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Outlook: Will California Be a Buyer’s or Seller’s Market in 2022?

Will California be a buyer’s or seller’s real estate market in 2022?

After a whirlwind year for the housing market in 2021, a lot of folks are now wondering what things will be like over the coming year. One common question among home buyers and sellers alike is: Will 2022 bring a buyer’s or seller’s market for California?

The short answer is that most cities across the state will probably continue to favor sellers over buyers — for the foreseeable future. That’s mainly due to an ongoing shortage of inventory within the real estate market.

But conditions can vary from one city or region to the next. So you’ll want to conduct some localized research to find out where you stand.

Definition of Buyers’ and Sellers’ Markets

In housing terms, a buyers’ market occurs when there are (A) plenty of homes available, but (B) not enough qualified buyers to “absorb” them all. In other words, housing supply is high while demand is low.

Under such conditions, homes tend to take longer to sell, and homeowners often have to reduce their asking prices to attract buyers. Sellers have to take whatever they can get, for the most part.

A sellers’ market is the exact opposite. This scenario occurs when there are few properties listed for sale, but plenty of buyers ready to purchase. In other words, supply is low but demand is high.

In these situations, buyers have to fiercely compete with one another for a limited number of homes. Multiple offers are common, and they often turn into bidding wars.

But those are the two extremes. There’s a wide swath of “middle ground” here as well. In some cases, real estate supply and demand are more balanced. So the market doesn’t really favor one party over the other. There tends to be more negotiating in this scenario, because the buyer and seller have equal leverage.

So, how do you know whether you’re in a buyers’ or sellers’ market? There are several ways to gain this kind of insight.

  • Read your local newspaper. Home prices and housing markets are always a hot topic. So your local news is bound to be watching it closely. Look for stories published within the last three months or so, since real estate conditions change over time.
  • Use the Internet. Do a Google News search for your city’s name, followed by the phrase “housing market” or “home prices.”
  • Talk to a real estate agent. If anyone is in a position to make the call between a buyers’ market or sellers’ market in California cities, it’s an experienced agent. They can be a great source of information.
  • Seek out friends, family members or coworkers who have either bought or sold a home in the area recently. Ask them about their experience. They should be intimately familiar with the current state of your local housing market.

As mentioned above, it’s important to focus on local trends. The national media tend to lump all real estate markets together into one big bucket. In truth, there is no such thing as “the” housing market. Conditions can vary greatly from one region to the next.

What Will California’s Housing Market Be Like in 2022?

Getting back to the question at hand: Will California experience a buyer’s or seller’s market in 2022.

The most likely scenario based on current real estate trends is this: Most cities across California will still have seller’s market conditions in 2022. But they might become a bit more “buyer-friendly” over the coming months.

While the lopsided supply-and-demand situation will continue to favor sellers, home buyers might get a break in terms of the overall pace of the real estate market. Inventory levels could rise in 2022, as well, and that would be a much-needed improvement over current conditions.

According to a 2022 housing market forecast from the California Association of REALTORS:

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 … motivated buyers will have more inventory to choose from.

The bottom line to all of this is that the 2022 real estate market in California could resemble what we’ve seen in 2021. But in some areas, the level of competition among buyers could start to ease next year. Inventory growth could also benefit home buyers  in 2022.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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