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

46,500 new and resale home transactions closed escrow in California during September 2021. The number of homes sold in September was 1,700 or 4% higher than a year earlier. For reference, this slight year-over-year sales volume decrease follows months of 10%-20%+ annual increases.

The steep annual sales volume rise over the past several months has been 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.

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. As of September 2021, year-to-date (YTD) home sales volume is a significant 32% above a year earlier.

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;
  • mortgage interest rates, which have remained near historic lows throughout 2020-2021;
  • 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 in 2021; and
  • in 2021, homebuyer fear-of-missing-out (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 32% above a year earlier as of September 2021. YTD sales suggest home sales volume will end the year around 20%-25% over 2020, a huge jump compared to the past decade of stagnant sales volume.

California home sales in 2022 and beyond

Despite the sales volume jump being experienced in 2021, 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; 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 2023-2024.

Read more about home sale trends and view California’s home sales volume charts here.