Note: This story was originally posted by Bankrate.com by TJ Porter & Michele Petry on January 18, 2023.
All across the nation, 2022 was a turbulent year for the housing market. Mortgage rates more than doubled without a corresponding decrease in housing prices, leaving homes unaffordable for many Americans.
California is one of the most populous and largest states in the country, and it’s also one of the most expensive. If you live in the Golden State, or are hoping to move there, you might be wondering how the real estate market in the state has fared over the past year. Let’s take a closer look at the California housing market.
California housing market overview
This state has a highly diverse population and an equally diverse real estate market. Trends may vary widely in major cities — especially in San Francisco and other pricey Bay Area towns — compared to other parts of the state.
While that makes it hard to generalize about the state overall, California is certainly one of the most expensive places to live in the United States. It is home to three of Bankrate’s top five most expensive places to buy a home, and most necessities are costlier than national averages. Put simply: California’s cost of living is high. But you pay for quality, and the state has many highly appealing places to live, including popular beachside cities like San Diego and the movie-star allure of Los Angeles.
California housing market trends and stats
- Overall, homes in California are slightly less expensive than they were one year ago — but only very slightly. According to data from the California Association of Realtors (CAR), the median single family home sold for $777,500 in November 2022, compared to $782,480 in November 2021. Today’s significantly higher interest rates make that already-high price feel even less affordable.
- This does not hold true across all areas of the state. For example, Fresno, Los Angeles and Orange County saw equally slight increases year-over-year, while the wine-country regions of Napa and Sonoma saw more significant increases.
- Homes are also taking longer to sell, CAR reports. In October 2021, homes spent an average of 11 days on the market before selling. A year later, that number had more than doubled to 23 days on the market.
- According to CoreLogic’s ClosingCorp, closing costs in California averaged just under $8,000 in 2021.
Should you buy or sell in the California housing market?
Deciding whether now is the time to buy or sell requires something of a crystal ball, especially with increasing worries about the economy. Here are a few things buyers and sellers should consider:
If you’re a home seller
If you’re looking to sell your California home, there’s a major factor working against you: high interest rates. As of mid-January 2023, the current rate for a 30-year-fixed mortgage in the state was 6.47 percent. That makes mortgage payments significantly less affordable than they were back when the going rate was closer to 3 percent — which means fewer people who can afford to buy your home. And if rates continue to increase, there’s a good chance you’ll have to settle for a lower price for your home. Make sure you have a good understanding of what your home is worth before you put it on the market.
If you’re a homebuyer
On the other hand, if you’re looking to buy a home in California, you have a variety of factors to consider. If mortgage rates continue to rise, that will lead to higher monthly payments. However, rising rates could cause home prices to fall, which may help balance the higher cost of financing.
In addition, there is the ongoing fear of a possible recession. If that comes to pass, home prices could fall. However, many people might find themselves out of a job or short on income, leaving them unable to buy a home.
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