California is America’s most populated state, with a population greater than many countries. With that comes a massively powerful economy, which on its own would be the world’s fifth-largest economy, according to CBS. This means that demand for homes in California is high, as the countless job opportunities combined with the warm weather, gorgeous natural scenery, and massive stretch of Pacific coastline make it arguably the most desirable state to live in America.
The demand for homes in California has always been significant, and for that reason, it is the state on the mainland United States with the highest average home value. With hugely expensive markets in Northern and Southern California, there aren’t many places in the state where a home comes cheap. 2021 was a hectic year for the real estate market when low inventory and high demand drove prices up across the country.
As California moves from the rainy and drab winter into the hot and sunny California spring and summer, let’s look at how the real estate market has performed and how it is likely to continue to perform across the state.
Northern California Trends
Northern California is home to the Bay Area and Silicon Valley, where much of the state’s wealth is situated. It is also one of the most expensive markets on the planet. Throughout the pandemic, with the increasing popularity of work from home, the narrative was that people would exit this area in droves due to the high cost of living and the reduced need to be situated in the Bay Area for work. This was never the case and still isn’t.
In December of 2021, the median sales price of a home in the nine Northern California counties that constitute the Bay Area was a whopping $1,200,000. This was a massive change of 13% year-over-year from December 2020, showing that buyers are still willing to pay a premium for the increased opportunity and access that comes from living in the Bay Area. While sales were down in the Bay Area, this has less to do with a lack of buyer interest and more to do with the inventory reaching a month’s supply of 0.8, an incredibly low number.
The increase in competition for a home combined with the low-interest rates is driving home prices up across the region. Some of the counties in Northern California had massive price surges, including Napa and Santa Clara, which have price growth of 24.7% and 26.5% respectively. With inventory remaining low, expect prices in Northern California to climb.
Southern California Trends
Southern California is where most Californians reside, a warmer stretch of land known for sandy beaches and deserts. Southern California has diverse regions ranging from smaller towns and cities with affordable real estate to the more expensive and established markets of Los Angeles, San Diego, and Orange County.
According to Norada, Southern California had a year-over-year price gain of 15.4% in December of 2021, bringing the median cost of a home in the area to $749,000. This was the second-largest growth percentage of any of the regions in California, behind the Far North. One of the reasons for this is the sustained success of the Los Angeles Metro Area’s real estate market. The Los Angeles Metro Area is home to nearly 19 million people, so as it goes, so goes Southern California.
Homes in the LA metro area have seen their value rise extremely consistently, although sales numbers are dipping. According to a Norada report, the Los Angeles Metro Area declined 10.6% in sales of existing single-family homes in December 2021 compared to December 2020. Despite this, the median price reached $826,000, which was a 16.7% increase year over year.
Months supply of inventory isn’t strong across Southern California right now. For the whole region, it is 1.2 months, which is the same number as the Los Angeles Metro Area. In other parts of the region, it is worse. Orange County and San Diego County both have one month of inventory remaining, making these competitive markets all the more competitive. While sales have slowed down, it is likely only a seasonal cooling, and the market will still remain hot. Southern California is one of the most sought-after real estate markets in the country, and even with high prices and low inventory, that will continue through spring 2022.
