2021 Marks Strongest Year for Housing in Over a Decade: Even though the pace of sales was falling last month, December solidified 2021 as the best year for existing single-family home sales in over a decade. With an annualized pace of more than 444,000 units, home sales were 7.9% ahead of 2020, which also rose by 3.5% from 2019. That marks the best year for closed transactions since 2009. Median prices also set a new record—coming in just shy of $800,000 for the year. Despite ongoing challenges with the pandemic, a labor market that has yet to fully recover, and interest rates that rose gradually throughout the year, buyer demand remains strong by pre-crisis standards although limited supply is expected to weigh on sales in 2022.
CA Homeownership Rising in New Census Data: Recently released data from the 2020 American Community Survey shows that the anecdotal "renewed passion for homwownership" has been borne out by the facts. Overall, homeownership increased to 56.1% in 2020 from 54.9% in 2019. Notably, this increase was shared across all major ethnic groups with the largest gains amongst the Latino and Asian populations, though Black and white homeownership also rose. These numbers should be interpreted with some caution given the effect of the pandemic on Census data collection efforts, but the direction of the change likely remains valid nonetheless.
California Continues Employment Recovery Despite COVID: A total of 50,700 net jobs were added to nonfarm payrolls in California last month, marking the 11th consecutive monthly increase—all of which have been in excess of 50,000 jobs. Job gains were broad based across most industries in California. Many lower-wage, higher-contact jobs returned in December as hotels, bars, and restaurants led the increase with 15,000 new positions last month. However, higher-wage, remotable jobs in Professional, Scientific, and Technical Services had the second fastest growth last month and also added 8,900 new jobs. Retail trade remains the standout, shedding an additional 7,300 positions as consumers continue to shop online. This appears to be one of the more persistent effects of the pandemic—even as consumers begin to dine out, vacation, and recreate, retail stores have seen a consistently slower recovery.
Continued Normalization Amidst Higher Rates, More Inflation, and Lower Inventory: Despite the abundance of positive news last week, the market does face significant headwinds to maintaining its current level of home sales in 2022. Interest rates rose to 3.56% in the latest Freddie Mac survey. In addition, consumer inflation, driven primarily by surging vehicle prices, continues to run hot, which will likely spur the Federal Reserve to take an aggressive stance on interest rates this year, meaning further rate increases are coming. This is already helping to subdue mortgage applications, which continue to fall from 2021 levels, though they remain robust by pre-crisis standards.
If you're ready to discuss today's market and whether now is a good time for you to buy or sell, give me a call at (562) 900-9430.
