Market Update - January/February 2022
Recently released data shows that 2021 was the best year for California’s housing market since the recovery from the Great Recession began over a decade ago. REALTORS® are optimistic and the state continues to see signs of broader economic improvement. However, rising rates and their impact on buyer demand, have joined a lack of inventory as the key headwinds to home sales in 2022.
2021 Marks Strongest Year for Housing in Over a Decade: Even though the pace of sales was falling last month, December solidified 2021 as the best year for existing single-family home sales in over a decade. With an annualized pace of more than 444,000 units, home sales were 7.9% ahead of 2020, which also rose by 3.5% from 2019. That marks the best year for closed transactions since 2009. Median prices for homes also set a new record—coming in just shy of $800,000 for the year (in California) . Despite ongoing challenges with the pandemic, a labor market that has yet to fully recover, and interest rates that rose gradually throughout the year, buyer demand remains strong by pre-crisis standards although limited supply is expected to weigh on sales in 2022.
Continued Normalization Amidst Higher Rates, More Inflation, and Lower Inventory: Despite the abundance of positive news, the market does face significant headwinds to maintaining its current level of home sales in 2022. Interest rates rose to 3.56% in the latest Freddie Mac survey. In addition, consumer inflation, driven primarily by surging vehicle prices, continues to run hot, which will likely spur the Federal Reserve to take an aggressive stance on interest rates this year, meaning further rate increases are coming. Despite the current rising trend, mortgage rates are still low by historical standards, and the average 30-Year rate will remain near or below 4% by the end of the year.
California Association of Realtors (CAR)