California Association of Realtors (C.A.R.) recently published a comprehensive report providing insights into the current state of the California housing market amidst persistently high mortgage rates. The data paints a nuanced picture of the market, presenting both challenges and opportunities for prospective homebuyers and sellers.
California Market Overview:
In September, existing single-family home sales in California totaled 240,940 on a seasonally adjusted annualized rate, reflecting a 5.4 percent decline from August and a notable 21.5 percent drop from the same period last year. Meanwhile, the statewide median home price stood at $843,340, presenting a 1.9 percent decrease from the previous month but a 3.2 percent increase from September 2022.
The California housing market continues to grapple with the ramifications of rising mortgage rates. This has led to a decline in home sales for the fourth consecutive month. However, this trend is counterbalanced by an upward trajectory in median home prices, marking the largest year-over-year gain in 15 months. Housing affordability remains a significant factor impacting the market, especially in the low- and mid-price ranges.
Across major regions in California, all areas experienced a decline in sales, with figures dropping more than 20 percent compared to the previous year. The San Francisco Bay Area recorded the most significant decline at 23.7 percent, followed by the Central Valley, the Far North, Southern California, and the Central Coast.
Forty-six of these counties experienced a decline in home sales compared to the same period last year. A significant portion, 43 counties, witnessed a dip of over 10%, with 28 counties facing a substantial decline exceeding 20%.
Among the counties facing notable declines, Siskiyou experienced the steepest drop at 52.4%, closely followed by Mariposa at 46.7% and Lassen at 39.1%. These figures underscore the widespread impact of current market conditions on sales across various regions.
Despite the overall declining trend, a few counties stood out with increased home sales compared to the previous year. Mono County led the way with a remarkable 50% increase, followed by Sutter at 14.5% and Madera at 10.3%. These counties have managed to buck the trend, showcasing resilience in the face of challenging market conditions.
Regional Median Price Variations:
An analysis of major regions in California revealed diverging trends in home prices compared to the previous year. All five major regions saw an increase in median prices. The San Francisco Bay Area led with a substantial 6.6% improvement, marking the region's largest annual gain.
Notably, five out of nine counties within this region recorded a significant annual gain, with Santa Clara registering the highest growth at 9.0%. Other regions, including Southern California (4.7%), the Central Valley (3.4%), Central Coast (3.3%), and the Far North (1.4%), also witnessed moderate annual increases.
While many counties in California experienced an improvement in home prices, 21 counties still grappled with a year-over-year decline in their median prices for September. Lassen County faced the most substantial decline, with a drop of -32.6% from the same month last year, followed by Lake (-23.4%) and Mendocino (-16.3%).
In contrast, 29 counties recorded an annual increase in median price. Mariposa County stood out with the most significant jump at 26.4%, followed by Calaveras (19.4%) and Tulare (14.9%), emphasizing the diversity in price trends across the state.
Housing Supply and Inventory:
The housing supply in California has been shrinking due to elevated mortgage rates, reflected in the unsold inventory index (UII) of 2.8 in September 2023. Active listings have declined consistently on a year-over-year basis for the past six months, with a drop of over 20 percent in many counties. Contra Costa County had the most substantial annual decrease, followed by Sacramento and Alameda.
Market Trends and Expectations:
The California housing market is expected to face continued challenges in the coming months, primarily influenced by the Federal Reserve's decision to maintain higher interest rates. Prospective buyers and sellers should carefully navigate the evolving landscape, keeping a close eye on market trends and adapting strategies accordingly. It's a market where vigilance and adaptability will be key to success.
Housing sentiment took a hit in September as mortgage rates soared to a 23-year high, according to the latest national housing survey by Fannie Mae. The survey found that only 16% of respondents believed it was a good time to buy, marking an all-time low set last year. The steady increase in rates over the past six months, rising by over 50 basis points in the last month alone, contributed to this decline.
With mortgage rates climbing and showing no signs of immediate decline, consumers held a pessimistic view of home-buying conditions. A mere 17% expected mortgage rates to decrease in the next 12 months. Notably, high mortgage rates have now surpassed high home prices as the primary reason why consumers perceive it as a bad time to buy a home.
On the selling side, the sentiment was relatively more positive, with 63% of consumers indicating that it was a good time to sell. However, this still marked a three-percentage point decline compared to the prior month, reflecting the overall impact of the housing market's challenges.
California's housing market remains at a critical juncture, balancing on the edge of a changing landscape. High mortgage rates, shifting sales patterns, and evolving buyer behaviors require a strategic approach for all stakeholders.