The following analysis of the Southern California real estate market is provided by Matthew Gardner, chief economist at Windermere Real Estate. We hope this information can help you make more informed real estate decisions. For more information about the housing market in your area, please contact your Windermere real estate agent.

Regional economic overview

The job recovery in Southern California continues to be quite the rollercoaster, with solid monthly gains followed by significant declines. More than 326,000 jobs returned in the first quarter of the year, but a less than 8,300 increase followed in the second quarter. The latest third quarter data (most recent data is from August) showed the Southern California region added more than 27,000 positions, but this is still disappointing.

The COVID-19 Delta variant has consequences for the labor market and a lack of available labor does not help. In all, the region has restored 1.31 million of the 2.02 million jobs lost when the pandemic hit, but this means Southern California is still losing more than 700,000 jobs. The unemployment rate in the region stood at 8.2% in August, significantly lower than 14.2% a year ago. The most recent data shows that the lowest unemployment rates were in Orange (6%) and San Diego (6.6%). The highest percentage was again in Los Angeles County, where it was 9.7%. While the current pace of the job recovery has been muted, I hope it will pick up in the not too distant future, but the near-term prospects of achieving full employment seem unrealistic.

Southern California Home Sales

❱ In the third quarter, 50,313 homes were sold in Southern California, down 0.1% from the same period in 2020 and 4.7% less than in the second quarter of this year.

❱ Pending home sales, which are an indicator of future closures, were 4.5% lower than in the second quarter of this year, suggesting that the last quarter could also be lower.

❱ Year-over-year home sales increased in Los Angeles County, but increased in the other markets covered in this report. Compared to the second quarter, sales declined in all markets except San Bernardino, where sales were up 6%.

❱ The problem is not demand, but a lack of supply holds the market back. Activity on the list is 22.3% lower than a year ago, impacting sales. That said, quotes were 17.1% higher than in the second quarter and as more choice started to emerge in the market, we were able to see sales volumes increase.

Southern California Home Prices

A map showing the percentage changes in the real estate market in several Southern California counties during the third quarter of 2021.

❱ The average price of homes sold in the region was $971,184. That was 19.1% higher than a year ago, but 1.4% lower than in the second quarter of 2021.

❱ Mortgage rates remain remarkably competitive, even though they are outside the all-time lows of last December. Also note that high mortgage rates are remarkably competitive – a key factor in expensive markets like Southern California.

❱ The region experienced double-digit price increases in all provinces listed in this report. Year on year, prices were up more than 19%, but they were down 1.4% from the previous quarter.

❱ As mentioned in last quarter’s report, I think interest rates will rise slowly, which will likely attract more buyers. With inventory levels starting to rise, I expect the regional housing market to show an upward trend, but probably not until the spring.

A bar chart showing the annual change in home sales prices for several Southern California counties in the third quarter of 2021.

Days at the market

❱ In the third quarter of the year, the average time to sell a home in the region was 17 days, which is 16 days less than a year ago and 2 days less than in the second quarter of 2021.

❱ Three counties saw the time it takes to sell a home decrease compared to the second quarter of this year: Riverside, Los Angeles and Orange. Market time was static in San Bernardino County and increased by one day in San Diego County.

❱ Homes in San Diego County continue to sell faster than other markets in the region. In the third quarter, it took an average of 14 days to sell a home there — 9 days less than a year ago.

❱ Because it takes on average just over two weeks for a home to find a buyer, the market remains very tight. That said, with stock levels rising, it’s possible that the days in the market will get higher, especially as affordability constraints may limit the number of qualified buyers.

A bar chart showing the average days on the market for homes in several Southern California counties in the third quarter of 2021.


A speedometer chart indicating a Southern California seller's market in the third quarter of 2021.

This speedometer displays the state of the real estate market in the region using housing stock, price increases, home sales, interest rates and larger economic factors.

The third quarter was quite a mixed bag, with inventory levels rising but lower sales and prices compared to the second quarter. When I look at list prices, which are a leading indicator, as opposed to selling prices, which are a lagging indicator, I see some easing in San Bernardino, Los Angeles and Riverside counties. While this is not a cause for concern, it may indicate that the market is on the cusp of cooling, albeit modestly.

I have therefore chosen to move the needle a little more towards home buyers, although sellers still have the upper hand.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As chief economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market at both the local and national levels. Matthew has over 30 years of professional experience in both the US and UK

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees of the Washington Center for Real Estate Research at the University of Washington; and serves on the Advisory Board at the Runstad Center for Real Estate Studies at the University of Washington, where he also teaches real estate economics.