The California housing market has been a focal point of interest, particularly in recent months. In this report, we delve into the latest data from September, shedding light on the trends and dynamics affecting the housing market in the Golden State. The latest data released by the C.A.R. presents a detailed overview of the California housing market.
In September, California witnessed a total of 240,940 existing, single-family home sales, reflecting a 5.4% decrease from the previous month (August) and a notable 21.5% decline from September 2022. The median home price for the state in September stood at $843,340, indicating a 1.9% drop from August but a 3.2% increase from the same month last year. Year-to-date statewide home sales were down by 28.5% in September.
California’s housing market has been undergoing a test due to persistently high mortgage rates, resulting in a fourth consecutive month of declining home sales in September. The median home price, however, continued its upward trajectory for the third consecutive month, experiencing its most significant year-over-year gain in over a year.
Persistently high mortgage rates have contributed to the decline in home sales, a trend observed over the past few months. Closed escrow sales of existing, single-family detached homes in California totaled 240,940 in September. This figure, when annualized, reflects the total number of homes that would be sold in 2023 if sales maintain the September pace throughout the year.
The slowdown in the market has created more favorable conditions for homebuyers. With reduced competition, consumers seeking a home for personal reasons or those who qualify for today’s interest rates find greater opportunities in the market.
C.A.R. President Jennifer Branchini noted, “More sellers are making concessions as homes are taking longer to sell, fewer homes are selling above asking price, and there are more homes to choose from.”
Despite the dip in September’s median home price from the previous month, California’s statewide median price has shown consistent year-over-year growth. The market is expected to experience monthly price declines in the coming months, following the traditional seasonal pattern. However, positive year-over-year price growth is anticipated to persist through the remainder of the year due to the ongoing housing supply constraints.
C.A.R. Senior Vice President and Chief Economist Jordan Levine commented on the current scenario: “As mortgage rates surge to new highs not seen in more than two decades, home sales are being tested and are likely to remain tepid for the next few months. Housing affordability will continue to hinder sales activity for the rest of the year, especially in the low- and mid-price ranges.”
California Housing Market: Regional Trends – September 2023
Sales Trends Across Major Regions
In September 2023, all major regions in California witnessed a significant year-over-year decrease in home sales. The San Francisco Bay Area region experienced the most substantial decline at -23.7%, followed by the Central Valley (-22.5%), the Far North (-22.3%), Southern California (-21.7%), and the Central Coast (-20.8%). This decline in sales has impacted the real estate market in the state, posing challenges for both buyers and sellers.
Sales Trends by County
Among the 52 counties tracked by C.A.R., 46 reported a decline in home sales from the previous year. A significant number of counties, 43 in total, experienced a decline of over 10%, while 28 counties saw a decline of more than 20%. Siskiyou (-52.4%), Mariposa (-46.7%), and Lassen (-39.1%) were the counties with the most significant declines in home sales, showcasing the widespread impact of the market slowdown.
Price Trends Across Regions and Counties
Despite the decline in sales, home prices have continued to show improvement. Across all five major regions, median home prices increased from the previous year. The San Francisco Bay Area had the highest annual gain at 6.6%, followed by Southern California (4.7%), the Central Valley (3.4%), the Central Coast (3.3%), and the Far North region (1.4%).
However, a notable 21 counties still experienced a year-over-year decline in median prices, with Lassen (-32.6%), Lake (-23.4%), and Mendocino (-16.3%) facing the most significant declines. On the other hand, counties like Mariposa (26.4%), Calaveras (19.4%), and Tulare (14.9%) recorded substantial increases in their median prices.
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California Housing Market Forecast 2023: Recently Revised
Based on the latest data and market conditions, the California Association of Realtors (C.A.R.) has revised its Housing Market Forecast for 2023. The forecast provides insights into the projected trends and expectations for the housing market in the state. Overall, it indicates a challenging market environment in California, with a decline in home sales and a projected decrease in median home prices compared to the previous year.
The revised Housing Market Forecast, released in April 2023, differs from the California Housing Forecast released by the C.A.R. on October 12, 2022. Here are the key differences between the two forecasts:
Existing Single-Family Home Sales:
- October 2022 Forecast: The forecast projected existing single-family home sales to total 333,450 units in 2023, representing a decline of 7.2% from the projected pace of 359,220 units in 2022.
- April 2023 Revised Forecast: The revised forecast estimates a steeper decline in existing single-family home sales, with 279,900 units projected to be sold in 2023. This reflects an 18.2% decrease compared to the 342,000 units sold in 2022.
Median Home Price:
- October 2022 Forecast: The forecast predicted a decline in California’s median home price by 8.8% to $758,600 in 2023, following a projected 5.7% increase to $831,460 in 2022.
- April 2023 Revised Forecast: The revised forecast also expects a decline in the median home price, but the projected figure is slightly higher at $776,600, reflecting a 5.6% decrease from the median price of $822,300 recorded in 2022.
Overall, the revised forecast released in April 2023 indicates a more pessimistic outlook for the California housing market compared to the October 2022 forecast. It predicts a steeper decline in home sales and a slightly higher median home price decrease. These adjustments likely reflect the changing market conditions and factors influencing the California housing market over time.
The revised forecast takes into account various factors influencing the housing market, such as mortgage rates, inventory levels, buyer demand, and economic conditions. The decline in home sales is primarily attributed to higher mortgage rates and the limited availability of homes on the market. These factors have contributed to a decrease in buyer activity and overall sales volume.
Despite the decline in sales, the median home price in California is expected to remain relatively high. The increase in market competition, with homes spending less time on the market and a higher percentage of homes selling above asking price, has influenced the rise in median home prices.
It is important to note that the forecasted figures are based on current market conditions and historical trends. However, unforeseen events or changes in economic factors can influence the actual performance of the housing market throughout the year.
Here’s the snapshot of the California Housing Forecast for 2023 which was released by the C.A.R. on October 12, 2022.
Where Will Home Prices Rise & Drop in California?
Zillow, a prominent real estate platform, provides valuable insights into the California housing market through its extensive data analysis. Here’s a glimpse of their recent findings as of August 31, 2023.
Current Market Insights
According to recent data from Zillow, the average home value in California stands at $747,352, which represents a 0.8% decrease over the past year. Homes are going to pending status in approximately 13 days, indicating a relatively swift market turnover. As of August 31, 2023, the median sale-to-list ratio is 1.002, with 54.2% of sales going over list price and 32.6% of sales being under list price.
Future Projections: Top 10 Metros for Highest Home Price Growth by 2024
- Riverside, CA: Expected home price growth of 2.8% by September 30, 2024.
- San Diego, CA: Anticipated home price growth of 2.7% by September 30, 2024.
- Santa Maria, CA: Expected home price growth of 2.6% by September 30, 2024.
- Madera, CA: Projected home price growth of 2.5% by September 30, 2024.
- Bakersfield, CA: Expected home price growth of 2.4% by September 30, 2024.
- Hanford, CA: Anticipated home price growth of 1.9% by September 30, 2024.
- Visalia, CA: Expected home price growth of 1.8% by September 30, 2024.
- Salinas, CA: Projected home price growth of 1.6% by September 30, 2024.
- Merced, CA: Expected home price growth of 1.6% by September 30, 2024.
- Fresno, CA: Anticipated home price growth of 1.5% by September 30, 2024.
Top 10 Metros for Highest Home Price Drop by 2024
- Ukiah, CA: Projected home price drop of -5.3% by September 30, 2024.
- Eureka, CA: Expected home price drop of -3.4% by September 30, 2024.
- Santa Rosa, CA: Anticipated home price drop of -2.7% by September 30, 2024.
- Clearlake, CA: Projected home price drop of -2.2% by September 30, 2024.
- San Francisco, CA: Expected home price drop of -2.1% by September 30, 2024.
- San Jose, CA: Anticipated home price drop of -2.1% by September 30, 2024.
- Chico, CA: Projected home price drop of -1.9% by September 30, 2024.
- Truckee, CA: Expected home price drop of -1.7% by September 30, 2024.
- Sonora, CA: Anticipated home price drop of -1.5% by September 30, 2024.
- Susanville, CA: Projected home price drop of -1.2% by September 30, 2024.
California Housing Market Forecast 2024 [By C.A.R.]
On September 20, 2023, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released its highly anticipated “2024 California Housing Market Forecast,” outlining key projections for the state’s housing market in the upcoming year.
Positive Rebound in California Housing Market
In 2024, the California housing market is expected to experience a rebound, primarily attributed to a decrease in mortgage rates. The forecast predicts a substantial increase of 22.9 percent in existing, single-family home sales compared to the projected pace of 2023.
Sales and Prices Projection
The forecast estimates a total of 327,100 units in single-family home sales for 2024, showcasing a promising rise from the projected 266,200 units in 2023. Additionally, California’s median home price is anticipated to climb by 6.2 percent to $860,300 in 2024.
Market Environment and Factors Influencing the Forecast
Factors like slower economic growth and cooling inflation are anticipated to bring down mortgage interest rates, creating a more favorable market environment to stimulate California home sales in the coming year. A housing shortage and competitive market are expected to continue exerting upward pressure on home prices.
Economic Indicators and Job Growth
The forecast takes into account economic indicators, predicting a modest 0.7 percent increase in the U.S. gross domestic product for 2024. The state’s nonfarm job growth rate is estimated to be 0.5 percent. However, the unemployment rate is expected to slightly increase to 5.0 percent in 2024 from the projected 4.6 percent in 2023.
Impact on Mortgage Rates and Housing Supply
With the expected softening of the economy in 2024, the Federal Reserve Bank is predicted to loosen its monetary policy, leading to a downward trend in mortgage rates throughout the year. This could provide buyers with greater financial flexibility, resulting in increased housing demand and further upward pressure on home prices. Despite an expected increase in active listings, housing supply is projected to remain below the norm.
The “2024 California Housing Market Forecast” by C.A.R. paints an optimistic picture of the state’s housing market, anticipating a significant rebound in home sales and a notable increase in median home prices. This forecast considers various economic factors and market conditions, providing valuable insights for both buyers and sellers. As the year unfolds, the actual market performance will undoubtedly shed more light on the accuracy of these projections.
California Housing Market – Weekly Report
Providing insights into the pulse of the California housing market, this weekly report provided by the CALIFORNIA ASSOCIATION OF REALTORS® covers key developments and trends shaping the real estate landscape in the state. Here’s a snapshot of the latest updates as of October 16, 2023.
Mortgage Rate Fluctuations
In the past month, there was a notable increase in mortgage rates, primarily attributed to the Federal Reserve’s announcement during their latest FOMC meeting. The Fed’s indication of keeping rates “higher for longer” dashed hopes for significant rate cuts in 2024.
However, last week saw some improvements in rates as several Fed speakers softened their tones, hinting that the Central Bank might conclude rate hikes.
Despite these changes, housing sentiment declined due to consumers identifying mortgage rates as a major challenge to housing affordability. Given the persistently high borrowing costs and expected rate fluctuations in the coming weeks, home sales are anticipated to remain subdued in the near term.
Inflation Trends
The core inflation rate has been showing a slow but steady decline. Consumer prices rose more than anticipated, with the headline inflation increasing by 0.4% month-over-month and 3.7% year-over-year in September. Energy prices, though moderated last month, continued to influence overall inflation.
The recent decrease in retail gas prices is expected to provide some relief to consumers and help alleviate inflationary pressure in October. The Core Consumer Price Index (core CPI), which excludes food and energy, also fell in September.
Although inflation is on a downward trend, progress remains slow and is expected to continue gradually over the next few months. The Federal Reserve is closely monitoring these trends and will base their decisions on the evolving economic situation.
Mortgage Rate Trends
Mortgage rates experienced significant fluctuations recently. They initially dropped sharply due to the Israel-Hamas conflict and comments from various Fed speakers suggesting a possible end to rate hikes. However, these improvements were largely reversed at the beginning of the current week, with yields surging.
The housing sentiment has been adversely affected by these elevated and volatile mortgage rates, reaching a 23-year high, as reported by Fannie Mae. Consumers’ optimism regarding buying conditions hit an all-time low, largely attributed to high mortgage rates surpassing high home prices as the top reason for a negative outlook on home purchases.
First-Time Buyers’ Market Share
The share of homes being sold to first-time buyers increased from 33.7% in 2022 to 36.2% in 2023, as per the C.A.R. 2023 Housing Market Survey. This rise was not driven by increased affordability but was primarily due to a decline in repeat buyers entering the market.
Many homeowners were hesitant to sell their houses, contributing to the rise in the first-time buyer share, and highlighting the impact of the lock-in effect on housing market dynamics.
Is It a Good Time to Buy a House in California?
The decision of whether it’s a good time to buy a house in California hinges on various intricate factors that characterize the ever-changing California housing market. Recent data from the California Association of REALTORS® (C.A.R.) illuminates the current market sentiment and professional predictions, aiding in the assessment of this pivotal question.
Considering the market dynamics as of the week ending October 14, 2023, here’s a breakdown to determine the opportune timing for prospective homebuyers in the state:
Market Activity
Examining the week’s activity ending on October 14, 2023, the following daily average figures were observed:
- Closed Sales: 419 per day
- Pending Sales: 462 per day
- New Listings: 586 per day
Realtors’ Insights
Insights from real estate professionals are crucial in understanding the trajectory of the market. As of the specified week, the perspectives of realtors are as follows:
- Realtors Anticipating Increase in Sales: 10.7%
- Realtors Anticipating Increase in Prices: 13.3%
- Realtors Anticipating Increase in Listings: 18.4%
These indicators collectively provide valuable insights for potential buyers. The decision to buy a house in California should be based on careful consideration of these metrics and an assessment of personal financial circumstances and long-term investment goals.
This analysis is based on the data available as of the week ending October 14, 2023, and the market dynamics are subject to change.
Housing Affordability Trends in California – 2nd Quarter 2023
The housing market in California has long been known for its high prices and competitive nature. The second quarter of 2023 brought some sobering news for potential homebuyers as housing affordability reached its lowest level in almost 16 years.
The California Association of Realtors (C.A.R.) recently released its Traditional Housing Affordability Index (HAI) report, revealing the impact of rising interest rates and ongoing supply shortages on the ability of Californians to afford homes. In this blog post, we’ll delve into the key findings of the report, shedding light on the challenges faced by aspiring homeowners.
- Sixteen percent of California households could afford to purchase the $830,620 median-priced home in the second quarter of 2023, down from 19 percent in first-quarter 2023 and down from 17 percent in second-quarter 2022.
- A minimum annual income of $208,000 was needed to make monthly payments of $5,200, including principal, interest and taxes on a 30-year fixed-rate mortgage at a 6.61 percent interest rate.
- Twenty-five percent of home buyers were able to purchase the $640,000 median-priced condo or townhome.
- A minimum annual income of $160,400 was required to make a monthly payment of $4,010.
The Affordability Crunch
Decline in Affordability
The report reveals that only 16 percent of California households could afford to purchase a median-priced home, which stood at $830,620 in the second quarter of 2023. This marks a decline from 19 percent in the previous quarter and 17 percent from the same period last year. This decline in affordability is attributed to the confluence of rising interest rates and persistently elevated home prices, driven by the shortage of available properties in the market.
Impact on Homebuyers
Minimum Income Requirements
To shed light on the economic implications of these affordability challenges, the report highlights the minimum annual income required to make mortgage payments for both single-family homes and condos/townhomes. For the median-priced single-family home, an annual income of $208,000 was necessary to make monthly payments of $5,200. On the other hand, a minimum annual income of $160,400 was required for the $640,000 median-priced condo or townhome.
Regional Variations
Diverse Affordability Landscape
Housing affordability varies widely across different regions and counties within California. The report shows that Lassen County, with an affordability index of 52 percent, was the most affordable county in the state. In contrast, Mono County had an affordability index of just 5 percent, making it the least affordable. The differences in affordability are influenced by factors such as local income levels, home prices, and interest rates.
National Context
California vs. the Nation
When compared to the national housing landscape, California faces a steeper affordability challenge. While only 16 percent of California households can afford the median-priced home, more than a third of the nation’s households can afford a $402,600 median-priced home. This disparity underscores the unique economic dynamics and supply-demand imbalances within the California housing market.
Therefore, we can see that as interest rates remain high and housing supply remains constrained, the second quarter of 2023 paints a challenging picture for Californians aspiring to become homeowners. Affordability has reached its lowest point in years, impacting a substantial portion of the population. While some counties maintain relatively higher affordability rates, others struggle to provide accessible housing options.
The housing market’s trajectory will likely continue to be influenced by various economic factors, including interest rates, home inventory levels, and overall economic growth. For now, prospective homebuyers will need to carefully assess their financial situations and explore creative solutions to navigate this complex landscape.
Sources:
- https://www.car.org/
- https://www.car.org/aboutus/mediacenter/newsreleases
- https://www.car.org/marketdata/data/countysalesactivity
- https://www.car.org/marketdata/marketforecast
- https://www.car.org/marketdata/marketminute
- https://www.car.org/marketdata/interactive/housingmarketoverview
- https://www.zillow.com/ca/home-values
