Overview of the Real Estate Market in California

The real estate market in California is pretty dynamic and subject to changes depending upon the sensitivity of the economic market just like any other real estate industry. 

The hot question in the picture is how is the real estate market trend in California? To answer that question, and to get an overview of the market currently, it is seen that very few properties are coming in through the sales pipeline. The realtor sentiment is eroded as there is slow economic growth and less real estate demand in the market.

However, it is expected to grow in 2024 according to the California Association of Realtors’s monthly Market brief.

A Comprehensive Overview of the Housing Market in California

What is the California housing market?

To understand about the California housing market, it is important to first study the real estate trends in the state over the past several years. 

When talking about real estate trends in this state, it is safe to mention that it has experienced a very dynamic and often competitive real estate market. This market is characterized by high demand for housing while there is limited housing supply along with fluctuating home prices. This data has been critically analyzed throughout the last couple of years.

The major metropolitan cities like San Francisco, Los Angeles and San Diego are known for their competitive and expensive housing markets in the state of California as well as in the whole of the United States of America.

Importance of understanding California housing market trends

The real estate industry is connected to various economic sectors and affects various factors that are running in the market. The situation of housing markets and understanding its trends is important because it affects various stakeholders such as individual homebuyers, businesses and businessmen, policymakers, the Government, and investors.

Here, a quick word is needed about salespersons, the role they play in the California real estate market, and how they get a California real estate license. 

Real estate agents in California, as in anywhere else, facilitate property transactions between buyers and sellers. They are well-versed in all aspects of the market, having gone through in-depth CA real estate courses. Most critically, an online California real estate course from a state-approved provider gives real estate agents the required knowledge base to rise quickly in the profession. 

Now, let us come back to the topic on hand, the California housing market.    

Click here to learn about how California housing market trends affect the stakeholders individually:

1. Home buyers and sellers

By keeping a tab on the current market trends, buyers and sellers like you can make informed decisions. By this, it means you should know when to buy or sell how to price strategies and how to gain potential negotiation. 

2. Investors

Being an investor, you must keep updated so that you can better manage risk by staying informed about market trends. This knowledge helps you identify various investment opportunities and potential pitfalls that you may face.

3. Financial institutions

Money is the lifeblood of any economy. Therefore, all banks and financial institutions rely on the health of the housing market to assess the risk in mortgage lending and other real estate-related financial products. Therefore, financial institutions need to keep updated to manage risks. 

4. Policymakers

The information about the housing market and real estate is used to formulate effective housing policies by policymakers at local and state levels of the government.

5. Businesses and Businessmen 

It is the first and foremost duty of any business or businessman to keep tabs on the current market situation. It is important because businesses work on profits and calculated risks. Therefore, it is important to stay updated on market trends in the state to do profitable deals and avoid as much risk as you can.

Recent California Real Estate Market Trends

Given the severe housing shortage in California, the California real estate trends projected that the prices are still going to rise upwards and upwards. Due to the debt ceiling crisis, it may project high pressure on the interest rates.

However, it is seen that the supply is growing, but it's not growing enough to fill the buyer demand fully. Inflation is easing out, but employment is expected to decrease.

The sales for California houses down 13.2% since October even with the prices being steady. 

Factors influencing the California real estate market

The real state of California or any other state is as dynamic and sensitive to fluctuations as it gets. 

Read more to learn some key factors that influence the California housing market:

1. Supply and demand: if there is a shortage in housing supply in areas where there is high demand, it can drive up the home prices. Whereas where there is enough supply and enough time, the prices can relatively be competitive and affordable. Areas where there is high supply and less demand. The prices can drastically degrees giving out cheap and very affordable options for buyers.
2. Economic factors: The economy of the state and the national economy play a significant part in impacting the housing market. Inflation rates, interest rates, unemployment, economic slowdown and recession all play a significant role in developing the economic health of the state. Turn affects the affordability of homebuyers in the state.
3. Regulatory environment: the zoning laws, California's regulatory environment, the authority and its policies can impact the availability of housing and also influence its prices significantly.
4. Technology influence: the areas with a strong presence in the technology industry such as Silicon Valley can experience unique housing market dynamics. This is because there are high income, earners and the high demand for housing from this sector.
5. Population growth: if there is a high influx of population in the area, it may result in a high demand for housing. If there is equal supply, according to the demand, then the prices or competitive and affordable. However, if there is a high influx of population, but a shortage of housing inventory, then it may lead to high pricing.

Median home prices in different regions of California

Housing prices in California have risen moderately over what was prevailing a year back. Reports from the California Association of Realtors show that the median price of single-family homes is $859,800 in Aug 2023 as compared to $834,740 same month last year. This is essentially a 3% increase overall. 

Houses for sale in California – Its effect on the real estate market 

What is meant by housing inventory? A simple explanation is the houses and flats that are not sold by the developer and are not in the sales pipeline. This refers to the current housing inventory. It is similar to that of the manufacturing sector, where the goods not sold yet are considered inventory.

The house inventory can have an impact on the market depending on if it's high or low.

Effect of high housing inventory on the market

1. It creates a buyer's market when there is a surplus of homes for sale. Buyers will have more options to choose from and sellers must be competitive with their pricing. This means affordability increases and therefore it results in high sales.  
2. The high inventory levels can lead to price stability or even a decline in home prices.
3. If you are a seller, your plans and motivations may be negatively affected because, in a high housing inventory market, it takes longer to sell as buyers have more choices and options to choose from.
4. A high inventory market usually slows down and impacts new construction as builders may hold projects to avoid oversupply in the market.
5. If you are the buyer, you have more options available which gives you more leverage during negotiations. This will give you an upper hand and pressurize sellers to be flexible on pricing to attract you. 

Effect of low housing inventory on the market

1. A low housing inventory means that there are not enough houses for sale in the market to keep up with the demand. This leads to increased competition to buy the limited options available, pushing up home prices due to fierce bidding wars. 
2. This market situation usually favours sellers and creates a seller's market.  As a seller, you have more negotiating power and can receive multiple offers on the same properties. This gives you high leverage on deals.
3. As the economic principle of demand and supply says, if there is high demand at low supply, the price appreciates. Therefore, a low housing inventory can drive up home prices significantly and can contribute to rapid price appreciation in the market.
4. Faster sales: In markets where there is a low inventory of homes, they tend to get sold quickly as buyers are eager to secure properties amidst competition. They don't want to wait and miss out on the golden opportunity. This is a good situation for sellers, but not a favourable one for buyers.
5. Affordability concerns: the appreciated home prices in such a market can pose affordability challenges for potential home buyers. This may lead to a situation where the average home price outpaces the average household income. This is a dangerous situation to be in, in an economy. 

Days on the market (DOM) for major cities in California 

For those of you who are new to this concept, Days On Market (DOM) is a real estate metric that measures the number of days a property has been listed for sale until it goes under contract or is finally sold to a buyer. 

It is an important indicator to know how long it takes for a property to transition from being listed to being taken off the market due to a successful sale. This metric is helpful for buyers to stay assured of the quality of houses in the area. 

The Days On Market (DOM) can vary widely depending on factors such as location, property type, market conditions and economic factors. Moreover, real estate market trends can change over time.

Here is a list of different cities in California that depicts the median Days on the Market (DOM) for properties:

• San Francisco- 66 days (median days)
• Los Angeles- 50 days  (median days)
• Fresno - 42 days  (median days)
• Sacramento - 40 days  (median days)
• San Diego - 26 days (median days)
• Oakland -  20 days  (median days)
• San Jose- 34 days (median days)

California Real Estate Market Forecast

As per reports in December 2023 from credible sources, the market forecast for the California real estate market trends seems optimistic and favourable for the year 2024. The housing market forecasts a falling mortgage rate, rising prices, and economic expansion with high demand for housing across the state. 

Predictions and projections for the California real estate market

The California real estate market is expected to grow over the next year. Projections put the rise at 6.2%, thereby marking the median price of homes at $680,000.  However, the housing affordability of investors will remain stagnant. It has also taken into consideration the outmigration of California to low-tech states. The state will remain viable and home buyers will continue to want to buy homes here.

Factors influencing the future of the housing market in California

• Global economic factors 
• Access to credit
• Technology influence
• Market speculation
• Climate change and natural disasters
• Government policies
• Demographic trends
• Interest rates
• Housing supply and demand conditions
•  Economic conditions