Update on California Home Price Trends for Summer / Fall 2022

The median home price for the state of California recently rose above the $800,000 threshold for the first time ever. This is the result of double-digit annual price gains for both of the past two years. According to Zillow, California’s median home value rose by more than 20% in the past year alone.

But we might see a bit of a cooling trend through the second half of 2022 and into 2023, at least where prices are concerned. Higher housing costs could reduce demand among buyers, which in turn could lead to slower home-price growth.

Here are the latest data and trends relating to California home prices in 2022.

Median Home Price in California Exceeds $800,000

Earlier this month, the real estate data company Zillow reported that the median house value in California had surpassed the $800,000 threshold. This follows a year of explosive price growth in cities all across the U.S.

According to a statement on the company’s website:

The typical home value of homes in California is $800,172. This value is seasonally adjusted and only includes the middle price tier of homes. California home values have gone up 21.2% over the past year.

As mentioned in this quote, the median price is essentially the midpoint for the real estate market. This means half of all homes in California were priced above the $800,000 figure, while the other half were priced below it.

Of course, prices can vary greatly from one local real estate market to the next. The median price for the San Francisco Bay Area, for example, rose above $1.5 million earlier this year (another all-time high). And then we have Central Valley markets like Bakersfield, where the median value falls below $400,000. So there’s a broad spectrum statewide.

But overall, home prices in California have risen substantially over the past couple of years. This accounts for the $800,000 median figure mentioned earlier.

A Pandemic-Fueled Surge in Home Values

Believe it or night, the COVID pandemic actually accelerated home-price growth in California and nationwide. Indirectly at least. Specifically, the pandemic led to a surge in home purchases the depleted already-low supply levels within the housing market.

The chart above shows the statewide median home value for California, going back ten years. Notice how the trend line gets steeper over on the right, starting in late 2020. That corresponds to the surge in buying activity mentioned above.

Will Home-Price Growth Slow in 2023?

Recent housing market forecasts predict that we’ll see slower home-price growth through the rest of this year and into 2023. That’s the outlook for California and for the nation as a whole.

Back in April, for example, researchers from Freddie Mac predicted that home prices nationwide would rise by 10.4% during 2022. That’s down from an actual gain of 17.8% during 2021. Looking forward, they predicted that house values in the U.S. would rise by a more modest 5% in 2023.

Forecasts for California home prices have shown similar (but slightly higher) long-range predictions. The general consensus seems to be that house values will rise more slowly over the coming months. In other words, the real estate market might be inching its way back to more “normal” conditions.

But slower growth doesn’t mean no growth. In fact, house values in most California cities will probably continue to climb for the foreseeable future. That’s partly due to an ongoing shortage of supply, relative to demand.

What Does It Mean for Buyers?

The bottom line for home buyers is that housing costs have risen over the past couple of years. California home prices hit another all-time high this month, with the statewide median climbing above $800,000.

It seems likely that house values in California could rise more slowly in the coming months, due to inventory growth and other factors. But a sense of urgency is probably still warranted, for home buyers. If prices continue to rise (even at a slower pace), it could reduce your buying power the longer you wait.

The Importance of Mortgage Financing

With California home prices hitting a record high, mortgage financing is more important than ever. Most home buyers in the state rely on mortgage loans to make a purchase, which is understandable given our pricey real estate markets.

Don’t let today’s high home prices deter you from pursuing your mortgage options. That dream of homeownership might be more within reach than you realize.

Bridgepoint Funding offers a broad range of mortgage options for California home buyers, many of which have flexible qualification criteria. So don’t hesitate to reach out with your financing questions!