Forecast: California Home Prices Will Slow, But Not Drop, in 2022

By Brandon Cornett | © 2021, LoanLimits.org | All rights reserved


Key highlights from this housing report:
California home prices are expected to rise more slowly in 2022
But home prices in California are not expected to drop in 2022
That’s according to a forecast from the state’s Realtor association
Supply and demand imbalance is putting upward pressure on prices
Overall, the market is expected to remain competitive next year

Last month, the California Association of REALTORS (C.A.R.) published their housing market forecast for 2022. Among other things, the industry group offered some predictions relating to house values.

C.A.R. researchers believe that home prices in California will rise more slowly in 2022, compared to 2021. Quite a bit slower, in fact. But they do not expect to see a drop in prices any time soon.
California Home Prices Predicted to Slow Down in 2022

According to the state’s Realtor association, home-price appreciation in California will slow down considerably in 2022. That’s according to their long-range housing market forecast, published in October of 2021.

C.A.R. predicted that the median home value in California would rise by 5.2% in 2022. In 2021, the median price is projected to rise by 20.3% (by year’s end). So we’re talking about a significant reduction in annual price growth, from 2021 to 2022.
By the end of this year, the state’s median house value could reach $793,100.
By the end of 2022, the median price point is projected to reach $834,400.

(Of course, this is only a forecast for California home prices. It’s the equivalent of an educated guess. No one can predict future housing trends with complete accuracy.)

Their prediction for 5.2% home price growth in 2022 would actually be a move toward normalcy. The 20% gains seen during 2021 are highly unusual and generally not sustainable over the long term. From an economic and market stability, California could actually benefit from a slowdown in home price growth.




So we shouldn’t view this forecast as a negative assessment of the state’s housing market. On the contrary, sales activity is expected to remain steady throughout 2022.

C.A.R. is predicting that California home prices will slow down in 2022. But the market as a whole will likely remain active and competitive next year.
But Prices Are Not Expected to Drop

Given the meteoric rise in house values over the past 15 months or so, it’s only natural to wonder if California home prices will drop in 2022. But that doesn’t seem likely.

A few cities across the state could see a dip in prices during 2022 — or at least a leveling off. But in the majority of California’s local housing markets, home prices are not expected to drop in 2022.

A slowdown, on the other hand, seems likely. That’s what C.A.R. and other forecasters have predicted. The general consensus appears to be that home prices in California and nationwide will wisely more slowly in the months ahead.

Related: Will houses get any cheaper in 2022?

A few weeks ago, the real estate data company Zillow surveyed a group of housing analysts and economists about future real estate trends. Among other things, the group predicted that house values would slow down nationwide.

To quote that report:


“Experts surveyed expect home prices nationwide to increase a cumulative 31.8% through 2025, the equivalent of an average annual rate of 5.7% — far below the current annual appreciation of about 17%.”

This outlook closely matches the C.A.R. forecast for home prices in California, extending into 2022. House values are expected to slow down, but not drop, over the coming months.