California Housing Market Report & Trends
Rising interest rates dampened the sales in the California housing market in October. As the average 30-year fixed mortgage rate is projected to remain over 6.5 percent for the remainder of the year, home values will continue to decline as affordability remains a concern. Home sales have fallen for 16 straight months year over year, and it was the third time in the last three months that sales fell more than 30% from the previous year, according to C.A.R.
It was the lowest sales level since February 2008 and the steepest year-over-year fall since December 2007, excluding the effects of the pandemic. Sales of existing single-family detached homes in California totaled a seasonally adjusted annualized rate of 274,040 in October. October’s sales pace was down 10.4 percent on a monthly basis from 305,680 in September and down 36.9 percent from a year ago, when 434,170 homes were sold on an annualized basis.
All price segments continued to decline by 30 percent or more year-over-year, with the segment between $750,000 and $999,000 experiencing the steepest decline at 40.8%. At 34.1 percent, the luxury market ($1 million to $1,999,000) experienced the smallest sales decline in October.
The median home price in California decreased 2.5 percent to $801,190 from $821,680 in September. The median price was 0.3% higher than the October 2017 price of $798,440, representing the smallest year-over-year price increase in 29 months. October marked the fifth consecutive month with an annual price increase of less than 10 percent.
<<<Also Read: Will the US Housing Market Crash? >>>
“Excluding the three-month pandemic lockdown period in spring 2020, October’s sales level was the lowest since February 2008. With pending sales showing a 50 percent drop from a year ago, we can expect additional tempering in housing demand in the coming months, as we previously forecasted,” said C.A.R. Vice President and Chief Economist Jordan Levine. “Home prices will also moderate further over the next several months as interest rates remain elevated in the near term and seasonal factors come into play.”
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 thirty-five percent on a year-over-year basis. Home prices rose in all major California regions except San Francisco Bay Area and Central Valley.
- The San Francisco Bay Area had a year-over-year price decline of 2.0 percent, with the median price being $1,250,000.
- The Central Coast had the highest year-over-year price gain of 8.3 percent, with the median price being $937,500.
- Southern California had a year-over-year price gain of 3.2 percent, with the median price being $773,810.
- The Central Valley had a year-over-year price gain of 0 percent, with the median price being $450,000.
- The Far North had the highest year-over-year gain of 6.5 percent, with the median price being $394,000.
California Housing Market Forecast for 2022
A supply-demand imbalance will continue to put upward pressure on prices, but higher borrowing rates and partial adjustment of the sales mix will likely limit the median price rise. Looking at the current market shift, C.A.R. has reduced its 2022 housing prediction. The 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.
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. 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.
Housing affordability is expected to drop to 23 percent next year from a projected 26 percent in 2021. Furthermore, as the trend of remote working continues, a change in housing demand to more affordable places will keep prices in check and prevent the statewide median price from climbing too quickly in 2022, according to the CALIFORNIA ASSOCIATION OF REALTORS®.
Latest California House Prices & Sales Trends [October 2022]
Here are some of the key points of the California housing market report for October 2022, according to C.A.R.
Existing-Home Sales Trends
- October’s sales pace was down 10.4 percent on a monthly basis from 305,680 in September.
- It was also down 36.9 percent from a year ago when 434,170 homes were sold on an annualized basis.
- Year-to-date statewide home sales were down 18.5 percent in October.
- At the regional level, all major regions experienced sharp declines from last year.
- With four of the five major regions dropping more than 35 percent.
- Southern California had the biggest drop of all regions, with sales plunging 40.8 percent from a year ago.
- The Central Coast (-38.8 percent), the San Francisco Bay Area (-37.3 percent), and the Central Valley (-36.4 percent) also posted sales declines of more than 35 percent from last year.
- The Far North (-19.1 percent) recorded the smallest sales declines of the five major regions.
- All but one California county recorded a year-over-year sales decline in October.
- 41 of them fell more than 20 percent.
- Madera (-52.4 percent) and Sutter (-52.4 percent) had the biggest sales drops of all counties.
- Mariposa was the only county that did not experience an annual sales decline.
California Home Price Trends 2022
- Median prices in all major regions continued to grow on a year-over-year basis except for SF Bay Area.
- Central Coast led the pack at an 8.3 percent increase, followed by the Far North at 6.5 percent and Southern California at 3.2%.
- In Central Valley, the median home price remained the same as last year.
- In San Francisco Bay Area, the median home price dropped by 2.0%.
- More than half of all counties in California maintained positive year-over-year median-price growth in October.
- Santa Barbara (33.2 percent) had the biggest price increase of all counties.
- Twenty-two counties recorded a dip in their median price from a year ago with Tehama dropping the most at -20.6 percent.
- Three other counties posted price declines in the double-digits, including Amador (-15.2 percent), Mariposa (-12.3 percent), and San Mateo (-10.0 percent).
California Housing Supply
- Housing inventory in California rose month-to-month and year-to-year at the start of the fourth quarter.
- The statewide Unsold Inventory Index (UII) increased to 3.3 months in October 2022 from 2.9 months recorded in the prior month.
- The supply also increase from 1.8 months recorded in the same period a year ago.
- 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.
- Forty-seven of the 51 counties tracked by C.A.R. experienced an increase in active listings from last October, a slight dip from 48 counties recorded in September.
- Five counties registered a triple-digit, year-over-year gain in October with Yolo (113.0 percent) leading the pack.
- Despite an overall improvement in the housing supply conditions, four counties experienced a contraction in active listings from last year.
- Del Norte continued to register the largest decline in October, with a drop of -48.8 percent year-over-year.
- The UII increased in all price ranges by 75 percent or more from a year ago, with the $500,000 – $749,000 price range gaining the most (88.2 percent).
- It was followed by the $750,000 – $999,000 price range (83.3 percent), the $1 million and up (82.4 percent), and the sub- $500,000 (75.0 percent) segment.
Median Days & Sales Price to List Price Ratio
- The median number of days it took to sell a California single-family home was 23 days in October and 11 days in October 2021.
- C.A.R.’s statewide sales-price-to-list-price ratio was 97.3 percent in October 2022 and 101.5 percent in October 2021.
- It was below 100 percent for the third time since June 2020.
- 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.
- October's price per square foot was $404, up from $389 in October 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 Housing Market Continues to Slow Down in November – Weekly Trends
According to C.A.R., buyer demand is dwindling as mortgage rates rise, reducing consumer spending power. Total construction spending rises despite falling single-family spending. September construction spending was up 0.2%, boosting the year-to-date total by 11.4%. September's growth was helped by a minor increase in nonresidential construction spending and a slowdown in residential spending, which had fallen for 3 months.
Multifamily and home improvement spending grew 0.3% and 2.9% respectively, while single-family spending dropped 2.6%. Single-family spending has fallen for four straight months as rising borrowing costs impact building. The Fed approved a 0.75-point rate raise for the fourth time this year, but it may be the last. The latest hike pushed the target range to 3.75-4%, the highest since January 2008. The Federal Open Market Committee (FOMC) continued its most aggressive pace of monetary policy tightening since the early 1980s (the last time inflation was this high).
However, they signaled in their report that the time to pause the pace of rate rises may be coming. There's little chance that rate hikes will finish soon, so a slower pace of increases is expected, although it depends on inflation. Despite a small decline in rates, mortgage applications have fallen for 6 weeks. Seasonally adjusted mortgage applications declined 0.5% from the week before. Purchase applications are now 41% behind last year at this time.
While refinance applications rose 0.2% from the week before, rates are still 85% behind last year. The 30-year fixed-rate mortgage (FRM) averaged 6.95% on November 3, according to Freddie Mac's weekly survey. This was down from 7.08% the week before. With the Fed's latest rate hike and another one expected by the end of the year, rates are likely to remain high and deter purchasers.
The percentage of REALTORS® who believe sales will increase in the foreseeable future has been steadily falling, reaching only 4.6% in October. This is the lowest reading since C.A.R. began polling its members shortly after the pandemic began. The study also revealed that fewer members expect listing prices to climb, with the proportion dropping from half of the respondents at the start of the year to one in five this month.
The percentage of people who believe prices will rise continues in the low single digits, as it has for the last five months. Members indicate reduced demand, but a lack of listings keeps inventory reasonably tight. According to C.A.R.'s, 1.6% of REALTORS® polled believe that prices will increase and only 4.6% think that sales will increase in the California housing market. The proportion of responders who think that listings will increase was 18.2%, still a drop of 12.1% from the previous poll.
Weekly Real Estate Trends and Forecast in California [November 5, 2022]
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 November 5, 2022.
California Active & Closed Median Home Prices Trends
- Existing SFR Active Listings = 46,000
- Year-to-Year Existing SFR Active Listings Growth = 45.4%
- Median New Listing Price = $715,000
- Year-to-Year New Existing SFR Median List Price Growth = 3%
- Month-to-Month New Existing SFR Median List Price Growth = -2%
- Median New Listing Prices Per Sq. Ft. = $411
- Existing SFR Median Closed Prices = $718,000
- Year-Over-Year Existing SFR Median Closed Price Growth = 1%
- Month-to-Month New Existing SFR Median Closed Price Growth = -2.9%
California Housing Market Competitiveness
- % of Active Listings w/Reduced Price = 46.5%
- Median Reduction on Reduced-Price Listings % = -5.9%
- % of Sales Closed Below List Price = 64.6%
- Median Reduction on Reduced-Price Sales % = -6%
- % of Homes Closed Above List Price = 25%
- Median Overage on Homes Closing Above List = 2.6%
- Median Days on Market for Closed Sales = 27
- Median Days on Market for Active/Unsold Homes = 48
Will the California Housing Market Crash?
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 6 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 moderate 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.
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 September 2022, the overall housing sentiment index was 55 (down 10% 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 September. There is some evidence that inventory is gradually starting to thaw, but real estate faces many variables in the months ahead. 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?
Consumer optimism declined in early September, according to C.A.R.'s monthly Consumer Housing Sentiment Index, as interest rates rose. The share of respondents who thought it was a good time to buy a home increased month over month for the fourth consecutive month to 14 percent, bringing the Housing Sentiment Index to 55. Meanwhile, those who believed it was a good time to sell a home fell to 51%, down 5% from August 2022. 73% of California consumers expected the state's overall economic conditions to worsen over the next year, while 80% expected interest rates to rise.
Is it a good time to sell a home in California?
According to the survey, close to two-thirds (51 percent) of Californians believe now is a good time to sell a home. That’s a decrease of 5% over the August 2022 poll. Less than one-third of the consumers (30%) who participated in the survey still feel that home prices will continue to rise in the 12 months. That’s a decrease of 6% from the previous month. Less than one-third of the people are optimistic about the economy's recovery. About 27% (-9% from last month) believe that economic conditions will improve in the state over the next 12 months while 73% still have a gloomy outlook.
California Housing Market Forecast 2023
Here's the California Housing Forecast for 2023 released by the C.A.R on October 12, 2022. A modest recession caused by an ongoing battle against inflation will keep interest rates elevated to suppress buyer demand and contribute to a weaker housing market in 2023, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS®. High inflationary pressures will keep mortgage rates high, reducing purchasing power and lowering property affordability for prospective purchasers in the coming year. As a result, housing demand and prices will fall throughout 2023.
- Existing, single-family home sales are forecast to total 333,450 units in 2023, a decline of 7.2 percent from 2022’s projected pace of 359,220.
- California’s median home price is forecast to decline 8.8 percent to $758,600 in 2023, following a projected 5.7 percent increase to $831,460 in 2022.
- Housing affordability is expected to drop to 18 percent next year from a projected 19 percent in 2022.
According to C.A.R.'s “2023 California Housing Market Forecast,” existing single-family home sales will fall 7.2 percent next year to 333,450 units, down from 359,220 units in 2022. The forecast for 2022 is 19.2 percent lower than the 444,520 residences sold in 2021. The median home price in California is expected to drop 8.8 percent to $758,600 in 2023, after rising 5.7 percent to $831,460 in 2022 from $786,700 in 2021. Next year's median price rise will be slowed by a less competitive housing market for homebuyers and a stabilization in the mix of home sales.
According to C.A.R.'s 2022 projection, the U.S. gross domestic product of 0.5 percent in 2023, after a projected uptick of 0.9 percent in 2022. With California’s 2023 nonfarm job growth rate at 1.0 percent, up from a projected increase of 4.9 percent in 2022, the state’s unemployment rate will edge up to 4.7 percent in 2023 from 2022’s projected rate of 4.4 percent.
Stubbornly high inflation and growing economic concerns will keep the average for 30-year, fixed mortgage interest rates elevated at 6.6 percent in 2023, up from 5.2 percent in 2022 and from 3.0 percent in 2021 but will remain relatively low by historical standards.
Let us look at the price trends recorded by Zillow over the past few years. Since the last twelve months, California home values have appreciated by nearly 8.7% — 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 $769,405. It indicates that 50 percent of all housing stock in the area is worth more than $769,405 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes).
- Typical Home Value in California: $769,405 as of September 30, 2022
- 1-year Value Change: +8.7%
- 1.005 is the Median sale to list ratio as of August 31, 2022
- 52.5% Percent of sales over list price as of August 31, 2022
- 33.5% Percent of sales under list price as of August 31, 2022
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 the fourth-quarter 2021 and down from 27 percent in the first-quarter of 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.