By
Hannah Griffith
|
8 min read
|
October 18, 2022

California Housing Market Report 2022

california housing market

What’s the California Housing Market Like?

The past 12 months have been a rollercoaster ride for the California Real Estate market. Currently, the median price for a home in the state is $763,000, which is 2% over the same month of 2021, when the median price was at $748,000. The peak of the past 12 months was $844,000, which puts the current median price at just 10% below the peak in April 2022. California housing predictions are at the top of people’s minds right now. Whether you are thinking about buying or selling, the conversation about housing prices is a hot topic right now.

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How Does The California Housing Market Compare to the National Housing Market?

The California housing market is similar to other markets because supply and demand drive housing prices. California is also impacted by mortgage rates, perhaps even more than some states where home prices are lower.

What is rather unique about California is its unique appeal as a great place to live. The state’s popularity reflects its population size of nearly 40 Million residents, the largest in the nation. 

With so many residents, it is no surprise that the demand for houses is far greater than the current supply of homes. This is the one factor that at this time keeps housing prices rising year over year in the state.

California Metro Areas With the Hottest Housing Markets 

California housing markets are all in high demand. However, there are some markets that stand out for various reasons. We are going to look at two market factors that indicate where the market is hot; the Percentage of homes sold over the listing price and median days on the market.

Top 5 metro areas where houses sell the fastest (smallest Median Days On the Market)

Visalia- 15 days (MDOM)

Visalia is located in the central valley of the state. It is primarily an agricultural community in Tulare County. The median housing price is $365,000, which is $35,000 below the national average. Year over year, the change in home prices was just .10% (one-tenth of one percent), which could be why the market is very active since that price is practically half of the state’s median home price for the same period.

Hanford-17 days (MDOM)

Hanford metro area is also in the southern San Joaquin valley. The Median sale price of homes in the area is $315,000, which is 5% over last year’s median housing price. The area’s median home price is $85,000 below the national average, which is unusual for the state of California, where most homes sell above the national average. Many homes in the city get multiple offers, and they usually sell for about 2% above the list price as of August 2022.

Fresno -17 days (MDOM)

Fresno is another metro area located in California’s central valley. The median home price in the Fresno area is $394,000, up 6.4% over last year. It is considered a hot and competitive market where homes sell on average 2% above the list price.

Eureka-19 days (MDOM)

Eureka is a seaside community in northern California.  The median price for homes in Eureka metro area is $468,000, which is a bargain for homes in a coastal area if you compare Southern California or the bay area, where median prices for coastal real estate are well over $1,000,000. This year’s median price in Eureka is 13% over last year.

Oakland-21  days (MDOM)

Oakland is the largest city in the East Bay region of the San Francisco Bay Area and the busiest port in Northern California.

The median home price in the Oakland Metro area was $910,000, which was about 3% lower year over year. The current market sells at about 2% above the list price with multiple offers.

Top 5 cities where houses sell above the asking price

Los Angeles- 46% of homes sell above the asking price

The Los Angeles Metro area of California, one of the most well-known destinations, is a sizzling hot market. The median home price in the area is $845,000, with nearly half of homes selling above the asking price. 

Oakland- 47% of homes sell above the asking price

The median home price in the Oakland Metro area was $910,000, which was about 3% lower year over year. The current market sells at about 2% above the list price with multiple offers.

San Francisco- 48% of homes sell above the asking price

The median home price is $1,510,000, which is 7.2% lower than last year. There is currently a 2 months supply. The median days on the market is 28, which is roughly twice as long as last year. The inventory of homes for sale in Aug of 2022 was 1,040, which was 44% less than the previous year.

Even after considering the drop in median home price and the increasing number of days on the market, the San Franciso area is a very hot market due to the massive demand for homes and the shrinking supply.

Eureka- 45% of homes sell above the asking price

The median price for homes in Eureka metro area is $468,000, which is 13% over last year. Eureka is a bit of a hidden gem on the California Coast. Homes by the sea in California usually start at over $1M and go into the multiple millions, so Eureka is quite a steal. This area is bound to blow up with the state's high demand and housing shortages.

Santa Rosa- 45% of homes sell above the asking price

Santa Rosa metro area is in wine country California. The median home price in the metro area was $793,000 as of Aug 2022, which is 5.7% over last year. The median days on the market is 35, with about 2 months' supply of inventory.

California Housing Market Predictions for 2022

All economic indicators at the moment point in the downward direction for the California housing market. The number of sales has been declining month over month for the past five months at a fast pace. Mortgage rates have also shrunk affordability to just 19% in California, further compounding the problem.

The California Association of REALTORs’ most recent housing prediction report points to a decline of 8.8% in housing prices for 2023. Considering they project an increase of 7.2 increase in 2022, that is a significant reversal. 

Higher Mortgage Rates Could Slow Price Growth in California

How will interest rates affect the housing market? We are already experiencing the impact of rising interest rates. Price growth in California has been on a decline for several months. If we look at both month over month and year over year, the trend is down. Whereas we used to see double digits appreciation in home prices year over year, as of Aug 2022, the latest data available, we are down to just a 1.4% increase in price from last year. This does not take into account the most recent mortgage rate increases, so appreciation is bound to weaken further for the rest of 2022 and into 2023. 

As of mid-October 2022, the 30-year fixed rate mortgage is above 7% on average. That represents a 133% increase in mortgage rates in less than nine months. The Feds are on a “no holds barred” approach to curve inflation, and interest rate hikes have become the norm over the last several Fed meetings. Unfortunately, it seems that rate hikes are not done.. We anticipate at least another 2 or 3 rate increases before the year ends. 

Key Market Stats for the California Housing Market:

As of the latest compiled housing report with data through Aug 2022.

Median home price $839,460 - 1.4% up from 2021

Existing home sales: 313,540 - a 24% drop from 2021

Months supply of inventory: 2.9% - up 52.6% from 2021

Affordability index: 16% - down 7% from last year.

Mortgage rates as of Oct 13th are at 7.2%

Historic price changes & affordability

The California housing market has seen explosive appreciation for years. The last 3 years have been particularly favorable to homeowners as they saw their homes appreciate by an average of 13.6% since Jan 2020.  During these last 33 months, we have seen home prices jump as high as 39% year over year, as happened in May 2021.

The steep rise in home prices and mortgage rates has led to the lowest affordability in California in 15 years. As of the 2nd quarter of 2022, only  16% of households in the state could afford to buy a median-priced home. In order to make the purchase, the buyer would have to make a minimum of $199,000 a year. Interestingly enough, last year, at the same time, they would only have had to make $150,800 a year. 

We know that the average person does not get a raise of 25% yearly, so we can see why affordability shrunk as it did. And even more important is that the calculated affordability rate was done when rates were in the low 5% range; as mentioned earlier, rates are now 50% higher, hovering at 7.2%.  Home affordability will shrink even further when the next report comes out.

Key Takeaways

  1. The housing market is clearly shifting, and the New York housing market is going to follow the trend as the rest of the nation. The good news is that many metro areas are not considered to be overvalued in New York. The price of homes relative to the annual income in the area is in line with a sensible ratio that indicates the fundamentals of value are still good for those areas.
  1. Real Estate markets are highly local, and even within the same state, there will be areas that are projected to be hit hard by the market shift and others will fare better. Look for areas where the market has not jumped in values over the last three years, and there are plenty of those in the state of New York.
  2. Timing the market for buying or selling is a big gamble. If it makes sense for you to buy, go ahead and buy a home. For sellers, if you have to sell in the next 12-24 months, you may want to consider doing it sooner than later, especially if you are in an area that may be considered overvalued and has a high potential for house prices to drop.

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