We've heard a lot of predictions over the last couple of years about what the real estate market might do and what was going to happen with foreclosures. Luckily, some of the gloomiest predictions turned out to be wrong.
Turns out, the real estate market is thriving, thanks in part to changes in the marketplace that allow for people to live where they want, while working remotely for their jobs.
Plus, government assistance programs has slowed the projected increase in foreclosures, too, which has kept more people in their homes.
So, what can we actually expect for the California market in 2022? Will it grow, level out, or even drop? Is this a good time to buy, sell and invest?
We're going to share it all with you in today's blog post. But, keep in mind, predictions are just that - estimates based on market trends. At the end of the day, playing the market always has some risk, so always work with a reputable realtor who can help you make the right decision for you.
The California Real Estate Market: What To Expect
According to the California Association of Realtors (CAR), the market is expected to remain stable and solid, given the pandemic remains under control. Here are the key points from the CAR predictions:
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 forecast 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.
Interest rates are expected to go up to around 3.5 percent, which is still low by historical standards.
California Real Estate Predictions: What Does This Mean?
A lack of inventory 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.
Even though supply will not match demand, higher interest rates and other factors will likely curb median price growth.
Also, as remote work continues to trend, we will see people choosing to move to more affordable areas, which will keep prices in check and from rising too fast.
“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 level of homes available for sale,” said C.A.R. President Dave Walsh. “Homeownership aspirations remain strong and motivated buyers will have more inventory to choose from. They will also benefit from a favorable lending environment, with the average 30-year fixed rate mortgage remaining below 3.5 percent for most of next year.”
California Real Estate Interest Rate Predictions:
We have seen unprecedented lows in interest rates, which has really encouraged a lot of purchases and also home refinances to capture this while it lasts.
CAR does see interest rates increasing to 3.5 percent, up from 3.0 percent in 2021 and 3.1 percent in 2020, but will still be low by historical standards.
So, while this is an increase that might slow the crazy market of previous years, it is still a great time to jump in if you've had a big move or investment in mind.
California Real Estate Market Fine Print:
Of course, all of these predictions and forecasts are assuming that the pandemic situation is kept under control.
We've learned that we really can't know what the future has in store, but if global events continue to stabilize, we should see slight gains as the market begins to level out.
C.A.R. Vice President and Chief Economist Jordan Levine says, “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.
Are you looking to buy, sell or invest this year? What do your real estate goals look like? If you're looking for a great realtor in California - give us a call at 916.524.9733.
Thanks for reading!