California Housing Market: Prices, Trends, Forecast 2023
June 21, 2023 By Marco Santarelli
The California housing market has shown signs of recovery in May, with home sales reaching the highest level in eight months and the median home price surpassing $800,000 for the second consecutive month. Despite the year-over-year decline in sales and price, the market is demonstrating resilience and stability.
The stats indicate a rebound in California’s housing market. Although sales and prices have declined on a year-over-year basis, the market is showing signs of resilience and stability. Increased competition, fewer price reductions, and a shorter time to pending status are positive indicators for the future. The impact of rising interest rates and the shortage of homes for sale will continue to influence the market dynamics in the coming months. Let’s dive into the details of the May home sales and price report released by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
Home Sales Surge to Eight-Month High
In May, existing single-family home sales in California reached a seasonally adjusted annualized rate of 289,460, representing a 9.8% increase compared to April. However, when compared to May 2022, home sales were down by 23.6%. Although the sales figure remained below the 300,000-unit mark for the eighth consecutive month, the rebound in May suggests a positive trend in the market.
Median Home Price Exceeds $800,000 Again
The statewide median home price in California climbed to $836,110 in May, marking a 3.0% increase from April. However, on a year-over-year basis, the median price dropped by 6.4% for the seventh consecutive month. Tight housing supply and an increase in the sale of high-end homes contributed to the upward pressure on prices. Despite the recent improvement, more negative annual price changes are anticipated in the coming months due to expected high interest rates in the third quarter of 2023.
Resilience of California’s Housing Market
C.A.R. President Jennifer Branchini emphasized the resilience of California’s housing market, attributing the bounceback in sales and prices to the value consumers place on homeownership. The market is stabilizing and even showing signs of improvement, with increased competition leading to a higher percentage of homes selling above the asking price and fewer sellers reducing their listing prices. Additionally, homes are going into pending status within two weeks, compared to over 30 days earlier this year.
Regional Sales Performance
While sales declined across all major regions in California, the rate of decline moderated compared to the previous year. The San Francisco Bay Area experienced the largest sales drop at 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%) recorded smaller decreases. Nearly all counties tracked by C.A.R. registered a decline in sales from the previous year, with some experiencing significant drops.
Impact of Interest Rates
The recent rise in mortgage rates has had an impact on the housing market, as prospective sellers with low-interest rate mortgages are hesitant to list their homes for sale, contributing to tight inventory. C.A.R.’s Senior Vice President and Chief Economist, Jordan Levine, explained that the shortage of homes for sale continues to put upward pressure on prices. However, with reduced homebuyer demand, the market faces an imbalance between supply and demand.
California Housing Market: Regional Trends
The California housing market continues to exhibit regional variations in May 2023. While some regions, like the Los Angeles Metro Area, witnessed month-to-month price increases, others, such as the San Francisco Bay Area, experienced declines. Similarly, sales figures varied across the regions, with some areas showing significant growth while others faced declines. It is crucial to consider these regional trends when analyzing the overall state of the California housing market.
Los Angeles Metro Area:
The median sold price of existing single-family homes in the Los Angeles Metro Area stood at $765,000 in May 2023. This reflects a 3.4% increase from the previous month but a 5.0% decrease compared to May 2022. Despite the year-over-year decline, the region experienced a substantial increase in sales, with a 20.6% month-to-month growth and a 21.8% year-over-year decline.
Central Coast:
In the Central Coast region, the median sold price for existing single-family homes was $1,000,000 in May 2023. This indicates a 2.0% decrease from April 2023 but a slight 0.5% increase from May 2022. Notably, the region witnessed a significant rise in sales, with a remarkable 36.6% month-to-month increase. However, when compared to the previous year, there was a 17.3% decline in sales.
Central Valley:
With a median sold price of $485,000 in May 2023, the Central Valley region experienced a notable 4.8% month-to-month increase. 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 had a median sold price of $380,000 in May 2023, 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:
In May 2023, the median sold price for existing single-family homes in the Inland Empire region was $574,990. This represented 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 in May 2023. This indicated 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:
In May 2023, the median sold price for existing single-family homes in Southern California was $800,000. This represented 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.
This article orginally appeared here: https://www.noradarealestate.com/blog/california-housing-market/
