Can California's Real Estate Market Survive?

With increasing home prices, a shortage of homes, and many tech employees working from home, is California’s real estate market poised for a drastic change? The state is known for its opportunities and dreams of Hollywood success stories, but the pandemic has since rattled everything. One real estate professor told Realtor.com that nobody would bet against California, yet a state cannot remain golden with such high home prices. Nine of the 10 most expensive metro areas can be found in California, and home prices reached a new high in August. California’s median home price is now $720,050.

That's more than 10 times California's median household income of $70,489 in 2018, according to the latest U.S. Census Bureau data.

The price hikes are due to the dearth of homes for sale. The shortage has been going on for years, but it's been compounded by the COVID-19 crisis. Shut in their abodes for months on end, Americans are seeking larger homes for working and schooling their children. But there simply aren't enough properties to satisfy demand, with the number of new listings down nearly 11.1% from August of last year on realtor.com.

Leslie Appleton Young, chief economist of the California Association of Realtors®, attributes some of that rapid run-up in prices to rich, white-collar workers who can now telecommute buying up luxury properties in more remote locations. In July, sales of homes priced at $3 million and up increased by about 76.6% year over year, she says. Homes priced at $1 million and up now make up about 20% of the state's sales.

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