California’s housing market will remain solid if the pandemic is kept under control, but structural challenges will likely persist into 2022. Supply constraints and higher home prices will bring California home sales down slightly this year, but transactions will still post their second highest level in the past five years, according to a housing and economic forecast by the CALIFORNIA ASSOCIATION OF REALTORS®.
C.A.R.’s “2022 California Housing Market Forecast” anticipates a decline in existing single-family home sales of 5.2 percent next year to reach 421,530 units, down from the preliminary 2021 sales figure of 444,520, but higher than the 411,870 homes sold in 2020.
The California median home price is forecast to rise 5.2 percent to $827,740 in 2022, and while an imbalance in demand and supply will continue to push up prices, higher interest rates will likely curb median price growth. Additionally, the report predicts that a shift in housing demand to more affordable areas — as the trend of remote working continues — will also keep prices in check and prevent the statewide median price from rising too fast in 2022.
A slight decline next year from the torrid sales pace of the past year-and-a-half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low supply of homes for sale. Motivated buyers will have more inventory to choose from, and they will benefit from a favorable lending environment, with the average 30-year fixed rate mortgage remaining below 4.0 percent for most of the year.
“Assuming the pandemic situation can be kept under control next year, the cyclical effects from the latest economic downturn will wane, and a strong recovery will follow,” said C.A.R. Vice President and Chief Economist Jordan Levine. “However, structural challenges will reassert themselves as the normalization of the market continues. Demand for homes will continue to outstrip available supply as the economy improves, resulting in higher home prices and slightly lower sales in 2022,” Levine continued.
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