California’s housing market is known for being expensive. It is home to some of the most high-end and well-known real estate housing markets; San Francisco Bay Area, Malibu, Beverly Hills, Los Angeles, and Orange County.

While the prices in those areas are always sky high, the lesser-known communities have seen massive price increases as well.

The driving force behind these increases is low inventory; it is the lowest we have ever seen. This has caused the statewide median home price to increase to $ 758,990.

That is a 24% increase in the last year. While this is incredible for home sellers who are ready to cash in on their investment and take up residence elsewhere, it is really bad news for entry-level buyers in the housing market.


The California Housing Market is a Madhouse

Most regions in California have seen double-digit price increases in the median price in the last year in the California housing market.

Of the fifty-one counties in California, forty-two had a year-over-year price increase. Mariposa saw the largest gain at 20.7 percent. Homes are selling way over list price, with buyers having to get creative to get their offer accepted. Buyers have little room for negotiation since they will likely be up against a handful of other offers.

They are waiving contingencies and paying well above the appraised value of a home. Some buyers report making offers on ten or more houses and still not having one offer accepted. It is frustrating and challenging, and it does not look like the California housing market will be shifting anytime soon.

California Median Home Price

But I Thought Everyone Was Leaving California

The news may make it seem like there has been a mass exodus from California. States like Arizona and Texas have reported an influx of Californians driving up their real estate housing market values. You would think that that would mean there was nobody left to buy California homes for sale. That is not true. While many people are leaving the state for various reasons, that does not mean that the California real estate market is suffering.

Homes are selling, and they are selling fast. The median number of days it took to sell a home was only eight days, which is unheard of. Sellers report having dozens of showings just hours after the home hits the housing market. People are out there, and they want to buy. Since interest rates are at near historic lows, it isn’t necessarily a bad time for buyers to get into a new home.

If you already own a home, you can utilize that equity and buy a home with more space or something in a different area. The current low-interest rates can save you hundreds of dollars on your monthly payment. Truthfully, it does not look like home values are going to stop increasing any time soon, so you should not have to worry about being upside on your mortgage in the upcoming years.


How High Can the California Median Home Price Go?

Since low real estate inventory in the California housing market is the main culprit for this massive price increase, we need to see more homes hit the market in order to balance out the demand.

New home construction dropped significantly after the real estate crash of 2008 and never picked up to the levels it should have.

The slow down in building is finally catching up to us in the real estate housing market, and if we want to see the market level out, more homes need to be built

This is not a problem exclusive to the California housing market; it is a nationwide problem. According to the National Association of Realtors, we are about 4 million homes short of having a balanced market. We need to start building.

Politicians in Sacramento have been working on legislation to increase housing production. This includes bills aimed at rewriting zoning regulations, easing up on the environmental review process.

Unfortunately, most of the bills have not passed. Instead, politicians are trying to give first-time homebuyers down payment assistance incentives. These incentives will only increase demand in the real estate housing market and cause the median home price to increase even more.

Another hurdle to overcome is the high price of materials needed to build a home.

Suppose home builders are allowed to pick up the pace in development. In that case, a lumber shortage and a shortage of skilled laborers will further drive up the cost of building. We really are in a pickle.


California Median Home Price Predictions

Experts predict that the market will continue on this same path into 2022. The California market has been one of the most in-demand in the country for decades. There was a 108%, median home price increase from 2012 to 2019 and then another explosion in the median home price since 2019.

Experts think the median home price increases will only be in the single digits as interest rates increase later in 2021, which will curb some potential homebuyers from moving into a different home.


Final Thoughts on the California Median Home Price

There is a point where the prices become too much for most people to afford, and we seem to be approaching that number.

California needs to build more housing. The number of houses on the market in March of 2021 was down 50% over March of 2020.

This is not a good thing since, as mentioned before, low demand causes high prices. Homebuilders need to be allowed to start new projects. Not just luxury homes either. We need housing for first-time homebuyers and others who do not have as much to spend on a home.