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2022: What to Expect in Southern California Real Estate
December 8, 2021

2022: What to Expect in Southern California Real Estate

by The CE Shop Team

2022 Will Continue to Bring the Heat in the Southern California Housing Market

Despite the year’s turbulence, the Southern California real estate industry has held strong as we near the end of 2021. The forecast for California’s housing market in 2022 remains optimistic despite declining sales and population growth due to the demand for homes in the state. Waning unemployment rates and rapidly rising home sale prices will keep real estate agents across Southern California busy this year.

2022 Southern California Real Estate Outlook: Hot

In October 2021, the average home in California was priced at $722,406, a 21.0% increase year-over-year (YoY). There’s little sign of prices stalling, though, as Norada Real Estate Investments predicts this figure will rise by another 5.2% within the next year. However, limited supply and increased home prices could make for slightly lower home sales figures in 2022, according to RISMedia.

“A slight decline next year from the torrid sales pace of the past year-and-a-half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low level of homes available for sale,” said C.A.R. President Dave Walsh in a statement. “Homeownership aspirations remain strong and motivated buyers will have more inventory to choose from. They will also benefit from a favorable lending environment, with the average 30-year fixed-rate mortgage remaining below 3.5% for most of next year.”

Rising prices echo the gradual healing of the economy statewide, signaling that this year could be profitable for agents and sellers alike, while low-interest rates maintain some degree of affordability for buyers.

Along with rising home prices, home sales statewide decreased 5.9% year-over-year in October 2021. Inventory also fell a significant 18.5% over the course of the year. Between lasting low-interest rates bolstering demand and a consistently low supply, Southern California is a seller’s market heading into 2022.

After the economic trials and tribulations of 2021, the Golden State’s population has declined for the first time since its founding in 1850. Per coverage from CBS8, “about 6.1 million people left for other states and only 4.9 million arrived from other parts of the country” from 2010 to 2020. However, the population decline hasn’t translated into lower costs of buying or renting property. 

In fact, rent prices increased 16.8% statewide year-over-year, much to the dismay of renters. In some parts of the state, that figure is even higher. For example, the cost to rent a one-bedroom apartment in Irvine skyrocketed by an average of 36.2% year-over-year. According to a report by USC’s Casden Economics forecast, less urban areas in Southern California will see steep increases in the cost of renting property.

"COVID-19 caused a large-scale move from central cities to the suburbs that resulted in a sharp rise in apartment vacancies in Downtown L.A., Koreatown and Beverly Hills and historically low vacancies in Rancho Cucamonga, North City San Diego and Oxnard," USC Lusk Center for Real Estate Director Richard Green, co-author of the forecast, said in a statement. "While vacancies are coming back down in urban areas, the outskirts remain low [in terms of] supply and will see rents go up at a much higher rate than the cities."

Meanwhile, only 0.5% of California homeowners fell delinquent on their mortgage as of March 2021 compared to 0.8% of American homeowners who fell delinquent on their mortgage during that same timeframe. Also, equity slipped into the negative on only 0.8% of homes statewide, making it the lowest rate of homes with negative equity across the United States. So, while the population declines, renters lament, and demand remains steady, California homeowners continue to thrive.

California Home Data
Source: Zillow

2021-2022 Southern California Real Estate Market Data

Zillow Home Value Index

$722,406

Home Value Change YoY

+21.0%

One Year Home Values Forecast

+5.2%

Rent Price Change YoY

+16.8%

The Percentage of Homes With Negative Equity

0.8%

Mortgage Delinquency Rate

0.5%

Available Housing Inventory

45,704

Buyer’s or Seller’s Market

Seller’s


Market Insights for Southern California

In August 2021, the California Employment Development Department reported that the state’s unemployment rate landed at 7.5% statewide, down from 12.3% in August of last year. While still higher than the national average, California’s improving job market shows promise. As healthy economic activity often correlates with growth in the real estate industry, narrowing unemployment rates are a positive sign for agents the year ahead. 

While California as a state experienced a decline in population for the first time in decades, many Southern California counties continued to grow. The 10-year trend shows residents moving out of dense urban communities to more suburban and even rural communities in California. San Benito County saw the most significant population growth, boasting a 17.9% increase in its population since 2010.

Beyond the economic opportunity, California has much to be proud of and offer to its residents and visitors alike. Here’s how California shakes out in comparison with the rest of the nation:

2022 Real Estate Market Forecast California

Commercial Real Estate Market Insight

The momentum of 2021’s residential real estate market did not mirror Southern California’s commercial real estate market. Throughout this year, the number of companies that left California continued to grow, citing high tax burdens and high costs of living for employees. 

However, we believe that the choppy seas caused by the COVID-19 pandemic are beginning to calm. Voit Real Estate Services released their Q3 2021 report, revealing lingering struggles but also some optimism for the commercial real estate market.

There is high demand in the industrial market, as lease rates and sales prices are increasing quickly in the remainder of 2021. As the eCommerce and logistics industries continue to thrive in a digital shopping society, warehouse space for goods is in high demand. Experts like Deloitte predict that commercial spaces will be retrofitted for warehouse or multi-purpose use in the coming year.

Additionally, the retail property sector has felt the pressure of pent-up demand. In San Diego, this sector saw an increase in the total transaction volume: over 2.1 million square feet of retail property was sold or leased in Q3 of 2021, up from 1 million square feet a year earlier. This is a positive sign of demand and activity, signaling hope for certain sectors of the commercial real estate market.

Overall, 2022 is still forecasted as a strong year in terms of real estate, so Southern California agents will need to be at the top of their game. From buyers battling rising prices to sellers fielding multiple offers, there has never been a better time to serve your fellow Californians

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