Lately, we've been blogging about some of the cities within the East Bay region, and…
Earlier today, the California Association of REALTORS® (C.A.R.) published their 2022 housing market forecast for California. They publish a long-range forecast every year, with predictions for home prices, sales, and other real estate metrics.
In their 2022 California housing market forecast, the industry group predicted we could see a slight slowdown next year in terms of home sales. Emphasis on the word slight.
C.A.R. researchers also expect home prices to rise more slowly next year. A lot more slowly, in fact. That would be a positive trend, overall. The rapid price growth of the past two years (and especially 2021) have worsened affordability problems across the state. A return to more “normal” home-price appreciation would be a welcomed trend at this point.
Those are the key takeaways from their California housing market forecast for 2022. Now, let’s take a deeper dive into the latest real estate trends and predictions for the Golden State:
California Housing Market Forecast for 2022
On October 7, the state’s Realtor association published its forecast for the California housing market in 2022. Here are some key highlights from that report:
- C.A.R. expects home sales to decline next year, compared to this year’s pace. In 2022, they predict that existing single-family home sales will total 416,800. That would be a 5.2% decline from this year’s projection of 439,800 sales.
- The median home price in California is expected to rise by 5.2% in 2022, landing at $834,400 by year’s end. That would be a huge downshift from this year. During 2021, the statewide median price is projected to rise by a whopping 20.3%.
- Statewide, housing affordability is predicted to fall to 23% next year, down from a projected 26% in 2021. This is a byproduct of the ongoing home-price gains mentioned above.
Granted, this is just a forecast for the California real estate market in 2022. It’s essentially an educated guess based on current trends within the housing market and broader economy. So we probably shouldn’t get hung up on the exact numbers being projected here.
The takeaway is that the California real estate scene is expected to cool down a bit next year, in terms of home sales. More importantly, C.A.R.’s analysts predict that house values will rise much more slowly next year than what we’ve seen in 2021.
A Better Year for Home Buyers?
Both of these would be positive trends from a home buyer’s perspective. A slower sales pace could ease the level of competition among buyers next year. And smaller home-price gains would help slow the decline of housing affordability across the state.
According to C.A.R. President Dave Walsh:
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.
He added that home buyers should have “more inventory to choose from” in 2022, which would be a refreshing change of pace. Numerous reports have shown an increase in the number of homes for sale across California. So those who buy in 2022 could have an easier time finding a suitable property within budget.
It’s Still a Competitive Real Estate Scene
C.A.R.’s California housing market forecast for 2022 suggests we could see a less competitive real estate scene next year. But that doesn’t necessarily mean we’ll have a buyer’s market anytime soon.
Due to tight inventory conditions and steady demand, most local housing markets across the state will continue to favor sellers for the foreseeable future. Even so, things are getting better for buyers.
The California housing market for 2022 predicted that sales transactions next year will “still post their second highest level in the past five years.” So while we could see a bit of a slowdown compared to 2021’s frenzied pace, the 2022 real state scene will probably remain highly competitive.
Translation: We’re moving toward “normal.” But we’re not there yet.
Here’s a table that highlights some of the trends and predictions mentioned above. This table was adapted from the news release announcing the 2022 California housing market forecast. The 2020 figures have been included for perspective. (Note: p = projected, and f = forecast.)
|Trends||2020||2021 (p)||2022 (f)|
|Existing Single-Family Home Sales||411,900||439,800||416,800|
|% Change in Sales||3.50%||6.80%||-5.20%|
|% Change in Price||11.30%||20.30%||5.20%|
|Housing Affordability Index||32%||26%||23%|
The most notable predictions from this table have to do with sales and price growth. The C.A.R. housing forecast for California predicts that sales will decline by more than 5% in 2022, compared to this year. They also expect to see a significant slowdown in the rate of home-price appreciation (5% growth in 2022, versus 20% in 2021).
All in all, this report offers some good news for home buyers who are planning to make a purchase next year. The real estate market might be less “frenzied” next year, and price growth could slow down. Additionally, inventory gains could make the house-hunting process a bit easier for buyers.
Disclaimer: This report contains predictions and forecast for the California housing market in 2022. Those views were provided by third parties not associated with our company. Real estate and economic predictions are the equivalent of an educated guess and should be treated as such.