California home sales volume decreased slightly in November 2021. This follows a mid-2021 peak for sales volume, which saw the highest number of homes sold since the 2008 recession.

43,400 new and resale home transactions closed escrow in California during November 2021. The number of homes sold in November was 1,000 fewer than the prior month but 2,700 more than a year earlier, amounting to a 9% year-over-year increase. For reference, the rapid pace of sales experienced since 2020 began to taper off in the second half of 2021.

The steep annual sales volume rise that occurred earlier in 2021 was thanks to homebuyers taking advantage of low interest rates and stimulus boosts. A strong fear of missing out (FOMO) on a low inventory of homes for sale has also influenced homebuyers. However, as the effects of stimulus are now behind us and interest rates are tilting higher with the Federal Reserve’s (the Fed’s) bond taper, homebuyers have begun to ease off the gas and sales volume is slowing.

At an annual rate, 2020 ended with 439,200 annual home sales in California. In total, 1,700 more home sales closed in California during 2020 than the prior year, amounting to a meager 0.4% increase in sales, despite the volatile dips and swings experienced during this pandemic year.

2020’s flat performance followed years of flat-to-down sales volume following the profitable years of the Millennium Boom. However, as of November 2021, year-to-date (YTD) home sales volume is a significant 25% above a year earlier. YTD sales along with seasonal trends suggest 2021 annual home sales volume will end the year around 23% over 2020, a huge jump compared to the past decade of stagnant sales volume.

Is it a seasonal trend, or something more?

Home sales vary from month-to-month for a variety of reasons, most significant being homebuyer demand. This demand is influenced by several factors currently at work in California’s homebuying market, including:

  • seasonal differences, as sales volume tends to peak mid-year, falling into the slow winter months with a small end-of-year December bounce;
  • mortgage interest rates, which have remained near historic lows throughout 2020-2021 but are inching higher in 2022;
  • homebuyer confidence, which has swung wildly since the outset of the 2020 recession and continuing through today’s recession hangover;
  • available multiple listing service (MLS) inventory, which remains below homebuyer demand at the start of 2022; and
  • in 2020-2021, homebuyer FOMO, which has pushed both sales volume and prices over sustainable heights.

Offering a wider lens for viewing home sales, YTD home sales volume peaked in summer 2021 and continues to fall back, now 25% above a year earlier as of November 2021. However, following the pre-pandemic seasonal sales volumes trends tells us sales volume reports are likely to show the recent slowdown in sales continue in the last months of the year. Thus, firsttuesday forecasts 2021 annual sales volume in California will show a 23% increase for a total of roughly 533,000 home sales.

California home sales in 2022 and beyond

While home sales volume jumped in 2021, the trend will not continue in 2022. Home sales are expected to fall back due to:

  • the recent expiration of the foreclosure moratorium, which will cause a backlog of forced sales to hit the market, dragging down home prices and discouraging homebuyers;
  • lower homeowner turnover as buyer FOMO subsides in the face of rising inventory;
  • a lack of support from interest rates; and
  • the ongoing recovery of job losses of 2020, over 700,000 of which are still absent from the jobs market as of November 2021.

The housing market won’t begin a consistent recovery until well after the need for government intervention and the pandemic response have ended, a timeline which continues to shift. Then, California’s housing market will need to emerge from the ongoing recession hangover and recover the historic job losses of 2020. This stable recovery is not likely to even begin until around 2024.

To read more about home sale trends and firsttuesday’s analysis, view California’s home sales volume charts.