The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) has released its April home sales and price report, revealing the state of California's housing market. Despite a surge in mortgage rates and a shortage of available homes, the median home price in the state has exceeded $800,000 for the first time in six months.
This increase can be attributed to market competition, with homes selling quickly and a higher percentage of homes selling above the asking price. The California housing market faced several obstacles, including the lock-in effect, which reduced the housing supply by discouraging potential sellers from listing their homes. Additionally, the surge in borrowing costs caused by mortgage rates exceeding 7 percent in late February and early March further weakened the market. Let's delve into the key findings of the report.
Decline in California Home Sales
In April 2023, existing, single-family home sales in California reached a seasonally adjusted annualized rate of 267,880. This figure represents a 4.7 percent decrease from March and a significant 36.1 percent drop compared to April 2022.
Furthermore, year-to-date statewide home sales experienced a decline of 37.4 percent in April. The decrease in home sales can be attributed to higher mortgage rates and a shortage of available homes on the market.
Increase in California Home Prices
Despite the decline in home sales, the statewide median home price in April climbed to $815,340. This reflects a 3.0 percent increase from March but remains 7.8 percent lower than April 2022. It is important to note that the decline in the median price compared to last year is due, in part, to the surge in prices seen in early 2022 as buyers rushed into the market before interest rates increased.
ALSO READ: Will the US Housing Market Crash?
The increase in market competition, with homes spending less time on the market and a higher percentage of homes selling above asking price, has contributed to the rise in the median home price.
Market Challenges
The housing market in California faced several challenges in April. The lock-in effect, which has tightened housing supply, discouraged potential sellers from listing their homes for sale. This resulted in a significant 30 percent year-over-year drop in new statewide active listings, the largest decline since the May 2020 pandemic shutdown.
Moreover, the surge in borrowing costs caused by mortgage rates surpassing 7 percent in late February and early March further weakened the market. Many transactions initiated during that period closed in April, contributing to the decline in home sales.
Revised Housing Market Forecast
Based on the current market conditions, C.A.R. has revised its 2023 Housing Market Forecast. The forecast now projects a decline in existing single-family home sales, estimating 279,900 units to be sold in 2023, an 18.2 percent decrease compared to the 342,000 units sold in 2022.
Although home prices are expected to improve in the second half of the year, the California median home price is projected to decrease by 5.6 percent to $776,600 in 2023, down from the median price of $822,300 recorded in 2022. It is worth noting that these projections reflect an increase from the previous estimate of $758,600 forecasted in October.
Regional Analysis
The report provides insights into regional sales and price activity across California. The decline in sales was observed in all regions, with the Central Coast experiencing the most significant drop at 42.8 percent. The Far North (41.8 percent), the San Francisco Bay Area (38.5 percent), Southern California (37.4 percent), and the Central Valley (36.7 percent) also saw sales decline by more than a third compared to the previous year.
Regarding median home prices, all major regions recorded drops from the previous year. The San Francisco Bay Area experienced the most significant decline at 16.7 percent, followed by the Central Valley (8.0 percent) and Southern California (6.2 percent).
California Housing Market: Regional Trends
The California housing market in April 2023 exhibited distinct regional trends in terms of median sold prices and sales of existing single-family homes. Here is a breakdown of the regional data:
Central Coast:
- Median Sold Price: $1,020,000
- Price Month-over-Month (MTM) Change: 10.6% increase
- Price Year-over-Year (YTY) Change: 2.9% decrease
- Sales MTM Change: 12.0% decrease
- Sales YTY Change: 42.8% decrease
Central Valley:
- Median Sold Price: $460,000
- Price MTM Change: 1.4% increase
- Price YTY Change: 8.0% decrease
- Sales MTM Change: 10.9% decrease
- Sales YTY Change: 36.7% decrease
Far North:
- Median Sold Price: $385,000
- Price MTM Change: 8.5% increase
- Price YTY Change: 3.8% decrease
- Sales MTM Change: 6.4% decrease
- Sales YTY Change: 41.8% decrease
San Francisco Bay Area:
- Median Sold Price: $1,250,000
- Price MTM Change: 1.8% increase
- Price YTY Change: 16.7% decrease
- Sales MTM Change: 0.5% increase
- Sales YTY Change: 38.5% decrease
Southern California:
- Median Sold Price: $785,000
- Price MTM Change: 1.9% increase
- Price YTY Change: 6.2% decrease
- Sales MTM Change: 7.8% decrease
- Sales YTY Change: 37.4% decrease
These regional trends indicate variations in price movements and sales activity across different areas of California. The Central Coast experienced the highest median sold price, while the Far North had the lowest. The San Francisco Bay Area saw the most significant year-over-year price decrease, and the Central Coast witnessed the largest decline in sales compared to the previous year.
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.
Housing Market Forecast for California Metro Areas
Let us look at the price trends recorded by Zillow over the past year. Based on Zillow's data and CAR's data, the California housing market is expected to experience a slowdown in 2023 and 2024. According to Zillow, the average home value in California is $728,121, down 3.4% over the past year, and homes go pending in around 15 days. Zillow's data also shows that 33.9% of sales go over the list price, while 51.4% go under the list price, indicating that the market is becoming more favorable for buyers.
Zillow also provides insights into the forecast for various metro areas in California. According to the Housing Market Forecast for California Metro Areas provided by Zillow, there are several major areas where home prices are projected to rise by 2024, as well as some areas where prices are expected to drop. Here's an overview:
Areas where prices will rise by 2024:
- Los Angeles, CA: The forecast predicts a steady increase in home prices, with a projected rise of 2.7% by April 2024.
- Riverside, CA: Home prices in Riverside are expected to experience significant growth, with a forecasted increase of 3.7% by April 2024.
- San Diego, CA: The forecast predicts a notable rise in home prices in San Diego, with a projected increase of 3.3% by April 2024.
- Fresno, CA: Home prices in Fresno are expected to see a substantial increase, with a forecasted rise of 4% by April 2024.
- Bakersfield, CA: The forecast predicts significant growth in home prices in Bakersfield, with a projected increase of 4.7% by April 2024.
- Visalia, CA: Home prices in Visalia are expected to experience substantial growth, with a forecasted rise of 4.3% by April 2024.
- Santa Maria, CA: The forecast predicts a significant increase in home prices in Santa Maria, with a projected rise of 5.9% by April 2024.
- Salinas, CA: Home prices in Salinas are expected to see notable growth, with a forecasted increase of 3.8% by April 2024.
- Merced, CA: The forecast predicts significant growth in home prices in Merced, with a projected increase of 3.8% by April 2024.
- Madera, CA: Home prices in Madera are expected to experience substantial growth, with a forecasted rise of 5.3% by April 2024.
Areas where prices will drop by 2024:
- San Francisco, CA: The forecast predicts a slight decrease in home prices in San Francisco, with a projected drop of 0.2% by April 2024.
- Sacramento, CA: Home prices in Sacramento are expected to experience a decline, with a forecasted drop of 0.5% by July 2023.
- San Jose, CA: The forecast predicts a slight decrease in home prices in San Jose, with a projected drop of 0.5% by April 2024.
- Santa Rosa, CA: Home prices in Santa Rosa are expected to see a slight decline, with a projected drop of 0.2% by April 2024.
- Ukiah, CA: The forecast predicts a decrease in home prices in Ukiah, with a projected drop of 1.6% by April 2024.
California Housing Market – Weekly Report – April 17, 2023
The California Housing Market Weekly Report for May 15, 2023, provides an overview of the current state of the housing market in California. According to the California Association of Realtors®, despite a drop in inflation levels, consumer and business optimism remained low due to concerns such as the debt ceiling, bank failures, and recession fears.
While the labor market remained strong and mortgage delinquencies reached historic lows, high borrowing costs and affordability constraints continued to dampen home-buying sentiment. The report highlights that consumer sentiment regarding home purchases improved, with the Fannie Mae Home Purchase Sentiment Index (HPSI) reaching its highest level since May 2022.
However, affordability concerns persisted, and only 23% of respondents believed it was a good time to buy a home. On a positive note, the delinquency rate for mortgage loans decreased in the first quarter of 2023, reaching its lowest level for any first quarter since 1979. This improvement was attributed to the strong job market, which has displayed remarkable resilience.
The report also discusses the decline in consumer sentiment and small business optimism. Consumers reported less optimistic views on the economy, with inflation expectations reaching a 12-year high. Small business owners also displayed growing pessimism, as reflected in the National Federation of Independent Business's Small Business Optimism Index.
However, there was a decrease in the share of businesses raising prices and an overall downshift in compensation, indicating some positive trends related to inflation. Although consumer prices remained elevated, there were gradual signs of easing. The Consumer Price Index (CPI) increased in April, but the year-over-year headline CPI inflation dropped below 5% for the first time in two years.
Softer readings for energy and food inflation contributed to this decline. The report suggests that these trends may influence the Federal Reserve's decision on interest rate hikes.
Overall, the report paints a mixed picture of the California housing market, with ongoing concerns affecting consumer and business sentiment. While certain aspects, such as mortgage delinquencies and inflation, showed signs of improvement, affordability, and economic uncertainties continued to impact market conditions.
Is It a Good Time to Buy a Home in California?
The daily average for the week ending May 13, 2023, was 486 closed sales per day, 293 pending sales per day, and 238 new listings per day. The percentage of REALTORS® who believe sales will increase in the foreseeable future increased to 29.7%, up 2.1% from the previous week's survey. According to C.A.R., 25.5% of REALTORS® polled believe that prices will increase, an increase of 8.1% from the previous week's survey. The proportion of responders who think that listings will increase was 31.8%, up 1.7% from the previous week.
Based on the data provided, there are mixed opinions regarding whether it is a good time to buy a home in California. The number of closed sales, pending sales, and new listings indicate ongoing activity in the housing market. Additionally, the percentage of REALTORS® who believe that sales will increase in the future has risen to 29.7%, suggesting some optimism about market conditions.
However, it is important to consider the opinions on price trends. While 25.5% of REALTORS® believe that prices will increase, which is an increase from the previous week, it indicates that there may be upward pressure on home prices in California. This could pose challenges for potential homebuyers in terms of affordability.
The data also shows that 31.8% of responders believe that listings will increase, indicating a slightly positive outlook for inventory levels. However, it is worth noting that this figure represents a relatively small percentage of REALTORS® who expect an increase in listings.
Housing Affordability Trends in California – 1st Quarter 2023
The California housing market experienced a significant shift in the first quarter of 2023, with rising affordability levels due to declining home prices and lower borrowing costs. According to a report released by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.), housing affordability in the state reached its highest level in a year during this period.
- Twenty percent of California households could afford to purchase the $760,260 median-priced home in the first quarter of 2023, up from 17 percent in the fourth quarter of 2022 and down from 24 percent in first-quarter 2022.
- A minimum annual income of $188,400 was needed to make monthly payments of $4,710, including principal, interest and taxes on a 30-year fixed-rate mortgage at a 6.48 percent interest rate.
- Twenty-six percent of home buyers were able to purchase the $619,900 median-priced condo or townhome. A minimum annual income of $153,600 was required to make a monthly payment of $3,840.
Rising Affordability in California
During the first quarter of 2023, housing affordability in California showed promising improvement compared to previous quarters. The percentage of households able to afford the median-priced home rose to 20 percent, up from 17 percent in the fourth quarter of 2022. However, it declined from 24 percent in the first quarter of 2022.
To purchase a median-priced home valued at $760,260, a minimum annual income of $188,400 was required. This calculation considered a 30-year fixed-rate mortgage at an interest rate of 6.48 percent, including principal, interest, and taxes. While these figures indicate progress, they are still far below the peak of 56 percent affordability observed in the first quarter of 2012.
Regional Affordability Analysis
Affordability indices were calculated for various regions and counties within California, providing a comprehensive perspective on the housing market across the state.
- Los Angeles Metro Area: The affordability index for this region improved to 19 percent in the first quarter of 2023, compared to 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, with an index of 21 percent. However, the high median home price in this area, projected at $1,120,000 for 2023, poses a significant challenge for homebuyers.
- United States: In comparison to the national average, which saw an affordability index of 40 percent, California's housing market proved to be less affordable, with an index of 20 percent.
County Affordability Analysis
The report also highlighted affordability indices for specific counties within California, shedding light on local market dynamics.
- Most Affordable Counties: Lassen County ranked as the most affordable county in the state, with an affordability index of 53 percent. It was 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, each with an affordability index of 12 percent. These counties required a minimum annual income of at least $208,000 to purchase a median-priced home.
- San Mateo and Santa Clara Counties: These two counties in the San Francisco Bay Area continued to be among the least affordable areas in the state. San Mateo County had an affordability index of 15 percent, while Santa Clara County had an index of 16 percent. The high cost of living and strong demand in the tech-driven region contributed to the challenges faced by prospective homebuyers.
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
