Southern California Home Prices Soar to Record Highs in 2021

Southern California home prices continued to soar in 2021, with the median price increasing by a staggering $102,000 in just one year. According to data from DQ News/CoreLogic, prices set records in 10 out of 12 months last year, while sales reached a 15-year high.

The housing market in 2021 “continued to defy gravity and stay hot,” said one economist, highlighting the unprecedented growth in home prices and sales. The median price of a Southern California home hit a record high in December for the 10th time in the past 12 months, reaching $697,500.

Despite a slight moderation in sales in December, the total number of home sales for the year was the highest since 2006. Annual home prices saw a remarkable 16.3% increase in 2021, marking the highest rate of price appreciation since 2013.

Several factors contributed to the extreme performance of the housing market in 2021, including record-low mortgage rates, a shortage of for-sale inventory, and high demand driven by millennials entering their prime homebuying years. The low inventory of homes for sale led to fierce competition among buyers, with many homes selling above asking price and buyers waiving contingencies such as appraisals and inspections.

Looking ahead to 2022, rising mortgage rates are expected to temper the rapid price appreciation seen in 2021. While forecasters predict that prices will continue to rise, the rate of appreciation is expected to be more moderate, in the 3-7% range.

Despite the potential impact of rising mortgage rates on buyer demand, the supply and demand imbalance in the housing market is unlikely to be resolved anytime soon. With inventory levels remaining low, competition among buyers is expected to remain high, making the housing market in Southern California a challenging environment for buyers in the year ahead.