California housing market stabilized briefly due to a temporary reprieve on mortgage rates in July and early August. The number of active listings has surpassed its yearly peak, and while it is taking slightly longer to sell a property, the proportion of homes experiencing price decreases has steadied near pre-crisis levels. Both monthly and annual price rises accelerated in August, and pending sales indicate a rebound for homes valued at $2 million and beyond, according to the California Association of Realtors®.
- Existing, single-family home sales totaled 313,540 in August on a seasonally adjusted annualized rate, up 6.1 percent from July and down 24.4 percent from August 2021.
- August’s statewide median home price was $839,460 up 0.7 percent from July and up 1.4 percent from August 2021.
- Year-to-date statewide home sales were down 14.9 percent in August.
- More than two-thirds of all California counties experienced a year-over-year increase in their median prices.
- Three counties had triple-digit year-over-year gains in homes for sale, with Yuba leading the pack.
The statewide median sales-price-to-list-price ratio was 98.4 percent in August as the market becomes less competitive. The median number of days required to sell a single-family home in California was 19 days in Aug, 10 days more than Aug 2021. California is still a moderate seller’s market and home prices have reached record-highs across all the regions due to tight supply.
The supply-demand imbalance continued to drive up property prices. But in recent weeks, interest rates have remained stable, and fewer properties are selling for more than the asking price. As a result, potential buyers have the rare chance to see more listings enter the market and face less competition which may push them into a bidding battle. Housing supply in California improved from a year ago but tightened slightly from the prior month as housing demand rose in August.
The overall supply condition in California improved from a year ago but tightened slightly from the prior month as housing demand rose in August. The Unsold Inventory Index (UII) increased to 2.9 months in August 2022 from 1.9 months a year ago. Weaker housing demand, however, continued to be the primary factor for the improvement in the index.
At the regional level, home sales in all major California regions declined from a year ago, with four of the five major regions dropping more than 20 percent on a year-over-year basis. Home prices rose in all major California regions except San Francisco Bay Area and the Far North.
- The San Francisco Bay Area had a year-over-year price decline of 1.2 percent, with the median price being $1,250,000.
- The Central Coast had a year-over-year price gain of 5 percent, with the median price being $950,000.
- Southern California had a year-over-year price gain of 4.6 percent, with the median price being $795,000.
- The Central Valley had a year-over-year price gain of 2.2 percent, with the median price being $460,000.
- The Far North had the highest year-over-year drop of 1.8 percent, with the median price being $380,000.
- The Los Angeles Metro Area had a year-over-year price gain of 4.7 percent, with the median price being $765,000.
Will the California Housing Market Crash?
Realtor.com's 20 Hottest Markets rankings show California has dropped off the list. People are seeking housing by moving to less expensive cities, with more affordable housing options. The rankings are a factor in a combination of demand (measured by the number of unique views per home listing) and how quickly homes are selling (measured by the number of days on the market). For the first time in the history of these monthly rankings—which began in 2016—California has dropped off the list and is nowhere to be found.
In January, California was on the list with five metros in the top 20 hottest markets. In March, that number had dwindled to just two metros; by April, California fell out of the rankings entirely. While Californians have endured exorbitantly high property prices for years, at least some homebuyers appear to have reached their breaking point. Amidst the harsh reality of rising mortgage rates (already over 5 percent) and inflation eroding their wages, many people are yearning for a new sort of paradise: one where they don't have to worry about paying their bills.
According to most experts, the market will continue to see good buyer demand and a positive rate of home price appreciation, despite a significant cooling from the extreme heat of early spring 2022. However, California is no longer a desirable location to live in since purchasers have endured exorbitantly high housing prices for years, and at least some homebuyers appear to have hit their breaking point. The tight supply and the higher cost of borrowing were responsible for the near double-digit decline in sales in June.
Each month C.A.R. surveys 1,000 California consumers regarding their sentiments about various aspects of the housing market or the economy that directly impact housing to create a California Housing Sentiment Index. In June 2022, the overall housing sentiment index was 56 (down 4% from last month). It showed that consumers acknowledged the current market challenges and felt increasingly pessimistic about homebuying opportunities.
Consumers who thought it was a “Good time to buy” dropped to 14% in June. There is some evidence that inventory is gradually starting to thaw, but real estate faces many variables in the months ahead. Encouragingly, the number of new listings being added to the MLS each day has finally started to exceed pending sales and C.A.R. is still forecasting a 10% growth in home sales this year. Here's what consumers feel at this time. The 2022 California housing market forecast has been revised to 380,630 units sold and a statewide median price of $863,390.
Is it a good time to buy a home in California?
The consumer optimism returned in early August, according to C.A.R.'s monthly Consumer Housing Sentiment Index, as interest rates fell. The share of respondents who thought it was a good time to buy a home increased month over month for the third consecutive month to 19 percent, bringing the Housing Sentiment Index to 59, but still significantly lower than the Index of 72 in August 2021.
Meanwhile, those who believed it was a good time to sell a home fell to 56%, down from 72% in August 2021. Interest rates have been rising since mid-August, and housing sentiment is expected to turn negative next month. Two-thirds (64%) of California consumers expected the state's overall economic conditions to worsen over the next year, while three-quarters (75%) expected interest rates to rise.
Is it a good time to sell a home in California?
According to the survey, close to two-thirds (56 percent) of Californians believe now is a good time to sell a home. That’s a decrease of 4% over the July 2022 poll. Less than one-third of the consumers (36%) who participated in the survey still feel that home prices will continue to rise in the 12 months. That’s an increase of 1% from the previous month. More than one-third of the people are optimistic about the economy's recovery. About 36% (+12% from last month) believe that economic conditions will improve in the state over the next 12 months while 64% still have a gloomy outlook.
California Housing Market Forecast 2022 and 2023
Let us look at the price trends recorded by Zillow over the past few years. Since the last decade (Aug 2012), California home values have appreciated by nearly 157.8% — Zillow Home Value Index. ZHVI is not the median price of homes that are sold in a month within a geographic region. It is calculated by taking all estimated home values for a given region and month (Also called Zestimates), taking a median of those values, and applying some adjustments to account for seasonality or errors in individual home estimates.
It, therefore, represents the whole housing stock and not just the homes that list or sell in a given month. By this calculation, the current typical home value of homes in California is $799,311. It indicates that 50 percent of all housing stock in the area is worth more than $799,311 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes).
In June 2021, the typical value of homes in California was around $674,000. Home values have gone up 18.5% since last June. It can be said that California is currently the seller's real estate market which means that demand is exceeding the supply, giving sellers an advantage over buyers in price negotiations. There are fewer homes for sale than there are active buyers in the marketplace. Buyer demand remains robust, which has been pushing home prices up by a double-digit rate of appreciation.
Here's the California Housing Forecast for 2022
What are the California real estate market predictions for 2022? California housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the U.S. Supply constraints and higher home prices will bring California home sales down slightly in 2022, but transactions will still post their second-highest level in the past five years, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
- Existing, single-family home sales are forecast to total 416,800 units in 2022, a decline of 5.2 percent from 2021’s projected pace of 439,800.
- California’s median home price is forecasted to rise 5.2 percent to $834,400 in 2022, following a projected 20.3 percent increase to $793,100 in 2021.
- Housing affordability is expected to drop to 23 percent next year from a projected 26 percent in 2021.
C.A.R.'s “2022 California Housing Market Forecast” assumes a 5.2 percent decrease in existing single-family home sales next year, to 416,800 units, down from the predicted 439,800 units in 2021. The forecast for 2021 is 6.8% greater than the pace of 411,900 houses sold in 2020. California's median house price is expected to climb 5.2 percent to $834,400 in 2022, from $659,400 in 2020. Demand and supply imbalances will keep prices rising, but higher interest rates and a partial adjustment of the sales mix will likely slow the price rise. The rise of remote working will help keep costs in control and prevent the statewide median price from increasing too quickly in 2022.
According to C.A.R.'s 2022 projection, the US gross domestic product would expand by 4.1 percent in 2022, after a predicted rise of 6.0 percent in 2021. With a predicted nonfarm job growth rate of 4.6 percent in 2022, up from 2.0 percent in 2021, California's unemployment rate will fall to 5.8 percent in 2022, down from 7.8 percent in 2021. In 2022, the average 30-year fixed mortgage rate will be 3.5 percent, up from 3.0 percent in 2021 and 3.1 percent in 2020, but still low by historical standards.
California House Prices & Sales Trends
Here are some of the key points of the California housing market report for August 2022, according to C.A.R.
Existing-Home Sales
- August’s sales pace was up 6.1 percent on a monthly basis from 295,460 in July.
- It was down 24.4 percent from a year ago when 414,860 homes were sold on an annualized basis.
- Year-to-date statewide home sales were down 14.9 percent in August.
- At the regional level, all major regions experienced sharp declines from last year.
- With four of the five major regions dropping more than 20 percent.
- The Central Coast region had the biggest drop of all regions, with sales plunging 30.6 percent from a year ago.
- The San Francisco Bay Area (-29.1 percent) had the second largest drop of all regions.
- Southern California also recorded a 28.8 percent drop from Aug 2021, while the declines in Central Valley (-22.1 percent) and the Far North (-10.5 percent) were comparatively less.
- All but four counties tracked by C.A.R. posted sales drops from last August 2022.
- Of the 47 counties that experienced a year-over-year sales decline, 30 counties suffered a plunge of more than 20 percent.
- San Benito County recorded the biggest sales drop from last August at -68.2 percent.
- Four counties recorded a sales increase from a year ago, with Plumas gaining the most at 43.3 percent.
California Median Home Price
- Median prices in all major regions continued to grow on a year-over-year basis except for SF Bay Area and the Far North.
- The Central Coast led the way at a 5.0 percent increase, followed by Southern California at 4.6 percent and Central Valley at 2.2%.
- In San Francisco Bay Area, the median home price dropped by 1.2%.
- In the Far North, the median home price dropped by 1.8%.
- More than two-thirds of all California counties experienced a year-over-year increase in their median prices.
- Seven counties continued to record double-digit growth rates in their median prices from a year ago.
- Napa (29.2 percent) had the biggest price gain of all counties.
- Fifteen counties registered a dip in their median prices from a year ago, with Tehama dropping the most at -13.8 percent.
California Housing Supply
- Housing supply in California improved from a year ago but tightened slightly from the prior month as housing demand rose in August.
- The statewide unsold inventory index (UII) increased to 2.9 months in August 2022 from 1.9 months a year ago.
- The improvement in the index was partly due to an increase in supply and partly due to weaker demand.
- The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
- Active listings surged by 57.1 percent year-over-year in August.
Median Days & Sales Price to List Price Ratio
- The median number of days required to sell a single-family home in California was 19 days in August and 9 days in August 2021.
- C.A.R.’s statewide sales-price-to-list-price ratio was 98.4 percent in August 2022.
- It was below 100 percent for the first time since June 2020.
- The statewide sales-price-to-list-price ratio was 102.8 percent in August 2021.
- Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate prices.
- A higher ratio of 100% or above shows a strong market favoring sellers.
- August's price per square foot was $406, up from $395 in August a year ago.
These monthly and yearly trend numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller?
“California’s housing market stabilized briefly as a temporary reprieve on mortgage rates in July and early August brought buyers into the market,” said C.A.R. President Otto Catrina, a Bay Area real estate broker and REALTOR®. “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. In fact, price growth in August actually picked up on both a monthly and annual basis, and pending sales suggest a bounce-back for homes priced $2 million and above.”
Housing Affordability in California
Housing costs have been on the rise in California, which has impacted affordability. Only twenty-four percent of California households could afford to purchase the $797,000 median-priced home in the first quarter of 2022, down from 25 percent in fourth-quarter 2021 and down from 27 percent in first-quarter 2021.
According to C.A.R.'s Traditional Housing Affordability Index (HAI), the percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the first-quarter 2022 was down to 24 percent from 25 percent in the fourth quarter of 2021 but was down from 27 percent in the first quarter of 2021. The first-quarter 2022 figure is less than half of the affordability index peak of 56 percent in the first quarter of 2012.
C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.
- A minimum annual income of $158,000 was needed to qualify for the purchase of a $797,000 statewide median-priced, existing single-family home in the fourth quarter of 2022.
- The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,950, assuming a 20 percent down payment and an effective composite interest rate of 3.97 percent.
- The effective composite interest rate was 3.28 percent in the fourth quarter of 2021 and 3.08 percent in the first quarter of 2021.
- A minimum annual income of $148,000 was needed to make monthly payments of $3,700
- It included principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.28 percent interest rate.
- Thirty-two percent of home buyers were able to purchase the $640,000 median-priced condo or townhome.
- A minimum annual income of $126,800 was required to make a monthly payment of $3,170.
- Compared with California, nearly half of the nation’s households could afford to purchase a $368,200 median-priced home.
- Which required a minimum annual income of $73,200 to make monthly payments of $1,830.
- Nationwide affordability was down from 54 percent a year ago.
References/Data Sources
- https://www.car.org/
- https://www.car.org/aboutus/mediacenter/newsreleases
- https://www.car.org/marketdata/data/countysalesactivity
- https://www.car.org/marketdata/marketforecast
- https://www.car.org/marketdata/marketminute
- https://www.car.org/marketdata/interactive/housingmarketoverview
- https://www.zillow.com/ca/home-values
- https://lao.ca.gov/LAOEconTax/Article/Detail/265
- https://sf.curbed.com/2020/3/23/21188781/sf-housing-market-coronavirus-covid-19
- https://www.ppic.org/publication/new-patterns-of-immigrant-settlement-in-california
- https://fox40.com/news/business/local-real-estate-market-slows-amid-covid-19-pandemic
- https://www.point2homes.com/news/us-real-estate-news/experts-california-real-estate-2020.html
- https://www.washingtonpost.com/business/2020/02/27/mortgage-rates-head-back-down-coronavirus-fears
- https://www.cnbc.com/2020/03/18/weekly-mortgage-applications-drop-over-8percent-as-interest-rates-jump.html
- https://www.usnews.com/news/business/articles/2020-03-25/business-fallout-companies-in-china-see-delays-in-reopening
- https://www.dallasnews.com/business/real-estate/2020/03/25/homeowners-who-cant-pay-their-mortgages-are-getting-help
- https://www.wfsb.com/news/businesses-considered-essential-under-stay-safe-stay-home-policy/article_53f8e0d0-6d17-11ea-a04d-57ecbb72c518.html
