Home Prices Continue to Rise in California – Here’s What it Means for Buyers & Sellers
Fueled by strong demand and low inventory, home prices in California continue to rise. According to the California Association of Realtors, the median price for a home in California has risen $182,000 since May of 2019. This breaks down to an increase of over $7500 per month. Although as home prices and costs to build are rising, buyer demand in California grows.
California Home Prices Reached Record Highs in May
In May 2021, Southern California home prices experienced a year-over-year increase of 33.1%. In the Inland Empire, median home prices gained 28.9%.
Fierce competition is leading many prospective buyers to offer above the asking price and potentially the home’s appraised value. In some instances, buyers are including escalation clauses for the home of their dreams, where they will pay higher than whatever the last offer was. Many are offering non-refundable deposits and no loan contingency. Many home builders have started their presales up to 6 months in advance of their sales center opening and model completion, selling completely off virtual tours.
As a comparison, in 2020, an average of 20.3% of California homes sold above their list price. By February of 2021 that number increased to 42.1% of homes in the metropolitan areas of Los Angeles. According to recent data from the California Association of Realtors (C.A.R.), 70% of homes in California sold above their list price this year. Is this sustainable?
No. Although these trends are continuing, in the long run, the market will pivot and change. Many will be priced out of the market and decide to wait for stabilization and if interest rates increase, some will not be able to qualify.
We have seen a shift since the first quarter of 2021 eliminating Seller concessions. This coupled with low inventory and high demand translates that California is now a Seller’s market. According to C.A.R.’s monthly Consumer Housing Sentiment Index, 59% of homeowners believe it’s a good time to sell.
Homes are selling at record speed, with many selling in just 7 days. The National Association of Realtors reported that nearly 90% of U.S. homes sold in April were on the market for less than one month. Current homebuyer interest is being fueled by low mortgage rates, shortage of available homes, and an influx of buyers seeking larger living spaces.
The trend to watch will be aging Californian residents will begin selling their homes in favor of moving out of the state. This is due to the potential tax increase proposed by the State to tax equity from a home sale should you invest in property out of state.
Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.