California home sales volume continued a seasonal decrease in October 2021 after reaching the highest levels seen since the 2008 recession in mid-2021.

44,400 new and resale home transactions closed escrow in California during October 2021. The number of homes sold in October was 2,100 fewer than the prior month and 1,100 fewer than a year earlier, amounting to a 2% year-over-year decrease. For reference, this slight annual sales volume decrease follows months of rapid sales that 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. Homebuyers have also been influenced by a fear of missing out (FOMO) on a low inventory of homes for sale. 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 October 2021, year-to-date (YTD) home sales volume is a significant 28% above a year earlier. YTD sales along with seasonal trends suggest 2021 annual home sales volume will end the year around 20% over 2020, a huge jump compared to the past decade of stagnant sales volume.

A return to seasonal trends

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 heading into 2022;
  • homebuyer confidence, which has swung wildly since the outset of the 2020 recession and continues its volatile path through today’s recession hangover;
  • available multiple listing service (MLS) inventory, which remains below homebuyer demand in 2021; and
  • in 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 28% above a year earlier as of October 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 20% increase for a total of roughly 529,000 home sales.

California home sales in 2022 and beyond

Despite 2021’s sales volume jump, home sales are expected to fall back in 2022, 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; and
  • the ongoing recovery of job losses of 2020, just over one million of which are still absent from the jobs market as of September 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.

For more information, read more about home sale trends and view California’s home sales volume charts.