How Is The Housing Market In California Right Now?
Home prices in the California housing market increased year-over-year in June. At the same time, the number of homes sold fell 23.6% and the number of homes for sale rose as compared to last year. In June 2022, the existing single-family detached house sales in California decreased 8.4 percent from 376,560 in May and 20.9 percent from 436,020 homes sold on an annualized basis one year ago.
According to C.A.R., outside of the initial lockdown in the Spring of 2020, this is the lowest level of home sales since 2008. The median house price in California decreased 4.0 percent to $863,790 from May’s revised record high of $900,170. This June’s price was 5.4% higher than the last June’s price of $819,630.
The median house price declined in June due in part to a shift in the composition of sales, as the high-end market began to retreat. According to Freddie Mac, June’s average 30-year fixed mortgage rate was 5.52%. With a 20% down payment, your monthly principal and interest amount for the 30-year fixed loan term would be $3,932. The down payment required to purchase a home in California is $172,758.
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 second half of the year, 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 estimate of $834,440 anticipated 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.
<<<Also Read: Will the Housing Market Crash in 2022 or 2023? >>>
Weekly Real Estate Trends and Forecast in California
The slightly more favorable lending environment, coupled with a higher level of housing supply, may have provided a window of opportunity for homebuyers who have been standing on the sideline for the past few months. CAR’s latest weekly housing data shows that new house sales plummeted 8.1% from May to June and 17.4% from June last year.
Some would-be homebuyers couldn’t afford larger monthly payments when interest rates rose. Demand slowdown raised new house inventories to 9.3 months, the most since May 2010. Builders lowered prices and provided incentives to buy down mortgage rates as home sales slowed. The median new house price in June was down 9.5% from May but up 7.4% from the previous June.
Consumer confidence plummeted the most in 12 months, while the expectation index fell to its lowest level since 2013. Consumer confidence falters as living expenses outpace income increases. 43% of respondents surveyed predict the U.S. will face a recession in the next 12 months, compared to 13% in April. In the current research, consumers’ labor market evaluation also dropped. The margin between those reporting “plentiful” jobs vs “impossible to find” positions decreased to 37.8%, its lowest level in almost a year.
Developers cut house development as buyer traffic slowed and inventory rose. June had the first month-over-month fall in construction investment since September 2021. Private expenditure fell 1.3% and state spending fell 0.5%. Single-family construction expenditure fell 3.1% month-over-month in June, whereas multifamily spending rose 0.4%. As rates and housing prices remain high, home-building activity will likely drop further in the coming months.
Source: CAR
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 July 30, 2022.
California Active & Closed Median Home Prices
Existing SFR Active Listings = 49,000
Year-to-Year Existing SFR Active Listings Growth = 18.3%
Median New Listing Price = $769K
Year-to-Year New Existing SFR Median List Price Growth = 8.6%
Month-to-Month New Existing SFR Median List Price Growth = -2.2%
Median New Listing Prices Per Sq. Ft. = $428
Existing SFR Median Closed Prices = $760K
Year-Over-Year Existing SFR Median Closed Price Growth = 3.4%
California Market Competitiveness
% of Active Listings w/Reduced Price = 40.3%
Median Reduction on Reduced-Price Listings % = -5.3%
% of Sales Closed Below List Price = 48.9%
Median Reduction on Reduced-Price Sales % = -4.9%
% of Homes Closed Above List Price = 40%
Median Overage on Homes Closing Above List = 3.3%
Median Days on Market for Closed Sales = 19
Median Days on Market for Active/Unsold Homes = 35
Source: CAR.org
As of June 2022, the California housing market has started showing signs of a market shift with the rising interest rate. As housing demand cooled in June, California house sales and prices declined. The market continued to downshift in June as housing demand cooled further to levels not seen in the past two years and logged its biggest dip since May 2020, according to C.A.R. California’s median home price declined 4.0 percent in June to $863,790 from the revised record-high of $900,170 recorded in May, according to the California Association of Realtors®.
The median price in June was 5.4 percent higher than the previous June’s price of $819,630. The moderated median house price was caused in part by a shift in the mix of sales in June when the high-end market began to pull back.
Nine out of 10 California counties continued to record an increase in their median price from a year ago.
Santa Barbara had the most significant year-over-year gain in its median price at 33.7 percent.
June’s sales pace was down 8.4 percent on a monthly basis from 376,560 in May and down 20.9 percent from a year ago when 436,020 homes were sold on an annualized basis.
After rising for four months in a row, the percentage of million-dollar house sales fell as sales in the higher-priced group fell 8.3 percent from the previous month.
The monthly increase in home prices looks to be slowing, suggesting a potential leveling out. The moderation in the median home price was due partly to a change in the mix of sales in June, as the high-end market started pulling back. The statewide median sales-price-to-list-price ratio remained above 100 percent, at 101.3 percent.
Homes are still flying off the shelves in record time. The median number of days required to sell a single-family home in California was 11 days in June, three days less than June 2021. While this type of price appreciation has an impact on housing affordability, higher home prices should encourage more sellers to list their homes for sale, slowing the rate of appreciation.
California is still a 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 in June. 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 that may push them into a bidding battle.
The overall supply condition in California improved further in June but there aren’t enough homes listed for sale to satisfy the demand from buyers. The Unsold Inventory Index (UII) was 2.5 months and the improvement in the index was partly due to an increase in supply and partly a pullback in 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 also climbed to the highest level since November 2019 and had a month-to-month increase of 28.8 percent from May.
In June 2022, at the regional level, home sales in all major California regions declined from a year ago, with all the regions falling by double-digits on a year-over-year basis. Home prices rose in all major California regions with the Central Coast leading the way at a 10.1 percent increase.
The San Francisco Bay Area had a year-over-year price gain of 3.7 percent, with the median price being $1,400,000.
The Central Coast had a year-over-year price gain of 10.1 percent, with the median price being $980,000.
Southern California had a year-over-year price gain of 8.4 percent, with the median price being $830,000.
The Central Valley had a year-over-year price gain of 10 percent, with the median price being $497,000.
The Far North had the highest year-over-year gain of 5.3 percent, with the median price being $400,000.
The Los Angeles Metro Area had a year-over-year price gain of 8.5 percent, with the median price being $800,000.
Source: C.A.R.’s June 2022 Market Report
Will the California Housing Market Crash in 2022?
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?
C.A.R.’s monthly Consumer Housing Sentiment Index for June 2022 found that only 14% of consumers believe that now is the good time to buy a home, and 86% think this is not a good time to buy a home. The overall housing sentiment dropped to 56, down 4% from last month. As a result of continuously rising prices and borrowing costs, the housing market sentiment also shows that only 38% of the consumers feel that it will be easier to find a home over the next twelve months. 62% said it won’t be easier to find their dream house (-7% less than the previous month).
Is it a good time to sell a home in California?
According to the survey, close to two-thirds (61 percent) of Californians believe now is a good time to sell a home. That’s a decrease of 7% over the May 2022 poll. Less than half of the consumers (41%) who participated in the survey still feel that home prices will continue to rise in the 12 months. That’s a decrease of 8% from the previous month. Less than one-third of the people are optimistic about the economy’s recovery. Only 21% (-5% from last month) believe that economic conditions will improve in the state over the next 12 months while 79% still have a gloomy outlook.
Infographic Credits: CAR’s June 2022 Housing Sentiment Index
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.
Courtesy of Zillow.com
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.
Courtesy of Car.org
Will Housing Ever Get Cheaper 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.
Source: Q1 2022 Housing Affordability Index By C.A.R.
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.
California Housing Sales & Prices (Monthly)
Infographic Courtesy of CAR
Here are some of the key points of the California housing market report for June 2022, according to the July 18, 2022 release by C.A.R.
Existing-Home Sales
June’s sales pace was down 8.4 percent on a monthly basis from 376,560 in May.
It was down 20.9 percent from a year ago when 436,020 homes were sold on an annualized basis.
Year-to-date statewide home sales were down 10.9 percent in June.
At the regional level, all major regions experienced double-digit sales declines from last year.
With three of the five regions falling by more than 25 percent on a year-over-year basis.
Southern California had the biggest drop of all regions, with sales plunging 27.1 percent from a year ago.
The San Francisco Bay Area (-26.8 percent) had the second largest drop of all regions.
It was followed by the Central Coast (-26.3 percent), the Central Valley (-19.6 percent), and the Far North (-18.5 percent).
All but two counties tracked by C.A.R. posted sales drops in June from a year ago.
Of the 49 counties that experienced a sales decline, 48 of them fell by double-digits from last year.
36 California counties had a year-over-year sales plunge of more than 20 percent.
San Benito had the biggest sales drop from last June at -48.6 percent.
Glenn (22.2 percent) and Mendocino (17.2 percent) were the only counties with a sales gain from last year.
California Median Home Price
Median prices in all major regions continued to grow on a year-over-year basis.
The Central Coast leads the way at a 10.1 percent increase, followed by Central Valley (10.0 percent) and Southern California at 8.4 percent.
Nearly nine out of 10 California counties continued to record an increase in their median price from a year ago.
Santa Barbara had the largest year-over-year gain in its median price at 33.7 percent.
Seven counties posted a dip in median price from last year, with Amador leading the pack (-7.9 percent),
California Housing Supply
The overall supply conditions in California improved again in June, with the statewide unsold inventory index (UII) rising to the highest level in two years, at 2.5 months.
The improvement in the index was partly due to an increase in supply and partly due to a pullback in 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.
Total active listings experienced a gain of 64.4 percent in June, the largest year-over-year growth in at least the last 89 months.
Active listings in June also climbed to the highest level since November 2019.
Forty-six of the 51 counties increased in active listings on a year-over-year basis in June, compared to 44 counties in May.
Nine counties had triple-digit gains in properties for sale from last year, with Yolo leading the pack at 126.8 percent year-over-year.
Median Days & Sales Price to List Price Ratio
The median number of days required to sell a single-family home in California was 11 days in June and 8 days in June 2021.
C.A.R.’s statewide sales-price-to-list-price ratio was 101.3 percent in June 2022 and 104.1 percent in June 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.
The statewide average price per square foot for an existing single-family home remained elevated.
June’s price per square foot was $424, up from $391 in June a year ago.
These monthly and yearly trends numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller?
“California’s housing market continues to moderate from the frenzied levels seen in the past two years, which is creating favorable conditions for buyers who lost offers or sat out during the fiercely competitive market,” said C.A.R. President Otto Catrina, a Bay Area real estate broker and REALTOR®. “With interest rates moving sideways in recent weeks and fewer homes now selling above the listing price, prospective buyers have the rare opportunity to see more listings coming onto the market and face less competition that could force them to engage in a bidding war.”
Whether you’re looking to buy or sell, timing your local market is an important part of real estate investment. For sellers in the California housing market, it is a good time to sell. A low inventory would keep the prices from falling. The Sales Price to List Price ratio has been 101.3% in June 2022. A seller would always prefer this ratio to be close to 100% or higher. C.A.R.’s monthly Consumer Housing Sentiment Index dropped (-4%) from the previous month as consumers acknowledged the current market challenges and felt increasingly pessimistic about homebuying opportunities.
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.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
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