California Housing Market: Prices | Trends | Forecasts 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. While January 2022 marked the first time since July 2020 that the state’s median price did not increase by double digits on an annual basis, the statewide median price is expected to edge higher in the coming months as the market enters the spring homebuying season.

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.

California Housing Market Report (May)

California housing market started showing signs of a market shift in May 2022. In May, the monthly average 30-year fixed mortgage rate reached 5 percent for the first time since April 2010, resulting in the lowest level of sales since June 2020 and the greatest year-over-year fall in five months, according to C.A.R.

However, California’s median home price increased to a new all-time high of $898,980 in May, exceeding the previous record of $884,890 set in April and breaking the $800,000 barrier for the third time in six months, according to the California Association of Realtors®. May’s median price was 1.6 percent higher than April’s and 9.9 percent higher than May 2021’s median price of $818,260. This record price gain is partly due to the sales mix since the luxury market continues to outperform the more cheap market segments.

• Forty-five out of 51 counties tracked by C.A.R. increased in their median prices in May.
• 15 counties in California set new record median highs in May.
• 31 of them rising 10 percent or more from a year ago.
• Marin had the biggest year-over-year gain in median price at 28.7 percent.
• The percentage of million-dollar house sales grew for the fourth consecutive month and reached a record high of 35.3% in May;
• Sales of homes priced below $500,000 fell again and to a record low.
• May’s sales rate was down 9.8 percent on a monthly basis from April’s 419,040.
• It was also down 15.2 percent from a year earlier when an annualized 445,660 houses were sold.
• The number of homes sold fell below the 400,000 mark for the first time since June of 2020.
• In contrast to the causes of the sales fall two years before, which were public health concerns and market uncertainties, the near double-digit decline this time was caused by a limited supply and an increase in mortgage rates.

The monthly increase in home prices looks to be slowing, suggesting a potential leveling out. May’s median price rise of 1.6% month-to-month was still above the long-term average of 1.1% between April and May for the previous 43 years. The statewide median sales-price-to-list-price ratio remained above 100 percent, at 103.4 and about 69.6 percent still sold above the asking price in May, which was less than the previous month.

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 9 days in May, two days less than May 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 May. Nearly 69.6% of homes sold above the asking price in May 2022. New construction can’t keep up with demand in the California housing market. Every major region saw home prices continuing to increase from last year as buyers competed amid a shortage of homes for sale. There is an increase in demand leading to bidding wars and subsequent higher selling prices.

The overall supply condition in California improved further in May but there aren’t enough homes listed for sale to satisfy the demand from buyers. The Unsold Inventory Index (UII) climbed back above 2 months for the first time in three 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 in May also climbed to the highest level since July 2020 and had a month-to-month increase of 26.4 percent from April.

In May 2022, at the regional level, home sales in all major California regions declined from a year ago, with four of the five regions falling by double-digits on a year-over-year basis. Home prices rose in all major California regions by more than 10 percent, with the Far North and Southern California setting new record medians in May.

• The San Francisco Bay Area had a year-over-year price gain of 12.3 percent, with the median price being $1,505,000.
• The Central Coast had a year-over-year price gain of 10.6 percent, with the median price being $995,000.
• Southern California had a year-over-year price gain of 11.9 percent, with the median price being $841,920.
• The Central Valley had a year-over-year price gain of 12.4 percent, with the median price being $500,000.
• The Far North had the highest year-over-year gain of 16.4 percent, with the median price being $425,000.
• The Los Angeles Metro Area had a year-over-year price gain of 10.7 percent, with the median price being $802,780.

Will the California Housing Market Crash in 2022?

According to most experts, the market will continue to see very robust buyer demand and a rapid 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 this time in May.

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 May 2022, the overall housing sentiment index reached 56 (down 9% 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 13% in May. 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 closed sales and C.A.R. is still forecasting at least 10% growth in home sales this year. Here’s what consumers feel at this time.

Is it a good time to buy a home in California?

C.A.R.’s monthly Consumer Housing Sentiment Index for May 2022 found that only 13% of consumers believe that now is the good time to buy a home, and 87% think this is not a good time to buy a home. The overall housing sentiment dropped to 56, down 9% from last month. As a result of continuously rising prices and borrowing costs, the housing market sentiment also shows that only 17% of the consumers feel that it will be easier to find a home over the next twelve months. 83% said it won’t be easier to find their dream house (+10% more than the previous month).

Is it a good time to sell a home in California?

According to the survey, more than two-thirds (68 percent) of Californians believe now is a good time to sell a home. That’s an increase of +6% over the April 2022 poll. Nearly half of the consumers (49%) who participated in the survey still feel that home prices will continue to rise in the 12 months. That’s a decrease of 11% from the previous month. Less than one-third of the people are optimistic about the economy’s recovery. Only 26% (-2% from last month) believe that economic conditions will improve in the state over the next 12 months while 74% still have a gloomy outlook.

Will Housing Become Less Affordable 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.

California Housing Market Forecast 2022-2023

Let us look at the price trends recorded by Zillow over the past few years. Since the last decade (June 2012), California home values have appreciated by nearly 160.6% — 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 $800,172. It indicates that 50 percent of all housing stock in the area is worth more than $800,172 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes).

In May 2021, the typical value of homes in California was around $659,000. Home values have gone up 21.2% over the last twelve months. 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 a rundown of the forecast released last year by CAR 

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.