Key Highlights
- Record-high median home price in California now over +$700,000
- Perfect storm of low rates, exaggerated housing shortage and heightened demand
Since June’s rebound from the COVID-19 outbreak in the spring, California’s median home prices have had four straight months of record highs. According to the California Department of Finance, the median home price in the Golden State hit $712,430 in September. In October, when the state’s unemployment rate dropped below 10% for the first time since March, the median home price slightly cooled -0.2% to $711,300. Data specific to California for November is not yet available.
According to a Sacramento-based appraiser, Ryan Lundquist, “A lot of people think the pandemic equals the market is suffering, but that’s just not the case. It’s a perfect storm of low rates, a housing shortage that we already had and is getting worse, plus heightened demand.”
Despite people talking about California residents leaving the state in droves due to its high living/housing costs and wanting/needing more affordability, California continues to have a population of 39M people. Lundquist said that the 650,000 residents who did, in fact, leave the state last year is, “…a drop in the bucket compared to how many people are here…”
Even if new homebuilders could build fast enough to satisfy such heightened demand from the state’s 39M residents, those builders haven’t been able to, or haven’t chosen to build mid-market, affordable housing quickly enough. Jonathan Miller, president of Miller Samuel Appraiser, said, “New home construction skews luxury…Most of the sales growth in single family homes in California is above the $600,000 mark. When it comes to inventory, there is more (money) lost in affordable and modest-priced housing, year over year, than in the upper-level housing market.”
Just think about what’s happening specific to the housing market in Los Angeles. That market is “flooded” with condos priced above $500,000 while below that $500,000 price point, condos are scarce.
Miller’s take on the California housing market, a market that is not a national outlier but rather a market more pronounced, ”California is a proxy for what we’re seeing nationally…The housing market needs disruption. This cocktail of mortgage rates below 3% and some of the lowest inventory rates in history is reducing the affordability of housing at an alarming rate. This picture is not sustainable.”
Thanks to the California Department of Finance and The New York Times.
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