Introduction
Despite being down 4% year-over-year, California's housing market seems to be defying expectations in various ZIP codes, with record-high home prices making headlines once more. How is this possible, and what does it mean for buyers and sellers? Let's take a closer look.
A Brief Overview of California's Housing Market
While the state's real estate market cooled off from its peak last year, many California neighborhoods are once again experiencing rising home prices. In fact, home prices in 34 California ZIP codes reached all-time highs in June 2023. These areas are primarily concentrated in Central and Southern California, including six ZIP codes in Fresno County and 12 in Los Angeles and Orange County.
The Pandemic Effect
The COVID-19 pandemic saw a surge in home values across the state, particularly in suburban and rural areas that gained popularity due to the remote work revolution. However, this boom experienced a cool-down, especially in urban regions like parts of Los Angeles and San Francisco where affordability became a major issue.
An In-depth Look at Record-Breaking ZIP Codes
The ZIP codes setting new records in 2023 are diverse in nature—ranging from rural to urban settings, and from modest to high market values. For example, ZIP code 93307 in Bakersfield and 93257 in Porterville (Tulare County) represent smaller and more rural communities, whereas 92657 in Newport Beach and 92617 in Irvine are more densely populated and urban.
What Determines These Highs and Lows?
Zillow's estimates are a good indicator of what drives these prices. Their data includes not just recently sold homes but also the estimated value of all homes in a particular ZIP code. According to experts, the price growth was expected to be highest in California's less expensive areas. Supporting this, many ZIP codes where home prices broke records had average values far below the statewide average of $743,000. For instance, several ZIP codes in Fresno had an average home value of around $200,000.
However, it's not just about affordability. Some of the priciest ZIP codes in the country also made the list, with 90210 in Beverly Hills topping the chart at an average home value of $5.5 million in June.
The Broader Regional Perspective
Big metropolitan regions like Los Angeles County and the Bay Area are also seeing their share of record highs in some ZIP codes.
Market Influencers
According to Patrick Carlisle, chief market analyst for Compass, low inventory across the state and nation is one of the main drivers of these record prices. The "mortgage lock-in effect" keeps many homeowners in their current homes, leading to low activity in the market and higher prices. Paul Salazar, a real estate agent, adds that the situation is not indicative of an overheated market but rather a buyer's or neutral market in Los Angeles. Homes selling now are either "turnkey" homes or have unique features that attract buyers.
Conclusion
Despite the general downturn in California's real estate market, select ZIP codes are setting new records in home prices. Market analysts attribute this to a range of factors, from the low housing inventory to the specifics of what buyers are looking for in a home. While it's too early to predict the future, understanding these trends provides invaluable insights for both buyers and sellers.
Whether you're a buyer waiting for the perfect fit or a seller considering putting your home on the market, understanding these dynamics can offer you a crucial edge in navigating California's complex real estate landscape.
