Record prices and profits in ’22, but the gains will slow this year
Homeowners enjoyed solid gains in 2022, even with higher mortgage rates and a much-slower housing market, whether they held or sold their property.
The average home sold for a record $689,000 in California in 2022, a 7.7% gain for the year – and a 53% increase for the last five years and up 160% over the past decade, according to ATTOM Data.
But the record-setting prices – and profits – are likely over, as higher mortgage rates caused prices to slip during the second half of last year.
“It seems pretty likely that home-seller profits peaked for this cycle in 2022,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “Median prices have declined on a monthly basis since mortgage rates doubled between January (2022) and October, and are likely to decline further … reducing profitability for home-sellers.”
The California Association of Realtors forecasts sales will plummet to 333,400 homes in 2023, a 7.2% decline compared to the projection for this year – and the fewest sales since 2007, considered the start of the housing market meltdown in the state.
December home sales plummeted 44% compared to a year ago, as buyers deal with the higher mortgage rates and homeowners hold off amid the market uncertainty.
DON’T CRY FOR ME, CALIFORNIA
But don’t feel too bad for home-sellers, especially for those who completed deals in 2022. Seven of the eight cities reviewed generated record profits for home-sellers, including $621,000 in San Jose and $473,000 in San Francisco.
That’s the dollars in your pockets after the mortgage is paid off. Of course, many home sellers buy another home, but they have a large down payment, especially compared to those looking to purchase their first home.
Post continues after the table
Home sellers enjoyed record profits in seven of eight regions in 2022
| Region | ’22 profit | % vs. a year ago |
|---|---|---|
| San Jose | $622,000 | +8.3% |
| San Francisco | $473,000 | +3.5% |
| San Diego | $295,000 | +13.7% |
| Los Angeles | $272,500 | +3.8% |
| Inland Empire | $210,000 | +19.0% |
| Sacramento | $198,000 | -0.3% |
| Fresno | $137,500 | +22.8% |
| Bakersfield | $117,000 | +17.0% |
While Bay Area home sellers can boast about the biggest dollar paydays in the state, Central Valley home sellers enjoyed the most significant percentage returns at 23% in Fresno and 17% in Bakersfield (see chart, below) compared to a year ago.
The percentage gains were even more impressive for homeowners who bought five years or a decade ago. Homeowners in all eight cities at least doubled their money over the past decade – and home prices in the Inland Empire (Riverside and San Bernardino counties) and the Sacramento region tripled.
And for those who bought at the of the market – between 2009 and 2011, depending on the region – the gains were even more significant, including $446,000 in Silicon Valley and $365,000 in 2009.
Building equity and boosting profits
Feeling rich? If you’re a homeowner, you probably should.
More than three of every five (62%) homeowners in California with a mortgage have more equity than debt based on the current market value of their property.
San Jose has the most so-called “equity-rich” homeowners at 74% in the U.S. Two of every three homeowners with a mortgage in San Diego and San Francisco are equity rich.
All of that equity has allowed homeowners to buy cars, finance home-improvement projects or pay off high-interest loans. But fast-rising mortgage rates have stalled homeowners from tapping into their equity during the past several months, according to the Mortgage Bankers Association.
And that could continue for some time, as home values – and home equity – tick lower, says ATTOM CEO Rob Barber.
“Dents are beginning to surface in the armor around the U.S. housing market after 11 years of a strong showing for owners,” he says. “Home values have been dropping since the middle of last year, which appears to be starting to cut into homeowner equity around the country. That’s probably happening because values are sinking faster than owners are paying off their mortgages.”
Percentage of equity-rich homeowners
- San Jose: 74%
- San Francisco: 67%
- Los Angeles: 66%
- San Diego: 66%
- California: 62%
- Riverside-San Bernardino: 56%
- Sacramento: 53%
- Fresno: 51%
- Bakersfield: 43%
| Region | Median sale price | % vs. a year ago | % vs. 10 years ago | Bottom of the market price |
|---|---|---|---|---|
| California | $698,000 | +7.7% | +160% | $237,500 (’09) |
| San Jose | $1.4 million | +7.9% | +164.7% | $446,250 (’09) |
| San Francisco | $1.2 million | +5.7% | +166% | $365,000 (’09) |
| Los Angeles | $875,000 | +8.3% | +146.5% | $338,000 (’11) |
| San Diego | $804,500 | +11% | +142% | $302,000 (’09) |
| Sacramento | $560,000 | +6.7% | +196.3% | $176,500 (’11) |
| Inland Empire | $540,000 | +12% | +200% | $160,000 (’09) |
| Fresno | $385,000 | +11.6% | +172% | $134,000 (’11) |
| Bakersfield | $325,000 | +8.3% | +166.4% | $115,000 (’11) |
