9 California Housing Market Predictions for 2021 (2023)

There’s no doubt that the coronavirus pandemic had an initial negative impact on the California housing market this year. Sales dropped and many feared a housing market crash.

But new data reveals that the market has recovered – it’s as if COVID-19 never touched the real estate industry in California (for most areas). Let’s look at some of the California housing market statistics for 2020, provided by Mashvisor. These will be key for making our California housing market predictions for 2021.

California Real Estate Market Statistics – September 2020

  • Median Property Price: $843,751 (up 5.5% from August)
  • Price per Square Foot: $465
  • California Homes for Sale: 36,098 (down 31% from August)
  • Days on Market: 71
  • Price to Rent Ratio: 25
  • Traditional Rental Income: $2,842 (up 5.1% from August)
  • Traditional Cash on Cash Return: 2.2% (up 43% from August)

As you can see, the California real estate market is doing well. House prices continue to climb and California real estate investors are earning more rental income and an increasing return on investment month to month.

Related: The Impact of the Coronavirus on the California Real Estate Market

At the same time, it’s a seller’s market. Housing inventory continues to drop and the days on market remains low. While the situation may differ from city to city, most local experts are reporting the same California real estate market trends. Jennifer Okhovat, a real estate agent with Compass in the Los Angeles real estate market told Mashvisor:

In Los Angeles, we are not feeling any signs of the market slowing down as of now.

Of course, COVID-19 is not all the California housing market is facing. Wildfires and the presidential election are also impacting market trends. How will all of this shape the California housing market 2021? Here is what experts are forecasting for next year:

The California Housing Market Forecast for 2021: 9 Expert Predictions

While no one can 100% predict the future (and 2020 is making it even harder for the most experienced in the industry), it’s safe to say that we can expect these 9 California housing market trends in 2021:

#1. California Home Prices Will Continue Rising

Mashvisor’s data reveals that California home prices rose from August to September. But if we look back at August 2020, we will see something even more astonishing – the California Association of Realtors (C.A.R.) reported that the Golden State’s home prices surpassed $700k for the first time. This was a 6.1% increase from July.

The house price trends over the past few months are clear – prices are continuing to grow, despite COVID-19. And many experts believe that, due to low inventory and growing demand (two upcoming California housing market predictions on this list), home prices will continue to rise in 2021.

Looking at Zillow’s California real estate market forecast for home price appreciation, it predicts that values will go up by 5% from now through August 2021.

A few experts weighed in and told Mashvisor that they also predict growing California home prices in 2021:

(Video) Real estate expert projects housing market is about to crash

The outlook for home prices in California is that they will continue to climb through 2020 and into 2021. With the current supply-and-demand imbalance across much of the state, it appears likely that California home prices will continue along their upward trajectory through this year and into next. As a result, an ever-growing number of would-be buyers could get priced out of the market.

-Matthew Martinez, a luxury and investment real estate broker at Diamond Real Estate Group who works across California, from Wine Country to the San Francisco Bay Area

Despite a triple terror of ongoing COVID-19, worsening wildfires, and a fractious presidential election, California’s housing market is marching on…So it’s estimated prices and property values will continue to rise in this seller’s market, and the supply-and-demand imbalance is lowering affordability for many would-be buyers.

-Karen Condor, a real estate expert from Pasadena, CA, with ExpertInsuranceReviews.com.

At the same time, it’s important to mention the California wildfires and the possible effect they may have on prices. Ashley Baskin, a licensed real estate agent who serves on the advisory board for HomeLife Digest, pointed out that:

As for the wildfires, we are expecting to see home prices drop in the affected areas. However, places untouched by the fires will remain competitive.

#2. Low Mortgage Rates Will (Somewhat) Help with the Affordability Issue

It’s true that increasing home prices will make buying a house in California even less affordable for many residents. 2021 will likely see even more buyers priced out of an already pricey real estate market.

However, the mortgage rate forecast for 2021 is generally a positive one – mortgage rates are expected to remain low. Even as the market began to recover at the end of May, Fannie Mae forecasted that mortgage rates would remain low and drop even further come 2021. Their mortgage rate forecast calls for an annual rate of 3.2% by the end of 2020, with rates dropping as low as 2.9% in 2021.

So even with rising prices, some buyers may find relief with this California housing market prediction, according to Ethan Taub, CEO of Loanry:

One prediction I have for the housing market that will make a lot of people happy is that I think that mortgage rates for houses in the area will hover in the area that they are in now, which is around the rate of 3.5%. With this in mind, more people will be able to afford a mortgage in time, meaning that with this combined with more houses going on the market, we will see the housing industry booming in California in 2021.

Related: 6 Most Affordable Cities in California for Real Estate Investing

#3. Home Sales in the California Real Estate Market Will Increase

9 California Housing Market Predictions for 2021 (1)

(Video) Something MASSIVE is About to Happen to the Housing Market

A few different factors will likely lead to a rise in California home sales in 2021.

One of the reasons home prices are going up in the California housing marketis the increase in homes sales. Although sales dropped during the first major wave of the coronavirus, they began to quickly bounce back. C.A.R. reported that existing home sales went up 6.3% in August from the month prior, a 14.6% year over year (YoY) increase.

It’s true that we still have a few months left in the year. But there are several signs pointing to the fact that a safe California housing market prediction to make is the rise in home sales. With lower mortgage rates and prices continuing to climb, buyers will likely continue to flood the market, hoping to take advantage of the new-found affordability before prices go any higher and future real estate appreciation.

#4. Inventory Will Remain Low, But May See a Gradual Increase

As seen from Mashvisor’s September data, the inventory of homes for sale continues to drop. While those statistics are based on the California homes for sale in our vast database, C.A.R’s data supports this trend. Their Unsold Inventory Index (UII) (a metric that represents how many months are needed to sell all the houses for sale on the market based on the current sales pace) dropped to 2.1 months in August. They reported a drop in active listings in most major regions across California, with the Southern California housing market being among the regions with the highest YoY drop – 52.4%. While there are a few different reasons for this drop (the wildfires, for instance), a major one is the pandemic. Not only did COVID-19 slow down general construction activity but many sellers have chosen to wait it out before returning to the market.

While it’s not likely 2021 will see a huge boost in housing inventory – enough to meet the growing demand and home sales – some experts do see a gradual increase in the California housing market’s future.

Personally, I think one of the biggest predictions that we will see in 2021 in California is a gradual rise in inventory levels. With more people choosing not to put their homes on sale during the pandemic, we should see the number of homes on sale rise in 2021, hoping that the pandemic is long gone and behind us. In about a month, a C.A.R. poll showed that the people willing to sell right now has gone up 4%, which is a big increase in the grand scheme of things. The mindset is changing and therefore those sales will start popping up.

-Emily Deaton, a financial journalist at Let Me Bank

#5. The California Housing Market Will Remain a Seller’s Market in 2021

If you were wondering “Will the 2021 California housing market be a buyer’s market or a seller’s market?”, the last few predictions have probably answered your question.

This year was a seller’s market and 2021 is likely to also be a hot seller’s market. With low mortgage rates driving demand and tight inventory, sellers are likely to see value gains and continue to have the upper hand in the market.

#6. California Home Insurance Will Become More Expensive

One overlooked California housing market prediction for 2021 is the clear impact of the wildfires on the cost of home insurance. Karen Condor provided some insight on this for Mashvisor:

Thanks to the impact of the wildfires and the buildup of homes in foothill communities, the rise in housing prices is also including a premium rise in California home insurance. Incredibly, California used to be the second-cheapest state in the U.S.; Oklahoma, Kansas, and Texas took the lead due to their severe storms, with the highest amount of claims for wind and hail, followed by water damage and freezing. But the skyrocketing industry loss ratio seen with California home insurance due to the number of wildfire-related claims has insurance companies not only raising rates, but decreasing coverage and even carrying out non-renewals. So while California regulators battle it out with the insurance industry over price spikes and reduced coverage, homeowners in fire-prone areas are experiencing sticker shock, either with their current carrier or when they have to scramble for a new one.

#7. The California Housing Market Will Not Crash in 2021

With COVID-19 came talks and fear of the impact of an economic recession on the housing market. Early forecasters thought the housing bubble would bust in California and a housing market crash was bound to happen before the end of 2020.

However, all of the market data and trends prove that the California real estate market is recovering. And with trends continuing on this trajectory, it’s highly unlikely that a California housing market crash will happen in 2021. This is thanks to the fact that demand continues to surge, despite rising prices and inventory shortages.

(Video) California Association of Realtors’ Housing Market Predictions

#8. Suburban and Rural Towns Will Be Hot for 2021

Due to the fact that California is showing signs of a generally “healthy” market with no crash in sight, you might be wondering where to invest. We have a few predictions for this, based on different factors.

The first is that you might want to consider investing in California real estate in suburban or rural areas in the state. A few of our market insiders spoke of this trend:

A suburban migration within the state from San Francisco and the Bay Area to more suburban areas like Sacramento may see an urban exodus of sorts taking place but will invariably boost home sales in the Golden State.

-Rostislav Shetman, Founder of 9Kilo Moving

Looking at Mashvisor’s investment data for the Sacramento real estate market, it is looking positive for rental property investors, making it a good place to invest in California:

  • Median Property Price: $437,135
  • Price per Square Foot: $280
  • Price to Rent Ratio: 24
  • Traditional Rental Income: $1,518
  • Traditional Cash on Cash Return: 2.1%

However, Ari Rastegar, a real estate developer in the Sun Belt, including Southern California, and the CEO & Founder of the Rastegar Property Companywarned that renters may actually leave the California housing market in favor of more affordable areas. With the pandemic and wildfires both raging on, Rastegar is seeing California renters ditch their overpriced apartments for vintage multi-family apartments in smaller, Sun Belt cities like Austin, Tulsa, and Salt Lake City. This is an important prediction to keep in mind when choosing a location for buying rental property in California.

Related: Suburban Real Estate Market Boom Due to COVID-19

#9. These Are the Best Places to Invest in Real Estate in California for 2021

These are the best places to invest in California in 2021 based on cash on cash return.

Continuing with our predictions of the best places to invest in California, here’s a look at Mashvisor’s data. The cities on this list were selected because they each provide real estate investors with good cash on cash return in 2020 and are likely to continue to do so in 2021:

#1. Madera
  • Median Property Price: $334,307
  • Price per Square Foot: $182
  • Price to Rent Ratio: 18
  • Traditional Rental Income: $1,526
  • Traditional Cash on Cash Return: 3.1%
#2. Cathedral City
  • Median Property Price: $401,543
  • Price per Square Foot: $223
  • Price to Rent Ratio: 17
  • Traditional Rental Income: $1,930
  • Traditional Cash on Cash Return: 3%
#3. Bakersfield
  • Median Property Price: $383,462
  • Price per Square Foot: $181
  • Price to Rent Ratio: 19
  • Traditional Rental Income: $1,645
  • Traditional Cash on Cash Return: 2.9%

Find a Profitable Traditional Rental Property

(Video) Real Estate Market Crash Update - Biggest Housing Market Crash of The Decade!

#4. Oroville
  • Median Property Price: $341,754
  • Price per Square Foot: $215
  • Price to Rent Ratio: 21
  • Traditional Rental Income: $1,388
  • Traditional Cash on Cash Return: 2.9%
#5. Chula Vista
  • Median Property Price: $572,649
  • Price per Square Foot: $361
  • Price to Rent Ratio: 18
  • Traditional Rental Income: $2,591
  • Traditional Cash on Cash Return: 2.8%

A Few Final Words

While it isn’t perfect by any means, the overall outlook for the California housing market in 2021 is positive. If you can afford to, buying a California investment property could mean that you enjoy real estate appreciation and cash flow next year.

Start your search for investment property for sale today with Mashvisor.

Start Your Investment Property Search!

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9 California Housing Market Predictions for 2021 (3)

(Video) The Sinking California Housing Market: NEW Report

Sylvia Shalhout

Sylvia was the Content Marketing Manager at Mashvisor. As a real estate writer, she has been covering topics for the beginner and advanced real estate investor, helping them make smarter decisions as well as real estate agents looking to take their business to the next level.


Are house prices going down in California 2022? ›

The median home price is forecast to decline 8.8% to $758,600 next year following a projected 5.7% growth for 2022, to $831,460. California Realtors Housing Forecast to 2023.

Are house prices likely to come down 2022? ›

Interest rate predictions

This could in turn push average mortgage rates upwards of 8% (while still historically low, that is more than double the 1.6% rate recorded at the end of 2021) Based on this data, Capital Economics has forecast house prices to rise throughout 2022, before falling by 5% in 2023.

Will home prices drop in 2021 California? ›

The 2021 figure is 6.8 percent higher compared with the pace of 411,900 homes sold in 2020. The California median home price is forecast to rise 5.2 percent to $834,400 in 2022, following a projected 20.3 percent increase to $793,100 in 2021 from $659,400 in 2020.

Will 2023 be a good year to buy a house in California? ›

Similarly, a 2023 housing market forecast issued by the California Association of Realtors said that buyers could enjoy less competition, more supply, and a “favorable market environment” next year.

Will house prices go down in 2023 California? ›

The California median home price is forecast to drop 8.8% to $758,600 in 2023, following a projected 5.7% increase to $831,460 in 2022 from $786,700 last year. Home prices statewide and in Southern California are projected to decrease by approximately 7% in 2023 compared to 2022.

Are houses in California going to drop? ›

According to the California Assn. of Realtors, home prices statewide and in Southern California are likely to fall about 7% in 2023 compared with 2022, in part because mortgage rates are expected to stay elevated.

What will happen to house prices in 2024? ›

Knight Frank forecasted four per cent rental value growth in the UK in 2023, and again in 2024. This then falls to three per cent in 2025 and 2026. In Greater London, rental value growth is pegged at five per cent in 2023 and then three per cent every year between 2024 and 2026.

Will house prices fall 2023? ›

In the mainstream market house prices will take a greater hit over 2023, according to Savills, falling 10 per cent over the year before ticking up to 1 per cent growth in 2024. By the end of 2027 Savills expects prices to be growing by 5.5 per cent, down slightly from 7.5 per cent growth in 2026.

Will house prices fall in 2022 2023? ›

As economic conditions continue to impact the country, industry experts are suggesting there will be less demand in 2023 which will likely result in house prices falling.

Will California home prices go back down? ›

Home prices and sales both are projected to drop in 2023, according to a new California Association of Realtors forecast released today. However, prices still will remain relatively high, and for those using a mortgage, homes will be even less affordable in 2023 than this year thanks to rising interest rates.

Who is buying all the houses in California 2022? ›

Between April 2021 and March 2022, 38% of foreign buyers in California were from Asia, 15% were from Canada, 12% were from Latin America and 27% were undetermined, according to the report.

Are California real estate prices dropping? ›

Every one of California's major cities—including Los Angeles, San Diego, and the Bay Area, some of the most expensive real estate markets in the country—has seen dramatic price declines over the last four months.

Will house prices go down in 2025? ›

Another 24% predicted that the housing market shift would come in 2024. 13% expect the market to favor home buyers in 2025. While just 8% expect that to happen by sometime in 2026 or sometime in the next five years. Metros in the South and Midwest are the least likely to see price declines over the next year.

Is real estate a good idea in California in 2022? ›

In California specifically, the California Association of Realtors (C.A.R.) issued a similar forecast, predicting that median home prices will increase by only 5.2% in 2022 after a red-hot 2021. C.A.R. attributes this to rising mortgage rates and migrations to more affordable markets enabled by remote work.

Is 2024 good time to buy a house? ›

Yet, the prospect of a housing crash has made things worse, not better, for homebuyers. Weakening prices, declining inventory and higher mortgage rates are now all saying the same thing: Investors should wait until 2024 to buy a house.

Is it a good time to buy a house in California? ›

The good news about home prices in California: They aren't rising as quickly as they are in many other places around the country. Data from the California Association of Realtors shows that the median home price increased by less than 9 percent between April 2021 and April 2022.

What the housing market correction will do to home prices in 2023? ›

On a month-over-month basis, home prices declined by 0.7% in August 2022 compared with July 2022. The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.0% from August 2022 to September 2022 and on a year-over-year basis by 3.2% from August 2022 to August 2023.

What will house prices be in 5 years? ›

It said house prices will have risen 6 per cent by the end of 2022 but that they will fall 5 per cent in 2023 and a further 5 per cent in 2024 as a result of the sudden spike in mortgage rates caused by the government's fiscal plans.

Are house prices going to fall soon? ›

Figures show that house prices are starting to fall. This decline is expected to continue in 2023. There are a number of reasons for this: Interest rates have increased from their record lows at the end of 2021, making mortgages more expensive.

Will 2023 be a good year to buy a house? ›

While there's a good chance housing inventory will increase in 2023, borrowing rates might follow suit, or otherwise hold steady at today's higher levels. Historically speaking, this isn't the highest mortgage rates have been. But compared to last year's rates, today's rates look very high.

What causes house prices to crash? ›

Forces that make a housing bubble pop include a downturn in the economy, a rise in interest rates, and a drop in demand.

Should I sell my house now? ›

With continued supply shortages and high buyer demand, now is a good time to sell your home. And with interest rates on the rise, it may be better to sell sooner rather than later — if rates spike much more, some prospective buyers may retreat from home shopping. But consider your reasons for selling carefully.

What will interest rates be in 2023? ›

Fitch now expects the Fed Funds rate to rise by 50bp to 4.5% at the December FOMC meeting and then by 25bp at each of the February and March 2023 meetings. We expect rates to remain at 5.0% through the rest of 2023.

Where will mortgage rates be in 2023? ›

Most housing experts say mortgage rates will average around 5% to 6% in 2023, though some have predicted rates will go even higher.

Why are home prices dropping in California? ›

Now, record high inflation has resulted in higher mortgage rates which has decreased the number of eligible buyers who can qualify for a home loan. This has also reduced the prices of homes still on the market, the study said.

Is it smart to buy a house right now 2022? ›

Buying A Home In The 2023 Housing Market

November 2022 is a non-ideal time to buy your first home. Mortgage rates are up, home prices are flat, and you'll likely buy before the market hits bottom. Home buyers who can be patient will come out ahead. Use today to prepare if you're buying a home in December or early 2023.

Will house prices go down in Sacramento 2022? ›

Sacramento home price has been forecasted to decline by 1% between September 2022 to September 2023 (ZHVI). Higher mortgage rates are putting a damper on the Sacramento housing market. Sales of existing homes are falling as compared to last year.

What happens when the housing market crashes? ›

Homeowners owe more on their mortgages than their homes were worth and can no longer just flip their way out of their homes if they cannot make the new, higher payments. Instead, they will lose their homes to foreclosure and often file for bankruptcy in the process.

Will mortgage rates go down 2024? ›

Mortgage rates could soon fall

Despite the Federal Reserve's efforts to bring down inflation, it may not dip until mid-2024, according to the latest forecast from the Mortgage Bankers Association (MBA).

What will houses be worth in 2030? ›

According to RenoFi, the average price of a single-family home in the U.S. could reach $382,000 by 2030.

Will real estate bounce back in 2022? ›

While every other industry was affected, the real estate sector has shown amazing resilience and is poised to bounce back with full vigour in 2022. The future of real estate in India after Covid will be driven by a significant rise in demand, especially in areas like residential, office, warehousing and data centers.

Will Bay Area home prices drop in 2023? ›

Higher mortgage rates are playing an important role in the moderation of price growth. Bay Area (San Francisco-Oakland-Hayward Metro) home values have gone up over the past year but they are expected to decline by 3.6% from Sept 2022 to Sept 2023 (ZHVI).

Should I wait until spring 2022 to buy a house? ›

Don't expect much relief in the form of lower rates in the coming months. Therefore, it certainly does not seem to be a good time to buy a house as rates have risen much more rapidly in 2022 than most industry analysts and economists had initially predicted.

Will 2026 be a good year to buy a house? ›

The outlook for the housing market to 2026 is rosy, especially for sellers. Financing looks good and plentiful, housing construction will pick up, and there are endless buyers, especially for single detached homes.

Why are houses so expensive in California 2022? ›

Housing is so expensive in California as there is a limited supply of housing but a high demand for housing due to an increasing population.

Is 2022 a good year to buy a house? ›

Is 2022 a good year to buy a house? Houses are investments that continually grow in value, so yes, 2022 is a good year to buy a home. Even though interest rates are going up, hyperinflated housing prices are beginning to level out.

Is it a good time to buy real estate in California? ›

The good news about home prices in California: They aren't rising as quickly as they are in many other places around the country. Data from the California Association of Realtors shows that the median home price increased by less than 9 percent between April 2021 and April 2022.

Will house prices go down in 2023? ›

In 2023, Yun expects home sales to decline by 7%, while the national median home price will increase by 1%, with some markets experiencing price gains and others price declines. He also projects a strong rebound for housing in 2024, with a 10% jump in home sales and a 5% increase in the national median home price.

Are house prices going to drop again? ›

Figures show that house prices are starting to fall. This decline is expected to continue in 2023. There are a number of reasons for this: Interest rates have increased from their record lows at the end of 2021, making mortgages more expensive.

What will happen to house prices in 2025? ›

This means price growth in the years running up to 2025 will add up to 2021 levels.” Should interest rates soar further than anticipated, taking mortgage rates over the five per cent mark, there is a strong likelihood that house prices will fall.

Will prices of homes drop in 2024? ›

A new report from Moody's Analytics forecasts that — given increased borrowing costs, elevated inflation, and a softening labour market — home prices will see a peak-to-trough decline of about 10% by early 2024.

Is buying a house worth it right now? ›

In 2021, interest rates reached historic lows, making buying a home a more attractive option. However, the Federal Reserve is now raising interest rates to help combat inflation. As a borrower, hearing about higher interest rates is never welcome news – higher rates mean a higher monthly mortgage payment.

Will 2023 be a better year to buy a house? ›

Despite housing prices expected to drop in 2023, it will become more expensive to purchase a home. According to a new projection from Freddie Mac, the for-sale cost of a home is expected to drop . 2% in 2023. Meanwhile, the average 30-year fixed-rate mortgage is expected to increase to 6.4%.


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