California Home Sales to Dip 14%, Prices to Rise 10% in 2022

The cooldown in California’s housing market continued in June as the market experienced its biggest dip in sales of existing homes since May 2020, according to a new report from the California Association of Realtors.

Sales of existing, single-family homes in California totaled 344,970 in June on a seasonally adjusted annualized rate, down 8.4% from May and down 20.9% since June 2021, when more than 436K homes were sold, CAR said. Year-to-date statewide homes sales were down 10.9% in June.

The statewide median home price in California dipped 4% in June to a still stratospheric $893,790, with fewer homes selling above listing prices. According to CAR’s report, mortgage payment growth in California decelerated in June for the first time in 10 months.

Based on its latest monthly report, CAR has revised its 2022 housing forecast for California: the association now projects a 14.4% decline from the 444,520 existing single-family homes sold in 2021, which would make the 2022 total about $380K. In October, CAR projected that sales would total 416K this year.

Despite what it expects to be a “more moderate growth rate” for home prices in California in H2 2022, CAR is projecting that the Golden State’s median home price will increase 9.7% to $863,390 in 2022, up from its October projection of $787K.

CAR also is projecting the average 30-year fixed mortgage interest rate to rise in CA to a range of between 6.25% and 6.5% by the end of 2022 and average 5.2% for the year.

“Excluding the three-month pandemic lockdown period in 2020, June’s sales level was the lowest since April 2008. Pending sales data also suggests we can expect additional retreating in the coming months,” said Jordan Levine, CAR VP and chief economist, in a statement.

“With inflation remaining high and interest rates expected to climb further in the coming months, the market will normalize further in the second half of the year with softer sales and more moderate price growth,” Levine said.

CAR said the slight decline in the state’s median home price in June, which was still 5.4% higher than the $820K median price recorded in June 2021, a moderation that was partly due to a change in the mix of sales last month as the high-end market—in California these means homes sold for well over $1M—started pulling back.

After increasing for four consecutive months, the share of million-dollar home sales dipped as sales in the higher-priced segment dropped 8.3% compared to May. The decline was more pronounced for sales of homes priced $2M and above, which dropped 17.9 percent compared to May.

The plunge in sales of pricey homes was offset somewhat by a 2.1 increase on a month-to-month basis of sales in the sub-$500K market.

“More [price] moderation will likely come in July as sharp declines in pending sales in the upper-price segments suggests a drag on the statewide median price in upcoming months,” CAR’s report said.

CAR President Otto Catrina, a Bay Area real estate broker, said the cooldown in what he termed the housing “frenzy” in California during the past two years will create more favorable conditions for buyers in coming months.

“California’s housing market continues to moderate from the frenzied levels seen in the past two years, which is creating favorable conditions for buyers who lost offers or sate out during the fiercely competitive market,” Catrina said in the CAR’s release announcing the June data.

“With interest rates moving sideways in recent weeks and fewer homes now selling above listing price, prospective buyers have the rare opportunity to see more listings coming onto the market and face less competition that could force them to engage in a bidding war,” Catrina said.