California Housing Market Insights: Promising Recovery, Regional Trends, and Future Projections
In May, the California housing market exhibited promising signs of recovery. Home sales surged to their highest level in eight months, while the median home price maintained its position above $800,000 for the second consecutive month. Despite experiencing a decline in sales and prices when compared to the previous year, the market has proven its resilience and stability.
The statistics provide clear evidence of a rebound in California's housing sector. Although sales and prices have experienced a year-over-year decrease, various positive indicators suggest a hopeful outlook for the future. Increased competition among buyers, a reduction in price cuts, and a shorter time for properties to reach pending status are all encouraging signs.
However, it is essential to consider certain factors that could influence the market dynamics in the upcoming months. Rising interest rates and the persistent shortage of available homes for sale are likely to have an impact. Therefore, it becomes imperative to delve into the specifics of the May home sales and price report recently released by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). By doing so, we can gain a comprehensive understanding of the current state of the housing market and better prepare for its future trends.
Housing Market Shows Promising Recovery with Strong May Sales
In May, California's housing market witnessed a remarkable surge, with existing single-family home sales reaching an impressive seasonally adjusted annualized rate of 289,460. This notable increase of 9.8% compared to April indicates a positive trajectory in the state's real estate sector. Despite the 23.6% decline from May 2022, the recent rebound in sales signals a promising recovery, even though the 300,000-unit mark remained elusive for the eighth consecutive month.
Median Home Price Surpasses $800,000 Once Again
In May, the median home price in California surged to $836,110, reflecting a noteworthy 3.0% rise from the previous month. However, when compared to the same period last year, the median price experienced a persistent decline of 6.4% for the seventh consecutive month. The combination of limited housing supply and an uptick in high-end home sales exerted upward pressure on prices. Despite this recent improvement, the housing market faces challenges ahead, as anticipated high-interest rates in the third quarter of 2023 are likely to lead to more negative annual price changes in the coming months.
California's Housing Market Demonstrates Resilience
C.A.R. President Jennifer Branchini highlights the remarkable resilience of California's housing market, citing the strong consumer demand for homeownership as the driving force behind the rebound in sales and prices. The market is displaying signs of stabilization and improvement, evident in the rising number of homes selling above their asking price and a decrease in sellers reducing their listing prices. Moreover, homes are swiftly going into pending status within a mere two weeks, a significant improvement compared to the previous timeline of over 30 days earlier this year.
Regional Sales Performance
Despite declining sales across major regions in California, the rate of decline showed signs of moderation compared to the previous year. The San Francisco Bay Area witnessed the most substantial drop in sales, with a decline of 23.8%, followed by Southern California (22.3%) and the Far North (21.8%). The Central Coast (-17.3%) and the Central Valley (-20.0%) experienced relatively smaller decreases. Nearly all counties tracked by C.A.R. reported a decline in sales from the previous year, with some regions witnessing significant drops in housing sales.
Impact of Interest Rates
The housing market experiences the impact of rising mortgage rates, as potential sellers holding low-interest rate mortgages show reluctance to list their homes, resulting in a constrained inventory situation. According to C.A.R.'s Senior Vice President and Chief Economist, Jordan Levine, the shortage of available homes remains a driving force behind the upward pressure on prices. Nevertheless, reduced homebuyer demand has led to an imbalance between supply and demand in the market.
California's Housing Market in May 2023: Analyzing Regional Trends
The California housing market maintains its distinct regional variations as evidenced by the data from May 2023. While certain regions, such as the Los Angeles Metro Area, observed month-to-month price increases, others, like the San Francisco Bay Area, encountered declines. Furthermore, sales figures displayed notable variations across different areas, with some regions witnessing substantial growth while others faced a decline in sales. Understanding these regional trends is essential for gaining a comprehensive perspective on the overall state of the California housing market.
Los Angeles Metro Area:
In May 2023, the median sold price of existing single-family homes in the Los Angeles Metro Area reached $765,000. This represented a notable 3.4% increase from the previous month, yet marked a 5.0% decrease compared to May 2022. Despite the year-over-year decline in prices, the region saw a significant surge in sales, with a remarkable 20.6% month-to-month growth and a 21.8% decline when compared to the previous year.
Central Coast:
The Central Coast region saw the median sold price of existing single-family homes at $1,000,000 in May 2023. This figure represents a slight 2.0% decrease from April 2023, but a modest 0.5% increase compared to May 2022. Notably, the region experienced a noteworthy surge in sales, with a remarkable month-to-month increase of 36.6%. However, when compared to the same period in the previous year, there was a significant decline of 17.3% in sales.
Central Valley:
The Central Valley region experienced a notable 4.8% month-to-month increase in the median sold price of existing single-family homes. However, when compared to May 2022, there was a 4.9% decline in prices. Sales in the region followed a similar pattern, with a 22.7% month-to-month growth and a 20.0% year-over-year decline.
Far North:
The Far North region reported a median sold price of $380,000, showing a slight 1.3% decrease from the previous month. However, in comparison to May 2022, there was a significant 10.6% drop in prices. On the positive side, the region experienced a substantial 44.8% increase in sales on a month-to-month basis, though there was a 21.8% decline in sales compared to the previous year.
Inland Empire:
With a median sold price of $574,990, the Inland Empire region witnessed a 1.8% increase from April 2023. However, when compared to May 2022, prices decreased by 3.5%. Sales in the region experienced a modest 13.9% month-to-month growth but a significant 22.9% year-over-year decline.
San Francisco Bay Area:
The San Francisco Bay Area had a median sold price of $1,300,000, indicating a 4.0% increase from the previous month but an 11.3% decrease from May 2022. Sales in the region experienced a notable 30.0% month-to-month growth, but there was a substantial 23.8% decline compared to the previous year.
Southern California:
For existing single-family homes in Southern California, the median sold price was $800,000, representing a modest 1.9% increase from the previous month. However, compared to May 2022, there was a 5.3% decrease in prices. The region also experienced a 19.4% month-to-month growth in sales, but there was a significant 22.3% decline in sales compared to the previous year.
California Housing Market Forecast 2023: Revised Projections and Market Analysis
Based on the latest data and market conditions, the California Association of Realtors (C.A.R.) has updated its Housing Market Forecast for 2023, providing valuable insights into the projected trends and expectations for the state's housing market. The revised forecast paints a challenging picture for California's real estate sector, with declining home sales and a projected decrease in median home prices compared to the previous year.
Released in April 2023, the revised forecast shows significant differences from the California Housing Forecast published by C.A.R. on October 12, 2022. Key variations between the two forecasts include:
Existing Single-Family Home Sales:
October 2022 Forecast: Projected a total of 333,450 existing single-family home sales for 2023, reflecting a 7.2% decline from the expected 359,220 units in 2022.
April 2023 Revised Forecast: Expects a more significant decrease in existing single-family home sales, with 279,900 units projected to be sold in 2023. This represents an 18.2% drop compared to the 342,000 units sold in 2022
Median Home Price:
October 2022 Forecast: Anticipated an 8.8% decline in California's median home price to reach $758,600 in 2023, following a projected 5.7% increase to $831,460 in 2022.
April 2023 Revised Forecast: Predicts a median home price of $776,600, reflecting a 5.6% decrease from the median price of $822,300 recorded in 2022.
The updated forecast indicates a more pessimistic outlook for the California housing market compared to the October 2022 forecast. The steeper decline in home sales and the slight increase in the projected median home price decrease likely stem from evolving market conditions and various factors influencing the state's real estate landscape.
The revised forecast takes into account crucial elements affecting the housing market, such as mortgage rates, inventory levels, buyer demand, and overall economic conditions. The decline in home sales is primarily attributed to higher mortgage rates and limited housing inventory, which have collectively contributed to a decrease in buyer activity and overall sales volume.
Despite the decrease in sales, California's median home price is still expected to remain relatively high. The surge in market competition, with homes spending less time on the market and a higher percentage of properties selling above the asking price, has played a significant role in driving up the median home prices.
It is essential to recognize that the forecasted figures are based on existing market conditions and historical trends. However, unforeseen events or changes in economic factors could influence the actual performance of the housing market throughout the year.
Given the evolving nature of the housing market, it is essential for potential buyers and sellers to closely monitor the latest forecasts and industry developments to make informed decisions in this ever-changing landscape.
Housing Market Forecast: Top 10 California Metro Areas with Projected Price Rises by 2024
The California housing market is a subject of continuous interest, given its dynamic nature and significant impact on the state's economy. As we peer into the future, many wonder about the housing market's performance in the coming years. Based on the latest data and forecasts, here are the top 10 areas in California where housing prices are projected to rise by 2024:
Santa Maria, CA: Expected to experience a steady 6.9% increase in housing prices by 2024, reflecting a positive outlook for the local market.
Madera, CA: Anticipated to see a rise in prices with a projected increase of 6.1% by 2024, suggesting modest growth ahead.
Bakersfield, CA: Forecasted to have a 5.8% increase in housing prices by 2024, signaling a positive trend in the local real estate market.
Hanford, CA: Expected to see a 5.7% rise in housing prices by 2024, indicating a favorable market for homebuyers and sellers in the region.
Visalia, CA: Projected to experience a 5.3% increase in housing prices by 2024, indicating a stable housing market with growth potential.
Riverside, CA: Forecasted to have a 5.0% rise in housing prices by 2024, suggesting continued demand and market stability in the region.
Fresno, CA: Expected to see a 5.0% increase in prices by 2024, indicating a positive market outlook and potential for growth.
Merced, CA: Projected to have a 4.9% rise in housing prices by 2024, suggesting a stable market with moderate growth opportunities.
Salinas, CA: Forecasted to experience a 4.8% increase in housing prices by 2024, indicating a positive market outlook for the city.
Los Angeles, CA: Projected to see a 4.3% increase in housing prices by 2024, suggesting continued demand and potential appreciation despite already high prices.
Please keep in mind that these forecasts are based on current trends and data, and market conditions can change. Various factors, such as economic growth, population trends, and housing supply, can influence the housing market's performance in these areas.
California Housing Market Weekly Update - June 17, 2023
The California housing market is continuously shaped by a range of factors, including interest rates, inflation, job growth, and buyer demand. In this week's report, we delve into the latest trends and insights that are influencing the Golden State's real estate landscape.
Federal Reserve Holds Rate Hikes: During the latest Federal Open Market Committee (FOMC) meeting, the Federal Reserve chose to keep the Fed funds rate unchanged. However, Fed Chairman Powell emphasized their readiness to implement further rate hikes this year to address persistent inflation. The bond market had previously anticipated one more rate increase by the end of 2023, but the pause in rate hikes suggests that interest rates will remain elevated for a longer duration.
California Housing Market Rebounds: Following consecutive sales declines in March and April, the California housing market displayed signs of recovery in May. Sales of existing homes surged nearly 10% every month, reaching the highest level in eight months. The availability of lower mortgage rates in April likely spurred homebuyers to initiate transactions that concluded in May. Although home sales still experienced a double-digit decline compared to the same period last year, the year-over-year drop was relatively mild, indicating a potential market stabilization.
Inflation and Mortgage Rates: Inflationary pressures continue to impact mortgage rates. The average 30-year fixed-rate mortgage, according to Freddie Mac, remained stable at 6.7% for the week ending June 11th. However, there are expectations of rates potentially rising above 7%, driven by a rise in 10-year Treasuries. Additionally, the Fed's indication of potential rate hikes may delay the return to sub-6% rates that some had anticipated.
Stabilizing Mortgage Applications: New mortgage purchase applications witnessed a noteworthy increase of 17% last week, breaking a streak of six consecutive weekly declines. While year-over-year application declines have slowed, new purchase applications still reflect a relative decrease compared to pre-pandemic levels. This suggests that rates have impacted purchasing power and underscores the ongoing challenge of limited inventory in the California housing market.
Slower Job Growth in California: California's job growth has shown signs of deceleration, although the state still adds new jobs. In May, employers created 40,000 new positions, following a revised increase of 70,000 in April. However, the year-over-year gains remained at 2.4%, below the average seen during the reopening phase. The unemployment rate remained steady at 4.5%, indicating an expanding labor force with re-entering workers. Despite some signs of a labor shortage, there are indications of a gradual improvement in the job market.
Mixed Macro Indicators: The current macro indicators present a somewhat optimistic outlook for the economy. In May, small businesses displayed increased optimism, although many are bracing for potential price hikes in the near future. Manufacturing activity saw a slight rise, but the industrial production index witnessed declines in the mining and utilities sectors. While retail sales experienced year-over-year growth of 1.6%, real retail spending, when adjusted for inflation, has been on a downward trend for the past four months. These indicators collectively suggest a more subdued growth in the second half of 2023.
Low Labor Force Participation Rate among Older Workers: Despite a recovery for younger workers, the labor force participation rate remains depressed for individuals aged 55 and above. The pandemic-induced early retirements, influenced by increasing home prices, have resulted in a shortage of experienced workers, further exacerbating the ongoing labor shortage. Additionally, this situation has contributed to accelerated wage growth and played a role in preventing inflation from declining at a faster rate.
Timing the California Housing Market: Is It the Right Time to Buy a Home?
The California housing market has experienced fluctuations in recent months, giving rise to questions about the optimal time to purchase a home. To provide a clear picture, let's delve into key data and indicators that shed light on the current scenario.
Sales Activity: The average daily closed sales, pending sales, and listings data provide crucial insights into market activity. As of the week ending June 17, 2023, there were 454 closed sales per day, signifying consistent buyer engagement in the market.
REALTOR® Sentiment: Valuable perspectives come from real estate professionals. According to the California Association of REALTORS® (C.A.R.), approximately 26.2% of REALTORS® anticipate an increase in sales in the foreseeable future. Although this reflects a slight decrease of 3.5% from the previous week, it still indicates a relatively positive outlook for sales activity.
Price Expectations: Another significant aspect is price projections. C.A.R. reports that 25.7% of surveyed REALTORS® believe prices will increase. Although this reflects a marginal 0.1% increase from the previous week, it suggests a degree of optimism regarding potential price appreciation.
Listing Supply: The availability of listings significantly impacts the homebuying process. C.A.R.'s survey indicates that 26.6% of respondents expect listings to increase. However, this figure experienced a 5.2% decline from the previous week, suggesting that inventory may remain relatively tight.
Considering these factors, the current California housing market presents a mixed picture. While sales activity remains steady and there is optimism among REALTORS® about future sales and price increases, the availability of listings may pose challenges.
When determining whether it's a good time to buy a home in California, prospective buyers should carefully consider their circumstances, such as financial readiness, personal preferences, and long-term goals. Engaging a trusted real estate agent, well-versed in specific market conditions in desired areas, can provide personalized advice.
Ultimately, the decision to buy a home in California should be thoughtfully weighed, considering market conditions, affordability, and individual circumstances.
Housing Affordability on the Rise in California – 1st Quarter 2023
Source: Housing Affordability Index By C.A.R.
During the first quarter of 2023, the California housing market underwent a noteworthy transformation, characterized by increased affordability. This shift was attributed to declining home prices and lower borrowing costs. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released a report confirming that housing affordability in the state reached its highest level in a year during this period.
In the first quarter of 2023, the proportion of California households that could afford to purchase the median-priced home, valued at $760,260, increased to twenty percent. This marked an improvement from seventeen percent in the fourth quarter of 2022, but a decrease from twenty-four percent in the first quarter of 2022.
To afford monthly payments of $4,710, covering principal, interest, and taxes on a 30-year fixed-rate mortgage at a 6.48 percent interest rate, a minimum annual income of $188,400 was required.
Of the home buyers, twenty-six percent were able to afford the median-priced condo or townhome, valued at $619,900. To make a monthly payment of $3,840, a minimum annual income of $153,600 was necessary.
Rising Affordability in California
In the first quarter of 2023, housing affordability in California showed positive signs of improvement compared to previous periods. The percentage of households able to afford the median-priced home increased to 20 percent, up from 17 percent in Q4 2022, though slightly lower than 24 percent in Q1 2022.
For prospective buyers aiming to purchase a median-priced home valued at $760,260, a minimum annual income of $188,400 was necessary. This estimation considered a 30-year fixed-rate mortgage with an interest rate of 6.48 percent, covering principal, interest, and taxes. While this rise in affordability is promising, it still falls well below the peak of 56 percent observed in the first quarter of 2012.
Regional Affordability Analysis
A comprehensive affordability analysis was conducted for various regions and counties in California, providing valuable insights into the state's housing market.
Los Angeles Metro Area: The affordability index for this region improved to 19 percent in the first quarter of 2023, up from 18 percent in the previous quarter.
Inland Empire: Housing affordability remained stable in the Inland Empire, with an affordability index of 24 percent.
San Francisco Bay Area: Affordability levels remained consistent with the previous year, recording an index of 21 percent. However, the high median home price in this area, projected at $1,120,000 for 2023, continues to pose a significant challenge for homebuyers.
United States: California's housing market proved to be less affordable compared to the national average, which saw an affordability index of 40 percent. California's index stood at 20 percent, reflecting the ongoing affordability challenges in the state.
County Affordability Analysis
The report's county-level affordability indices provided valuable insights into the diverse housing market dynamics within California.
Most Affordable Counties: Lassen County emerged as the most affordable county in the state, boasting an affordability index of 53 percent. It was closely followed by Plumas County at 42 percent and Siskiyou County at 41 percent.
Least Affordable Counties: Mono County, along with San Luis Obispo, Monterey, and Orange Counties, shared the distinction of being the least affordable, with each having an affordability index of 12 percent. Prospective homebuyers in these counties needed a minimum annual income of at least $208,000 to afford a median-priced home.
San Mateo and Santa Clara Counties: These two counties in the San Francisco Bay Area continued to face affordability challenges, with San Mateo County having an affordability index of 15 percent, and Santa Clara County at 16 percent. The tech-driven region's high cost of living and strong demand contributed to the difficulties experienced by potential homebuyers.
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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