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Over the past year, the Northern California markets covered by this report added 159,000 jobs. Given these solid job gains, it was no surprise that the unemployment rate fell from 5.6% to 2.9%. By county, the lowest jobless rate was in Santa Clara County (2.3%) and the highest rate was in Shasta County at 4.3%. The labor force continues to expand, which is a positive signal of the relative strength of the economy in Northern California. The region is only 17,000 jobs short of its pre-pandemic peak employment.
Riverside home prices stayed even at about $600,000 while sales declined 19.2% vs last month. The Central Coast region saw its average price rise 1.9% or $17,500 while sales fell 22% vs September and were down 38.8% from 12 months ago. The Los Angeles Metro Area in September suffered a 1% drop in price or $7,430 on average on the sale of a single family houses to $742,570. Sales in Metro LA fell 12.% from September and are down 40.8% from 12 months ago. CAR’s housing consumer index fell 5 points to hit 65, with 85% of respondents saying it’s not a good time to buy. 96% have no intention to buy in the next 12 months which projects tougher selling conditions for sellers.
San Francisco, CA
Year over year, sales fell in all counties contained in this report. Solano County saw a modest drop, but there were fairly significant decreases across the rest of the region. All things considered, I have left the needle in the same position as in the first quarter of the year. The market still favors home sellers, but rising inventory levels and slowing price growth suggest they are not in a better position now than they were at the start of the year. The average time it took to sell a home in the Northern California counties in this report dropped two days compared to the second quarter of 2021.
❱ In the final quarter of 2021, 14,218 homes sold—a drop of 10.6% compared to a year ago and 14.2% lower than in the third quarter. Seasonality is at least partially responsible for the quarter-over-quarter drop, but it’s also because inventory constraints are limiting sales. Even with sales pulling back, the average home price in the region rose an impressive 17.2% year over year to $1.215 million. Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs. Even with rising inventory levels and higher financing costs, the market appears to still be buoyant.
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Positive job growth and a growing economy continue to stimulate the housing market, which has led home sales and prices to rise even as mortgage rates and supply levels jumped. Although affordability continues to be a significant issue, there are no indications that a major correction is imminent. However, we are seeing the speed that homes sell starting to slow, as is the pace of price growth. That said, with average list prices in most counties continuing to rise, sellers remain confident. The jump in home prices compared to the prior quarter may be a surprise to some given the rapid increase in mortgage rates.
September construction spending was up 0.2%, boosting the year-to-date total by 11.4%. September's growth was helped by a minor increase in nonresidential construction spending and a slowdown in residential spending, which had fallen for 3 months. ❱ Although supply levels have improved, price growth continues to rise at very impressive rates. This is likely due to low mortgage rates and increasing demand. ❱ Affordability continues to be an issue in all areas, but the pace of price growth has been slowing as mortgage rates rose .3% in the quarter. I anticipate that rates will continue to trend higher as we move through the year, which is also likely to act as somewhat of a headwind to price appreciation.
California Home Price Trends 2022
Santa Barbara (33.2 percent) had the biggest price increase of all counties. In San Francisco Bay Area, the median home price dropped by 2.0%. All but one California county recorded a year-over-year sales decline in October. The Central Coast (-38.8 percent), the San Francisco Bay Area (-37.3 percent), and the Central Valley (-36.4 percent) also posted sales declines of more than 35 percent from last year. In the third quarter of this year, 11,454 homes sold, which is down 32.5% from a year ago and down 19.5% from the second quarter.
Thousands of people have been moving to the area thanks to its affordable housing and close proximity to San Francisco and Lake Tahoe. Marco Santarelli is an investor, author, Inc. 5000 entrepreneur, and the founder of Norada Real Estate Investments – a nationwide provider of turnkey cash-flow investment property. His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate. He’s also the host of the top-rated podcast – Passive Real Estate Investing.
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However, although the moving costs San Francisco are not high, the house prices in Northern California are. ❱ In the first quarter, it took an average of 40 days to sell a home, with homes selling fastest in Alameda County, and slowest in Shasta County. ❱ Year-over-year, sales rose in all counties contained in this report, with double-digit growth in all areas other than Solano County. ❱ In the second quarter, it took an average of 28 days to sell a home, with homes selling fastest in Alameda County and slowest in Shasta County. ❱ The greatest drop in market time was in San Luis Obispo County, where it took 19 fewer days to sell a home than it did the prior year. The greatest drop in market time from a year ago was in Napa County, where it took 14 fewer days to sell a home.
Compared with California, nearly half of the nation’s households could afford to purchase a $368,200 median-priced home. The effective composite interest rate was 3.28 percent in the fourth quarter of 2021 and 3.08 percent in the first quarter of 2021. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,950, assuming a 20 percent down payment and an effective composite interest rate of 3.97 percent. A minimum annual income of $158,000 was needed to qualify for the purchase of a $797,000 statewide median-priced, existing single-family home in the fourth quarter of 2022.
An exodus of people and businesses might sound threatening but it may be that this state’s housing market is invincible. 47 of 51 CA counties saw an increase in active listings again in October. 5 northern counties saw inventory increases over 100%, yet prices were not all down in those counties. The Los Angeles metro region saw house prices fall 1% in October after a 2% drop in September. In the Bay Area, prices fell slightly by .5% (-6,500) and in San Diego fell 4.3% (-$39,000). The main October Sales/Price chart from CAR reflects a deepening trend.
The Central Valley had a year-over-year price gain of 0 percent, with the median price being $450,000. Southern California had a year-over-year price gain of 3.2 percent, with the median price being $773,810. The Central Coast had the highest year-over-year price gain of 8.3 percent, with the median price being $937,500.
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