June 18, 2024 Your Source for Brentwood News

California Home Sales Decline Amidst Rising Mortgage Rates and Limited Inventory

Statewide Median Home Price Exceeds $800,000, Reaching Six-Month High

By Dolores Quintana 

According to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) report, a combination of rising mortgage interest rates and a limited inventory of available homes contributed to a decline in California home sales in April. However, during the same period, the statewide median home price surpassed $800,000, reaching this milestone for the first time in six months.

In April, closed escrow sales of existing, single-family detached homes in California reached a seasonally adjusted annualized rate of 267,880, according to data collected by C.A.R. from over 90 local REALTOR® associations and MLSs across the state. This figure represents the total number of homes that would be sold in 2023 if the April sales pace continued throughout the year, accounting for seasonal factors.

Compared to the previous month, April’s sales pace declined by 4.7 percent from March’s 281,050, and it dropped by 36.1 percent from the same period last year when 418,970 homes were sold on an annualized basis. This marks the seventh consecutive month in which existing single-family home sales in California remained below the 300,000-unit pace.

Despite the decline in home sales, market competitiveness increased as the time homes spent on the market decreased from 33 days in January to 20 days in April. Moreover, the share of homes sold above the asking price doubled from one in five at the beginning of the year to more than two in five in April. C.A.R. President Jennifer Branchini, a Bay Area REALTOR®, noted that this heightened competition contributed to the statewide median home price climbing above $800,000 for the first time in six months.

In April, California’s median home price rose 3.0 percent from March’s $791,490 to $815,340, surpassing $800,000 for the first time since October 2022. However, on a year-over-year basis, April’s median price experienced a decline of 7.8 percent from the revised $884,680 recorded in April of the previous year. This drop in median price compared to last year was partially attributed to the significant price surge in early 2022, driven by homebuyers rushing into the market before interest rates increased.

The lock-in effect and low housing demand continued to restrict the housing supply and prevent potential sellers from listing their homes for sale. This contributed to a 30 percent year-over-year decrease in new statewide active listings, marking the largest drop since the pandemic shutdown in May 2020. Additionally, the market weakness was influenced by a surge in borrowing costs, as mortgage rates exceeded 7 percent in late February and early March. Many transactions that were initiated during that period closed in April, further impacting the market’s performance.

In light of these factors, C.A.R. revised its 2023 Housing Market Forecast. The projection anticipates a decline of 18.2 percent in existing single-family home sales, with 279,900 units expected to be sold in 2023 compared to 342,000 units in 2022. While overall home prices are expected to improve in the second half of the year, the median home price in California is projected to decrease by 5.6 percent to $776,600 in 2023, down from $822,300 in 2022. The updated projection for the statewide median price represents an increase from the previous estimate of $758,600 forecasted in October. Additionally, C.A.R. projects the 30-year fixed mortgage interest rate to average 6.3 percent for the year.

Key findings from C.A.R.’s April 2023 resale housing report include:

  • Sales declines accelerated in all regions, with the Central Coast experiencing the largest drop at -42.8 percent. The Far North followed closely behind with a decline of 41.8 percent. Sales in the San Francisco Bay Area, Southern California, and the Central Valley all fell by more than a third year-over-year.
  • All 51 counties tracked by C.A.R. reported a sales decline compared to the previous year. Mariposa had the largest drop at -80.8 percent, followed by Calaveras and Santa Cruz. However, pending sales increased in 39 counties, indicating a potential improvement in closed sales in the coming months.
  • Median home prices dropped from a year ago in all major regions, with the San Francisco Bay Area experiencing the largest decline at -16.7 percent. Thirteen counties saw a decrease of more than 10 percent, while 12 counties recorded an increase in their median price compared to last April.
  • Housing inventory in California rebounded after two consecutive months of decline. The Unsold Inventory Index (UII) in April 2023 increased by 38.9 percent compared to the previous year. All price ranges saw an increase in the UII of more than 20 percent, with the $1 million and higher price sector showing the largest gain.
  • Additional data from C.A.R.’s report includes the median number of days to sell a California single-family home (20 days in April), the sales-price-to-list-price ratio (100 percent in April 2023), the average price per square foot ($395 for an existing single-family home), and the 30-year fixed-mortgage interest rate (6.34 percent in April).

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