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 October, 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 real estate market.
Current California Housing Market Report 2023
Overview of Home Sales
According to C.A.R.'s data, existing, single-family home sales in California reached a seasonally adjusted annualized rate of 241,770 in October. This represents a modest 0.3 percent increase from the previous month but a noteworthy 11.9 percent decline from October 2022. The figures indicate a continuation of the trend observed over the past several months, with home sales remaining below the 250,000-unit pace for the second consecutive month.
The year-to-date statewide home sales were particularly noteworthy, experiencing a substantial 27.2 percent decline in October compared to the same period last year.
Are Home Prices Dropping in California?
October's statewide median home price stood at $840,360, reflecting a marginal 0.4 percent decrease from September. However, the year-over-year comparison paints a different picture, showing a robust 5.3 percent increase from October 2022. This marks the fourth consecutive month of rising home prices, with the median price recording its most significant year-over-year gain in 17 months.
Despite the month-to-month dip, the data suggests that the market is experiencing positive year-over-year price growth, with prices expected to stabilize in the coming months, following the traditional seasonal pattern.
Factors Influencing the Market
Several factors contributed to the muted home sales and evolving price dynamics. C.A.R. President Jennifer Branchini identified a substantial jump in interest rates as a key constraint on home sales in October. However, she also highlighted other factors favoring buyers, including properties staying on the market longer before selling and a decrease in homes selling over the list price. These trends could potentially motivate more sellers to offer concessions.
C.A.R. Senior Vice President and Chief Economist Jordan Levine pointed to the Federal Reserve's decision to pause rate hikes and recent economic indicators signaling a slowing economy. As a result, mortgage rates have started to decrease in recent weeks. If this trend continues, it could alleviate pressure on both the buying and selling sides of the housing market in 2024.
Housing Supply and Inventory Dynamics
The challenges in the California housing market extend beyond sales and prices to the critical aspect of supply and inventory. The report indicates a persistent shrinkage in housing supply compared to the previous year. In October 2023, the statewide unsold inventory index (UII) stood at 2.7 months, reflecting the number of months needed to sell the current supply of homes at the existing sales rate. This represents a decrease from 3.1 months in October 2022, illustrating the ongoing strain on housing inventory.
The month-over-month comparison reveals a -3.6 percent decrease in the UII, emphasizing the market's struggle with high mortgage rates. Active listings at the state level have been consistently declining for seven consecutive months, with the most recent six months showing declines exceeding 20 percent year-over-year. However, the recent decrease in mortgage rates, coupled with the Federal Reserve's decision to pause rate hikes, may offer some relief to both the supply and demand sides of the housing market in the coming months.
Regional Disparities in Inventory
The report delves into regional variations, with nearly two-thirds of all counties experiencing declines in active listings from the previous year. Some counties, such as Mono, Contra Costa, and Merced, saw substantial year-over-year drops, while others, including Mariposa, Del Norte, and Amador, recorded notable gains. The dynamics on a month-to-month basis further highlight the ebb and flow of the market as it transitions into the off home-buying season.
New active listings at the state level declined for the 16th consecutive month, but the rate of decline moderated, dipping less than 10 percent for the first time in a year. This slowdown is partly attributed to low-base effects, as new active listings in October 2022 also experienced a significant drop from the previous year. Regional disparities in new active listings persist, with some counties experiencing substantial declines, while others, such as Mono, Del Norte, and Plumas, posted gains.
Market Performance Indicators
The median number of days it took to sell a California single-family home remained brisk at 20 days in October 2023, compared to 28 days in October 2022. This underscores the continued demand for homes in the market.
C.A.R.'s statewide sales-price-to-list-price ratio was 100 percent in October 2023, reflecting a balanced market where homes are typically sold at their listed prices. In October 2022, the ratio was slightly lower at 97.3 percent, indicating a market where negotiations may have played a more significant role in final sale prices.
The statewide average price per square foot for an existing single-family home increased to $421 in October 2023, up from $396 in the same month a year ago. This upward trend in the price per square foot further emphasizes the overall appreciation in home values despite the challenges faced by the market.
As California grapples with a complex housing market influenced by interest rates, supply and demand dynamics, and economic trends, stakeholders must navigate these challenges strategically. The interplay of various factors makes it imperative for both buyers and sellers to stay informed and adaptable in this dynamic real estate landscape.
Looking ahead, the report suggests that the housing market's trajectory will be influenced by various factors, including mortgage rate movements and inflation trends. As the Federal Reserve monitors economic conditions and adjusts its policies accordingly, the California housing market is likely to respond to these changes.
Regional Data on California Housing Market: October 2023
Regional Sales Performance
On a year-over-year basis, most major regions witnessed a dip in home sales during October, underscoring the challenges faced by the California real estate market. The Central Valley region experienced the most significant decline, with sales dropping by -11.3 percent from the previous year. Southern California (-7.4 percent), the San Francisco Bay Area (-3.9 percent), and the Far North (-2.3 percent) also saw reductions in sales. In contrast, the Central Coast was the exception, recording a sales increase of 1.9 percent from last October.
Delving deeper into county-level data, 36 out of 52 counties tracked by C.A.R. reported a decline in sales from the previous year. Notably, 16 counties experienced drops exceeding 10 percent, with four counties seeing declines of more than 20 percent. Del Norte (-47.4 percent), Stanislaus (-28.0 percent), and Tehama (-25.0 percent) were among the counties with the most significant dips, while Trinity (600 percent), Napa (49.1 percent), and Lassen (46.7 percent) stood out for their impressive increases in sales.
Regional Price Trends
While home sales faced headwinds, regional price trends told a different story. In October, home prices increased across most major regions compared to the previous year. The Central Coast led the way with a substantial year-over-year gain of 12 percent in its median price—the only region experiencing a double-digit increase. Counties within the Central Coast region, such as Monterey (29.8 percent) and Santa Barbara (22.9 percent), posted impressive price gains of over 20 percent from the prior year.
Other regions, including Southern California (6.5 percent), the San Francisco Bay Area (5.7 percent), and the Central Valley (4.0 percent), also saw modest median price increases from a year ago. The Far North region was the outlier, registering a price decline of -4.3 percent from October 2022.
County-Level Price Dynamics
County-level analysis further reveals a mix of outcomes, with 13 counties still experiencing a year-over-year decline in median prices in October. Del Norte (-21.1 percent), Mendocino (-17.7 percent), and Lassen (-14.8 percent) posted the most substantial price declines. On the positive side, 39 counties recorded an annual median price increase, with Tehama (35.8 percent), Monterey (29.8 percent), and Santa Barbara (22.9 percent) leading the way in price appreciation.
Buyer Behavior: Above Asking Prices
A notable aspect of buyer behavior is the percentage of homes selling above their asking prices. In five California counties, at least half of the homes sold above their listed prices. The Bay Area region dominated this trend, with Alameda (72 percent), San Francisco (67 percent), Santa Clara (65 percent), and San Mateo (58 percent) leading the pack. In the Central Valley region, Glenn County (50 percent) was the lone representative among counties where half of the homes sold above the asking price.
ALSO READ: Will the US Housing Market Crash?
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 November 13, 2023.
The California housing market is navigating through a series of challenges and shifts in the third quarter. Housing affordability, a crucial factor influencing buyer decisions, has experienced a notable decline, reaching a 16-year low. The backdrop of this decline is a combination of elevated costs of borrowing and the lingering impact of a tight supply, contributing to higher home prices.
While recent weeks have shown a slight improvement in mortgage rates, translating this dip into actual transactions is expected to take some time. The sentiment among homebuyers, which saw a downturn in October, holds the potential for a rebound in the coming months if the decreasing trend in interest rates persists. However, the broader economic landscape's slowdown in the fourth quarter raises questions about the trajectory of market conditions, with hopes pinned on a potential peak in interest rates.
Housing Affordability at a 16-Year Low
The report highlights a concerning trend in housing affordability, with the California index declining to 15%, marking the lowest level since the third quarter of 2007. The interplay of tight supply and elevated mortgage rates has led to an all-time high in the costs of borrowing. The monthly mortgage payment for a median-priced home surged by 6.3% from the previous quarter and a substantial 15.4% from the third quarter of 2022, reaching a two-decade high in interest rates.
Qualifying for the purchase of a median-priced home in California now requires a minimum annual income exceeding $221,000. Affordability trends varied across counties, with a decline observed in 36 counties, stability in 10, and an increase in five. As home prices are anticipated to decrease in the fourth quarter, the report suggests a potential improvement in affordability if interest rates continue to decline.
Consumer Sentiment and Home Purchases
Consumer sentiment regarding the housing market reflects frustration, with interest rates at a 23-year high and home prices maintaining elevated levels. The latest Fannie Mae national housing survey indicates a record low in the share of consumers (15%) who believe it is a good time to buy. Concerns about future mortgage rate increases and expectations of rising home prices in the next 12 months contribute to this pessimism.
On the contrary, consumers express a more positive outlook on home selling, with 63% considering it a good time to sell. This sentiment has improved from 51% recorded in October 2022, showcasing optimism about selling conditions. The stabilization of home prices and a persistent tight housing supply contribute to this positive perspective on the selling side of the market.
Looking Ahead: Anticipated Improvements
Despite the current challenges, there is optimism for improvements in the California housing market. The expectation of lower home prices in the fourth quarter, coupled with a potential decline in interest rates, offers hope for increased affordability. The dynamics between buyer sentiment and market conditions will likely shape the trajectory of the housing market in the coming months.
As stakeholders navigate these trends, staying informed about market shifts and remaining adaptable will be key to making strategic decisions in this dynamic real estate landscape.
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 November 11, 2023, here's a breakdown to determine the opportune timing for prospective homebuyers in the state:
Examining the week's activity ending on November 11, 2023, the following daily average figures were observed:
- Closed Sales: 362 per day
- Pending Sales: 453 per day
- New Listings: 522 per day
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: 10.8%
- Realtors Anticipating Increase in Prices: 9.3%
- Realtors Anticipating Increase in Listings: 14.4%
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 Nov 11, 2023, and the market dynamics are subject to change.
Housing Affordability Trends in California – 3rd Quarter 2023
The housing market in California has long been known for its high prices and competitive nature. California housing affordability has reached a 16-year low, according to the latest report from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The third quarter of 2023 witnessed a significant downturn, with only 15 percent of households able to afford the median-priced home, reflecting a decline from 16 percent in the previous quarter and 18 percent in the same quarter last year.
- Median Home Price: $843,600
- Minimum Annual Income Required: $221,200
- Monthly Payment: $5,530
- Interest Rate: 7.14%
This quarter marked a turning point as the effective interest rate surged to a two-decade high of 7.14 percent, up from 6.61 percent in the second quarter of 2023 and 5.72 percent in the third quarter of 2022. This increase in borrowing costs has contributed to the decline in housing affordability, pushing it to the lowest level since 2007.
Less than one in five home buyers (15 percent) could afford a median-priced, existing single-family home in California during the third quarter of 2023. This is a substantial drop from the peak of 56 percent in the first quarter of 2012. A minimum annual income of $221,200 was necessary to qualify for the purchase, with monthly payments, including taxes and insurance, amounting to $5,530.
The effective composite interest rate crossing the 7 percent mark for the first time in over two decades has added to the challenges. However, there is hope that a potential economic slowdown could result in rate drops, providing relief to both the supply and demand sides of the housing market and improving affordability in the coming quarters.
Condominiums and Townhomes:
For condominiums and townhomes, the scenario is slightly different. Twenty-three percent of home buyers were able to afford the $650,000 median-priced condo or townhome. However, this represents a decline from the previous quarter's 25 percent and the third quarter of 2022's 28 percent. A minimum annual income of $170,400 was required to make a monthly payment of $4,260.
Comparing California with the national average, more than a third of the nation's households could afford a $406,900 median-priced home, requiring a minimum annual income of $106,800 for monthly payments of $2,670. Despite this, nationwide affordability has decreased from 39 percent a year ago.
Thus, the third quarter of 2023 has brought challenges to the California housing market, with affordability hitting a 16-year low. The interplay of rising interest rates and escalating home prices has created a complex landscape for potential homebuyers. As the state navigates these challenges, the hope is that economic factors may contribute to a positive shift, improving housing affordability in the upcoming quarters.
Challenges Facing the California Housing Market
Several factors have contributed to the challenges facing the California housing market. Here are some key factors that interact with each other, creating a complex and dynamic housing market in California.
1. High Demand and Limited Supply:
California has a high population density and strong economic growth, leading to a high demand for housing. However, there is a limited supply of available housing, particularly in desirable areas. This imbalance between supply and demand has driven up housing prices, making it difficult for many prospective buyers to afford homes.
2. Affordability Issues:
The high cost of housing in California has made homeownership less attainable for many residents. The median home price in the state is significantly higher than the national average. The combination of high home prices, rising interest rates, and stringent mortgage qualification rules has created affordability challenges for prospective buyers.
3. Strict Zoning and Land Use Regulations:
California has some of the most stringent zoning and land use regulations in the country. These regulations often restrict new construction and development, making it difficult to increase the housing supply to meet demand. This has resulted in a housing shortage and contributed to the rising prices.
4. Lack of Affordable Housing:
California faces a severe shortage of affordable housing, particularly in major cities. The cost of constructing affordable housing and the complex process of obtaining approvals and permits have hindered the development of affordable units. This has exacerbated the affordability crisis and led to a growing population of renters.
5. Economic Factors:
Economic conditions, such as job growth, wages, and interest rates, can significantly impact the housing market. Slowing economic growth or stagnant wages can dampen demand for housing, while rising interest rates can increase borrowing costs and dissuade potential buyers. These factors, in combination with high housing prices, have made it challenging for many Californians to enter the housing market.
6. Impact of Natural Disasters:
California is prone to natural disasters, including wildfires and earthquakes, which can damage or destroy homes and disrupt the housing market. Rebuilding efforts and insurance costs following these events can impact housing availability and affordability in affected areas.
7. Migration Patterns:
Migration patterns also play a role in the housing market. California has experienced both domestic and international migration, leading to increased demand for housing. However, in recent years, there has been a trend of net outmigration, with some residents leaving the state due to affordability concerns, congestion, and other factors. This can impact the supply and demand dynamics of the housing market.