California Home Equity Levels Are Up Sharply, Heading Into 2022

Home prices across California have risen substantially over the past few years, and during 2021 in particular. As a result, home equity levels among many California homeowners are higher now than than they were a year ago. Among other things, this could put some homeowners in a good position to sell or refinance in 2022.

Big Gains for California House Prices

Here’s something that probably won’t surprise you. Home prices in California rose sharply during 2021, reaching record highs in many cities across the state.

According to data provided by Zillow, the statewide median home value rose by around 20% over the past 12 months. That’s an unprecedented level of growth for our state. Never before have we seen a 20% year-over-year increase in home prices (at least not to our knowledge).

According to a recent report from the California Association of REALTORS® (C.A.R.), the median home price in the state is projected to reach $793,100 by the end of this year. Additional, but possibly more modest, gains are expected in 2022 as well.

The bottom line here is that house values in California have risen sharply over the past year or so, bringing home equity levels along with them.

So what does all of this mean for homeowners? Among other things, it means that the average homeowner in California has more home equity today than they did a year ago. This is true even for those who purchased within the past couple of years.

Home Equity Levels Way Up, Going Into 2022

The December 2021 C.A.R. report mentioned above showed big gains in home equity among California homeowners. And those who have sold their homes in recent months have made some pretty big profits.

To quote the C.A.R. report:

Home sellers typically pocketed a net cash gain of $322,500 from the sale of their homes [in 2021] — a 96 percent increase from the purchase price. Less than one percent (0.7 percent) of all sellers had a net loss from their home sale in 2021, which is well below the long-run average of 9.9 percent going back to 1994.

California home sellers who have occupied their houses for less than five years earned a 33% profit when selling, the report showed. Homeowners who lived in their homes for five years or more pocketed a 135% sale profit, on average.

The level of equity growth that has occurred over the past 12 to 15 months is like nothing we’ve ever seen before. These trends have certainly benefits homeowners across the Golden State.

Big Opportunities for Selling or Refinancing

With California home equity levels rising into 2022, many homeowners will be in a good position to either sell or refinance their properties.

As we’ve seen from the C.A.R. statistics above, a lot of California homeowners are making big profits from their sales. These opportunities will carry over into 2022 as well, since home prices (and equity levels) are expected to continue climbing next year.

But what about refinancing? Will 2022 be a good year to refinance a home in California?

We are preparing a separate, more detailed report to address that question. The short version is that many homeowners in California are still in a good position to refinance. But if mortgage rates creep upward in 2022, as predicted, the window of opportunity could start to close.

When this article was published in mid-December, the average rate for a 30-year fixed mortgage loan was hovering around 3.1%. That’s based on the weekly nationwide survey conducted by Freddie Mac.

If your existing mortgage rate is higher than that, you might be in a good position to refinance in 2022. Rising home equity levels in California will only help your cause.

Related: Should I refinance my home in 2022?

However, most predictions for 2022 suggest that interest rates will inch upward over the coming months. So if you’re planning to tap into your home equity with a California refinance loan, you might want to consider doing it sooner rather than later.

Granted, mortgage predictions are far from certain. They’re the equivalent of an educated guess. Even so, it’s something to consider if a refi is in your future.

Have Mortgage Financing Questions?

We are located in the Bay Area but service the entire state of California. If you have questions about refinancing your existing mortgage loan, please contact our staff. We can review your current situation to see if a refinance loan makes sense in your particular situation.

With California home equity levels rising at a record pace, 2022 might be a good year to refinance your home. Please contact us with any questions you have or to apply for a mortgage loan.