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Home Buying in California

La Jolla Coastal Community San Diego California

There is no place quite like California. The Golden State delivers diverse opportunities and lifestyle options, from its mountain ranges and ocean beaches to its bustling cities and rural counties. There are plenty of opportunities to participate in outdoor activities throughout the year, including surfing, hiking, and skiing, and the state is world-renowned as an entertainment and cultural powerhouse.

California has long been and continues to be the country's priciest housing market and most populated state. However, its population growth has slowed significantly since the turn of the 21st century. Some major metropolitan markets, including San Francisco, San Diego, Sacramento, and Los Angeles, have seen a reduction in construction rates, a significant drop in affordability compared to most other states, and growing unemployment. California's bottom-tier homes, which are the types of homes typically bought by first-time home buyers, are, on average, 33% more expensive than mid-tier homes throughout the rest of the US.

California is undoubtedly facing a housing crisis, with many Californians priced out of the market. For home prices to stabilize, affordability and inventory must rise sharply. The affordability issue is most exaggerated in California's coastal regions. For example, San Francisco and San Mateo show that only 8.4% of homes for sale are affordable to those making the area's median income of $133,800.

Before buying a house in California, you'll want to understand your housing needs, get your credit and finances in order, and find a realtor to guide you. However, the most critical step is understanding California's unique housing market.

Current California Housing Trends

To understand home buying in California, you'll want to look closely at current market trends.

Here are some critical numbers:

  • California Median Home Price

    The median California home price is around $850,000, much higher than the national median of less than half that amount. Median home prices are even higher in some of the state's metropolitan areas, like San Diego and Los Angeles. Regionally, it's the same disparity: Oregon, Nevada, Arizona, and Idaho fall within the range of $400,000 to $500,000 for a median home price. The median home price in Washington state is approximately $600,000.

  • Number of Homes Sold

    While California is facing a serious housing crisis, homes are still being bought and sold throughout the state, in fact, about 25,000 are sold each month. According to forecasts, that number and the cost of homes in California will continue to rise.

  • Median Days on Market

    In California, often characterized as a seller's market, the median DOM (Days on Market) is 27 days, which is lower than in other states. Homes closer to Los Angeles, including those found in Orange County and the San Fernando Valley, tend to sell faster, often within weeks, thanks to high demand and proximity to job centers. In rural areas like the Central Valley or northern parts of the state, the median DOM will be longer, averaging more than 40 days, primarily because of lower population densities and fewer buyers entering the market.

  • Supply Statistics

    California's population grew by 6.1% for nearly a decade, but the state's housing supply only grew by 4.7% in recent years. Currently, California remains around 50% below the 180,000 new units needed annually to serve the population.

How to Find the Right Home to Buy in California

Suburbs Near Huntington Beach California

When buying a home, it is strongly recommended you work with a realtor. A realtor will help you find the right home to buy based on your budget and needs. Realtors are essential in guiding you through the California home-buying process.

When choosing a real estate agent, here are some of the characteristics you should look for:

  • Good communication skills
  • A working knowledge of the regional housing market
  • Experience
  • Licensing
  • References
  • Referrals from family and friends

Finding the Right Home

When buying a home in California, here are some things you will want to consider:

Location

Location is everything when buying a home in California. Location impacts not only the purchase price of the house but also various other quality-of-life issues, such as where your children attend school and how long it takes to commute to and from work.

Be sure to consider the following elements:

  • Urban life vs. Suburban living: California's bustling urban centers contrast starkly with its serene suburban neighborhoods. Major metropolitan cities like San Diego, San Francisco, and Los Angeles are known for their vibrant culture, excellent healthcare facilities, and diverse job opportunities, all in a concentrated area. In suburban areas like Walnut Creek, Palo Alto, and Irvine, you'll discover a quieter lifestyle, spacious properties, and more family-friendly environments while still having access to reasonable commute times to and from the major cities.
  • Proximity to Work: Most of California's major employment hubs are concentrated in Silicon Valley, San Francisco, Los Angeles, and other major cities. This can strongly influence housing decisions because proximity to their workplace becomes a key factor for those who work outside the home. Cupertino, Oakland, and Santa Monica are popular home-buying locations because they offer shorter commutes, access to major highways, and overall higher quality of life for professionals working in the city.
  • Public Transportation: Access to public transportation is also a critical factor in California's housing market. The state's extensive public transit systems, including BART, Metro, and Caltrain, are vital for many commuters. Homebuyers often prioritize properties near transit stations, bus routes, or commuter rail lines. Towns like Berkeley, Pasadena, and Redwood City are particularly appealing to those who seek quick access to urban centers without needing a car, and even those who work remotely appreciate the convenience of nearby public transportation.

Type of Home

When buying a home in California, the type of residence you choose plays a significant role in your lifestyle and investment. With so many options available, it's essential to consider what best fits your individual needs.

Here are some common home types you might encounter while buying a home in California:

  • Single-Family Homes: Single-family homes are highly sought after because they offer privacy, space, and autonomy. These detached homes typically feature outdoor space. However, owning a single-family home means taking on all maintenance responsibilities, from gardening to fixing appliances and managing utility bills. Despite the added work, many homeowners appreciate the freedom of not sharing walls or amenities with their neighbors.
  • Condominiums: Condos are especially popular in urban centers like Los Angeles and San Francisco. They offer a low-maintenance lifestyle with the added benefit of shared amenities such as pools, fitness centers, and security. Condos are often in prime locations, close to restaurants, shopping, and public transportation. However, condo living comes with monthly homeowners' association (HOA) fees, which cover maintenance and amenities but may also include certain rules and restrictions that residents must follow.
  • Townhomes: Townhomes in California provide a middle ground between single-family homes and condos. They are typically more affordable than single-family homes and require less outdoor maintenance. Many townhome communities are designed with shared spaces like parks and playgrounds, making them attractive to families. However, townhomes often have shared walls with neighbors and may offer less privacy and space than single-family homes.
  • Duplexes and Triplexes: Another home buying option in California is the duplex or triplex, where you can own a multi-unit property. These homes are popular for those interested in living in one unit while renting out the other(s) to generate income. They offer the advantage of potential rental income while providing some of the autonomy and space of a single-family home. However, being a landlord comes with great responsibility, including property maintenance and tenant management, which may not be for everyone.
  • Bungalows and Cottages: These smaller homes are often found in older neighborhoods throughout California. They provide a cozy living experience with the benefit of outdoor space. They are ideal for those seeking a single-story living environment with character and history.While they may lack modern amenities, their unique style and often lower cost make them appealing to many homebuyers.
  • Luxury Homes: Throughout California, but particularly in areas like Beverly Hills, Malibu, and Napa Valley, luxury homes feature expansive properties, high-end finishes, and exclusive locations. These homes often have extensive amenities like private pools, home theaters, and guest houses. While they come with a hefty price tag, luxury homes provide unmatched comfort and prestige.

The Typical Home Buying Process in California

The home-buying process in California typically involves the following steps:

  • Get prequalified for a home loan.
  • Partner with a local real estate agent.
  • Make an offer.
  • Schedule a home inspection.
  • Close on your new home.

Financing Your Home Purchase

Financing Your Home Purchase

Here are some ways to finance a home purchase in California:

Traditional Mortgages

Typically, two types of traditional mortgage options are available to California home buyers:

  • Fixed-rate mortgages: These are the most common type of mortgage. They maintain the same interest rate for the life of the loan.
  • Adjustable-rate mortgages (ARMs): An adjustable-rate mortgage has an interest rate that fluctuates based on market conditions.

California homebuyers often turn to large financial institutions like Bank of America and Wells Fargo to secure traditional mortgages. These lenders offer various mortgage products and competitive rates, making them popular among homebuyers.

Government-Backed Loans

For California home buyers, there are several government-backed home loans available through the California Housing Finance Agency:

Down Payment Assistance Programs

  • California Dream for All Shared Appreciation loan: This down payment assistance program targets first-time homebuyers to help with down payment and closing costs.
  • MyHome Assistance Program: MyHome offers a deferred-payment FHA junior loan up to 3.5% of the purchase price or appraised value and a deferred-payment conventional junior loan up to the lesser of 3% of the purchase price or appraised value. Both aim to assist California home buyers with down payment and closing costs.

California Home Insurance

California Home Insurance

California does not require home buyers to carry home insurance. However, most mortgage lenders require it as part of their terms and conditions. Some areas of California are known for their particular susceptibility to natural disasters, such as floods, wildfires, and earthquakes, which can significantly impact insurance rates. For instance, homes near forested areas may see their premiums double due to the increased wildfire risks. Similarly, coastal properties at risk of flooding often require specialized flood insurance, which can add substantial costs to a homeowner's insurance policy.

Home Buying Challenges

There are many challenges for California home buyers, including:

  • High home prices: The state's home prices are incredibly high relative to median incomes. California has the highest home prices in the country, except for Hawaii.
  • Limited housing supply: Housing production in California continues to fall short of the projected needs, so the selection of affordable homes remains scarce.
  • High demand for housing: California's high demand for homes has created a seller's market with buyers facing fierce competition.
  • Elevated construction costs: Construction costs are quite high in California due to regulatory hurdles, mandatory fees, and the high cost of land and labor.
  • High mortgage rates: As mortgage rates continue to climb, it is more difficult for California home buyers to secure and repay mortgage loans.
  • Greater initial investments: Down payments and closing costs are high in California, creating another barrier to entering the home-buying process.

Navigating the California Home-Buying Journey

Buying a home in California can be a complex and overwhelming experience. Therefore, California homebuyers must carefully consider factors like high costs and limited supply to the competitive market and the state's unique financing options. While the state's diverse geography, dynamic economy, and rich culture make it attractive to homebuyers, these factors contribute to the unique challenges they face. Understanding California housing trends, choosing the right location, and finding a suitable property type are all critical steps.

California's housing market is not for the faint of heart. Therefore, working with a real estate professional is essential in navigating California's unique housing market. A realtor can help you identify opportunities and avoid pitfalls, ensuring a smooth home-buying experience.

Whether you're drawn to the vibrancy of urban areas like Los Angeles and San Francisco, suburbs like Irvine or Palo Alto, or coastal towns like Santa Monica, there is something for everyone in California. If you stay informed and make strategic decisions, you can turn the challenges of the California housing market into an opportunity to invest in one of the most desirable states in the country.

Instant Access to California Property Records

Home Buying Guide

Instant Access to California Property Records

  • Owner(s)
  • Deed Records
  • Loans & Liens
  • Values
  • Taxes
  • Building Permits
  • Purchase History
  • Property Details
  • And More!

Instant Access to California Property Records

  • Owner(s)
  • Deed Records
  • Loans & Liens
  • Values
  • Taxes
  • Building Permits
  • Purchase History
  • Property Details
  • And More!

Instant Access to California Property Records

Home Buying Guide

California Property Resources