Did the California dream reach its end? Some experts say that Southern California housing prices will drop in the following months

By
Services for Real Estate Pros with Representative

With an average house price of over $800,000, California is one of the higher-valued real estate markets in the USA. 

California has been a real estate dream for a long time, with an operative job market, pleasant weather, fine sand beaches, and natural beauty. It’s a veritable paradise to live on Earth. For years in a row, it has been named the nation’s hottest real estate market. But the latest statistics and research show that this real-estate love affair is getting close to its end due to several factors. According to Realtor.com, California is no longer on the list of the Hottest Markets rankings. 

Many cannot believe that a destination listed among the first five in the top 20 hottest markets fell out of the rankings. What triggered Golden State’s downfall?

Why do people no longer find California a hot place to live?

People considering California their dream home have paid exorbitantly high prices for a while, but it looks like many have reached their breaking point and are starting to look towards other destinations. Real estate buyers have found themselves in a hard reality over the last few months, as they’re caught between the inflation directly impacting their income and growing mortgage rates. In the given context, they concluded that they needed to find a new paradise to live in, one where they don’t have to struggle to pay their bills. 

The COVID-19 pandemic has caused a spike in the number of people moving away from California, driven by a pricey cost of living and overpriced real estate. People are paying more for utility bills, gasoline, food, daycare, clothing, and all daily services while their paychecks fail to keep up with the inflation rate. However, for many moving to another state is challenging, considering the many benefits the Golden State offers. California is one of the few states in the USA that provides its residents with high quality of life, pleasant weather, numerous recreational options, easy access to healthy food, ample economic opportunities, and access to natural health treatments such as cannabis products. California is among the states where people can legally buy superior delta-8 THC gummies. Sadly, the spiraling costs of real estate are leading to impossible choices among homeowners who feel pressured to make the leap and seek housing in more affordable places.   

Why do people choose other destinations to buy houses?

If California isn’t as hot a real estate destination as it used to be, what is? It looks like people are heading east because the prices are more affordable. For example, the New England city of Manchester was listed as the No. 1 hottest market by Realtor.com. The East Coast has witnessed an influx of real estate buyers since the beginning of the pandemic, mainly because they can work remotely full-time and use their dollar to live in a place where they afford a more financially comfortable life. Low prices directly impacted the hottest real estate markets from Realtor’s top, but it’s crucial to highlight that we’re talking about relative affordability for a specific zone. 

California real estate market trends 

Starting in May 2022, the California housing market has shown signs of change. In May, the monthly average 30-year fixed mortgage rate was 5%, reaching the lowest level in years. Nonetheless, even in this context, the Golden State’s median real estate price spiked to a new all-time high of $898,980, surpassing the previous $884,890. Real estate specialists state that the record price directly results from sales, as the luxury market performs better than the other segments. 

- The present decline results from an increase in mortgage rates and limited supply

- The market registered a drop in the number of homes 

- Sales of real estate priced less than $500,000 and reached a new record low

- 15 counties in California experienced a new record median high in the spring 2022

Statistics show that the increase in real estate prices is slowing down, and the market might be leveling out soon. May’s average monthly price increase of 1.6% remained above the average of 1.1%. Even in the given situation, homes are sold fast in most areas, and the average number of days a house spends on the market in California is nine days. The appreciation impacts real estate prices, and higher quotes encourage homeowners to list their properties for sale. No matter that California is no longer everyone’s dream destination for a home, it remains a seller’s market, and prices continue to reach record-highs in all regions. The supply-demand imbalance triggers a spike in property prices. According to research, 69.9% of properties were sold above the asking price in May 2022. Also, new construction of homes finds it challenging to keep up with the demand, and all areas registered an increase in prices from 2021. Real estate supply has improved since May, but there still aren’t enough houses for sale to meet the demand. 

In May 2022, real estate sales in major regions dropped compared to the previous year, and four in five regions fell by double-digits on an annual basis. Prices increased in all Californian areas by 10%, and Southern and Far North California set new records. 

Should we expect to witness the California housing market crash in 2022?

Real market experts state that the market will continue to witness a very robust buyer demand in the following months, with a rapid price appreciation rate. However, California is no longer a dream location for homeowners since most people can no longer pay exorbitant prices and have reached their breaking point. Consumers no longer think this is a good time to buy a property, and some evidence shows that the inventory is slowly thawing. As a result of growing borrowing costs and home prices, people feel that they’ll find it challenging to purchase their dream home in California in 2022. 

The real estate market is transitioning toward a post-pandemic era, which might trigger several changes in buyers’ behavior. The California dream reaching its end is only one of the consequences of the pandemic. 

Comments (5)

Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

A correction is fine. Great information.  Thanks for sharing and enjoy your week!

Jul 21, 2022 06:59 AM
Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs

Good Morning. I was born in Pasadena. My parent bought there first hom ein Monterery Park in 1948 after I was born.....My mother and I Eric are below in Calif at end of 1948 or 49...

Jul 21, 2022 07:10 AM
Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH
CRS

Thanks for sharing Cynthia!!! Great information about California housing markets

People considering California their dream home have paid exorbitantly high prices for a while, but it looks like many have reached their breaking point and are starting to look towards other destinations. Real estate buyers have found themselves in a hard reality over the last few months, as they’re caught between the inflation directly impacting their income and growing mortgage rates.

Jul 21, 2022 07:10 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Cynthia and thanks for your information to share with us today in the Rain.  Make it a super day!

 

Jul 21, 2022 08:05 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Cymthia, do think we are already seeing corrections in many cities right now.

Jul 21, 2022 08:21 AM