Home buyers in California sometimes confuse the home inspection with the home appraisal, and vice…
The California housing market has changed a lot over the past couple of years. During 2021, we witnessed a record-breaking increase in home prices and sales activity, among other major changes.
Those trends have a lot of first-time home buyers in California wondering what 2022 might bring. Will 2022 be a good year to buy a first home? What will the real estate market be like this year? Will things get easier for buyers, compared to competition-fueled frenzy of the past year and a half?
In short, what should California first-time home buyers expect in 2022?
Important Trends for California First-Time Buyers in 2022
While no one can predict future housing trends with complete accuracy, we can “read the tea leaves” by analyzing past and current conditions. With that in mind, here are four trends that could affect California first-time buyers in 2022.
1. Home prices are still rising in most California cities.
According to a report published by the California Association of REALTORS® (C.A.R.) at the end of 2021, home prices across California were up by double digits year-over-year. To quote that report:
California home prices continued to stabilize in the off-season, dipping below the $800,000 benchmark for the second straight month. At $782,480 in November, the statewide median price was down 2.0 percent from October’s $798,440and was up 11.9 percent from the $698,980 recorded in November 2020.
The real estate data company reports an even bigger annual increase, stating that “California home values have gone up 20.3% over the past year.” This was reported in January of 2021.
These two organizations analyzed home prices in different ways, and for different periods of time. Hence the difference in their numbers. The bottom line here is that those who are planning to buy a first home in California in 2022 will encounter higher costs, compared to those who purchased during the past 12 months.
Looking forward, home prices in most California cities are expected to continue climbing in 2022. So first-time buyers might want to consider purchasing sooner rather than later, to avoid (potentially) higher housing costs.
2. The real estate market will probably favor sellers in 2022.
Over the past year or so, there have been countless reports of California home buyers struggling to find a house. Stiff competition, limited inventory, and fast-rising prices have made the real estate market challenging, especially for first-time buyers.
While the market could become a bit more “buyer-friendly” in 2022, it will probably continue to favor sellers for the foreseeable future. Low housing supply is the number-one reason for this. So let’s talk about that next.
3. Inventory levels could frustrate some first-time buyers.
Buying a first home in California during 2022 could be challenging for some buyers. That’s due to an ongoing inventory shortage that has been with us for many months now.
As of January 2022, most housing markets across California had less than a two-month supply of homes for sale. That means the real estate market tends to favor sellers, when it comes to pricing and negotiations.
This imbalance could affect many first-time buyers in 2022, especially those in highly competitive markets like the Bay Area.
According to the December 2021 C.A.R. report mentioned earlier:
California’s Unsold Inventory Index (UII) dipped on a month-to-month basis for the second straight month, as active listings fell 22.4 percent from last year.
This doesn’t mean first-time home buyers can’t succeed in 2022. They can! It just means that buyers will have to be patient, persistent, and market-savvy … especially when it comes to making an offer on a house.
When buying a first home in California, you want to have a clear understanding of local housing market conditions. Find out what home prices are doing in your area. Take a look at the average time houses are listed, before being sold. Find out if inventory is rising, falling, or holding steady. This will help prepare you for the home-buying process.
4. Mortgage rates are expected to trend upward in 2022.
When it comes to mortgage rates in California, there’s some good news and bad news.
The bad news (from a borrower’s perspective) is that rates are expected to creep upward during 2022. Forecasts from both Freddie Mac and the Mortgage Bankers Association predict a gradual increase in home loan interest rates, over the coming months.
The good news is that 30-year mortgage rates could hover below 4% for the foreseeable future. During the first week of January 2022, the average rate for a 30-year fixed home loan was 3.22% (source: Freddie Mac). That’s a very attractive rate from a historical standpoint.
It’s also important to realize the aforementioned forecasts are an educated guess, and thus far from certain. Even so, it’s worth noting that most industry watchers expect borrowing costs to trend upward during 2022.
This is another important point to consider, if you’re planning to buy your first home in California in 2022.
Buying your first house can be a daunting experience. There’s a lot on the line, financially and emotionally. Research and preparation can help you succeed. We hope this article has helped you get off to a good start.