Southern California Home Prices Reach Record High in 2022 Amid Sky-High Mortgage Rates

The housing market in Southern California is currently experiencing a historic boom, with home prices reaching record highs in March 2022. Despite sky-high mortgage interest rates, the average home price in the region has soared to $869,082, up 9% from the previous year.

The combination of limited inventory and a wealth gap has led to a surge in cash buyers who are able to outbid others and negate the impact of high rates. Many buyers are professionals such as architects and Hollywood types, who have saved, liquidated stock portfolios, or received help from family to make hefty down payments well over 20%.

While some buyers are able to navigate the high prices and rates, others are finding it increasingly difficult to afford a home in the current market. According to the California Association of Realtors, only 11% of households in Los Angeles and Orange counties can reasonably afford the median-priced house.

Despite the challenges, forecasters predict that prices will remain elevated due to tight inventory and continued income growth. To truly make housing more affordable, experts suggest the need for increased income growth and more housing construction.

As the market continues to evolve, many buyers are exploring alternative strategies such as co-borrowing with family and friends to make homeownership more attainable. While there are signs of a rebound in construction, the housing market in California is facing challenges that require innovative solutions to ensure affordability for all residents.