Real Estate Market Trends in California for 2024

Stay ahead of the game with the latest real estate market trends in California. Find out what's happening in the competitive California housing market and make informed decisions for buying or selling your property. Don't miss out on valuable insights - explore the current trends today!

California's real estate market saw its fair share of ups and downs in 2023. As we look ahead to 2024, a number of key factors and emerging trends will shape housing and commercial real estate in the Golden State.

The Inside Scoop on the 2023 California Real Estate Market

2023 was a year of moderation for California real estate after the frenzy of the previous few years. Home prices climbed at a slower rate while sales cooled off. The market began shifting back towards buyers in many areas. Rising mortgage rates and economic uncertainty tempered demand. At the same time, the state’s persistently low housing supply kept market conditions tight.

Commercial real estate also saw its share of challenges in 2023. Office and retail vacancies remained elevated due to remote work and changing consumer habits. Industrial real estate stayed strong thanks to ongoing demand from e-commerce and logistics companies.

Key Factors to Consider for real estate market trends in California 2024

As we forecast the California real estate market in 2024, key factors to watch include:

• Interest rates: Mortgage rates are expected to remain above 5% in 2024. Higher borrowing costs will impact affordability.
• Economy: California has seen job and income growth slow. A potential recession could further dampen real estate demand.
• Migration trends: More people left California than moved in during 2022. Increased remote work gives people flexibility.
• Housing supply: Inventory remains low statewide. Ongoing challenges with construction costs and zoning restrictions limit new housing development.
• Commercial real estate trends: Remote and hybrid work arrangements will continue influencing office and retail demand. Industrial and multifamily remain desirable asset classes.

Unique Trends and Insights to Watch

In addition to the major factors above, several emerging real estate trends in California are worth monitoring in 2024:

• The rise of iBuyers like Opendoor and Zillow purchasing homes directly from sellers.
• Ongoing impacts of remote work on housing and office space demand.
• Government programs aimed at increasing affordable housing construction statewide.
• Climate change and sustainability initiatives influencing real estate development and investing.

Housing Market Trends

The California housing market saw a dramatic shift in 2022 as spiking mortgage rates rapidly cooled demand. With rates projected to moderate in 2024, we could see a rebound, but affordability will remain a major challenge.

Home Prices

After rapid appreciation since 2020, expect home price growth in California to continue slowing in 2024. More listings coming onto the market combined with higher mortgage rates will temper bidding wars. Median prices should rise in the low single digits statewide. The Bay Area and coastal metros will likely see minimal price gains while inland California markets could appreciate faster.

Sales Volume

Following 2021's frenzied pace, existing home sales dropped over 20% across California in 2022. Sales activity should stabilize and remain softer through 2024 as buyers adjust to higher rates. The state’s persistent housing shortage and strong economy will keep sales levels moderately healthy.

Inventory Levels

Inventory improved slightly in 2022 but remained near all-time lows. California’s supply crunch won’t improve overnight. However, more existing homeowners may list as part of a lifestyle change, boosting inventory modestly. New construction will also add limited supply, primarily focused on the luxury end.

Affordability

After deteriorating sharply during the pandemic, housing affordability remains a major challenge across California. California's median home price remains over 8X higher than the national median while incomes trail the nation. Increased mortgage rates further reduce purchasing power for buyers. Prices should moderate somewhat, but higher borrowing costs will limit improvement to affordability. Down payments and income requirements will continue pricing many buyers out.

Regional Variations

The San Francisco Bay Area and coastal urban markets like Los Angeles and San Diego, CA saw the fastest home price growth in 2021-2022. Prices remain highest in these regions, and they are likely to flatten out in 2024. Inland markets should see slightly stronger demand from remote workers and buyers seeking affordability. The Central Valley continues offering the state's most affordable options for buyers, though supply is extremely tight.

Commercial Real Estate Trends

Commercial real estate markets face headwinds from economic uncertainty and evolving space usage needs. However, pockets of strength persist, and opportunities will emerge for savvy investors.

Office Space

Office vacancy rates climbed across California in 2022 as companies delayed leasing decisions. With remote and hybrid work arrangements persisting, office demand will remain muted in 2024. Sublease space continues flooding the market too. Tenants seeking flexibility will have bargaining power on shorter leases with concessions. Expect Class A space and sought-after submarkets to outperform.

Retail Space

California's retail real estate faces evolving headwinds. While top-tier malls and open-air centers remain desirable, vacancies are elevated at aging shopping centers. Retailers continue rightsizing footprints, accelerating store closures. Still, necessity-based retail and restaurants in high-traffic locations will draw tenant demand. Adaptive reuse projects breathing new life into obsolete malls also provide opportunities.

Industrial Space

Demand for logistics and distribution space remains robust, keeping industrial vacancies extremely low across California. E-commerce and supply chain problems are driving leasing volume as tenants compete for both warehouse and last-mile space. While deliveries of new space pick up in 2024, competition will remain fierce, especially for modern Class A facilities.

Multifamily Housing

The state's housing shortage bodes well for continued apartment demand. However, growth in rental rates is slowing from 2020-2022's rapid pace as deliveries pick up. Investors still covet multifamily housing, viewing rents as more stable than office and retail income streams. Concessions may increase in some metros to attract renters. Overall fundamentals remain favorable relative to commercial real estate alternatives.

Hospitality

California's hotel sector made strong progress rebounding from COVID slowdowns, aided by strong leisure and group travel. Room rates climbed back near 2019 levels in many markets. However, economic uncertainty may dampen corporate travel in 2024. The return of international visitors will help major gateway markets like San Francisco and Los Angeles. New lifestyle hotel concepts also continue drawing investor interest.

Emerging Trends

The Rise of iBuyers

Investor-backed iBuyers like Zillow, Opendoor, and RedfinNow shook up the 2021 housing market by purchasing thousands of homes directly from sellers. While pulling back temporarily as prices surged, iBuyers remain active in California. They aim to streamline the selling process while taking a fee. With slower 2024 markets potentially worrying some sellers, iBuyers could capture more business. Their impact bears monitoring.

Remote Work's Impact

Remote and hybrid work options gained traction during the pandemic. This trend continues letting some residents move away from major expensive metros. In 2024, remote work will further enable migration to secondary markets within California offering relative affordability and lifestyle advantages. The change isn't a boon for major coastal markets but benefits interior communities.

Sustainable Real Estate

Environmentally-conscious building and renovating practices are increasingly mainstream. Governments, companies, and homeowners want more energy efficiency along with water and resource conservation. Green materials, solar power, EV charging access, and other sustainable elements will become bigger priorities and selling points for California properties in 2024 and beyond.

Answering Key California Real Estate Questions for 2024

What are the best regions to invest in real estate?

Coastal urban centers remain competitive thanks to their strong economies. Areas within commuting distance to major hubs can offer value for remote workers. The Central Valley provides affordable options. Regardless of area, focus on markets with growing populations and employment bases. Proximity to amenities is also key.

What challenges face the market?

Higher interest rates and a potential downturn limit buyers’ purchasing power. New construction faces hurdles like high costs and strict regulations. Housing supply shortages won’t improve overnight. For commercial real estate, the unknown impacts of remote work present a hurdle to long-term planning.

What advice should buyers and sellers heed?

Sellers should price homes competitively and expect slower sales processes than 2021-2022’s frenzy. Buyers need patience and shouldn’t feel rushed into major financial decisions. Working with experienced real estate professionals is critical for both groups.

How is the California real estate market doing right now?

California now has a healthy seller's market. Residences are in extremely high demand, thus listing costs have gone up and residences usually don't stay on the market for very long.

Is now the right moment to list a California home for sale?

It's often a good time for California homeowners who are considering selling due to the high demand and increasing listing prices.

Consider purchasing a home in California. Is this the right time?

Considering the present demand, purchasing a home in California may be difficult because of rising costs and fewer possibilities. If you discover the appropriate property, you could still be able to save money given the low mortgage rates right now.

Is it now a smart idea to invest in California real estate?

Real estate investing in California may be advantageous due to the high demand for houses in areas like Los Angeles and San Diego. Profitability, however, may need strategic preparation, such as choosing the ideal communities and establishing an effective property management strategy.

How are the major cities in California faring in terms of real estate?

Major Californian cities including San Francisco, Los Angeles, and San Diego have experienced rising listing prices and a high demand for properties, resulting in seller's markets.

What does the real estate market in California's future hold?

Although it is difficult to forecast the future of the California real estate market, current trends such as high demand and cheap mortgage rates may persist. Changes in economic conditions, however, may also have an impact on the market.

How can I stay up to date with the most recent real estate market trends in California?

Keep abreast with local market information and news, sign up for California real estate publications, and think about working with a neighborhood real estate agent who can offer knowledgeable insights.

The Outlook for California Real Estate in 2024

In 2024, expect moderating home prices, slower sales, and improved inventory across California’s housing market. Though appreciation should slow, limited supply and a strong economy prevent major downturns. Commercial real estate faces more uncertainty, with office and retail space struggling while industrial remains healthy. For both groups, the state’s persistent housing shortage underpins long-term investment appeal.

While rising interest rates bring headwinds, California real estate retains desirability thanks to the state’s iconic lifestyle, coastal cities, tech-powered economy, and limited housing supply. Savvy investors who can ride out some slowing, especially for commercial properties, will still benefit from long-term appreciation in 2024 and beyond.