By Gord Collins

 June 21, 2023

Housing Market California

May’s home sales and price report from CAR shows more red ink, continue to reflect how depressed the California real estate market has become.

First time buyers affordability has continue its downward path as rates stay high and prices edge up. The biggest reduction in affordability year over year is in Southern California.

Existing-home sales fell 0.2% in May to a seasonally adjusted annual rate of 4.30 million. Sales are down 20.4% compared to May, 2022. See chart below. California’s median home price rose above $800,000 in May for the second straight month, rising 3.0%  to $836,110 in Mayvs April’s $811,950.

Sales are down 23.65% year to date, however there was a jump of 9.8% over April. We’re in a bit of a surge but it we wonder how long that will last.  There are conflicting forecasts for the US economy with some expecting a surge from the end of FED rate hikes, while others note the FED isn’t done and that jobless claims are up.

“The bounceback in May’s home sales and price shows the resilience of California’s housing market and is a testament to the value that consumers place on homeownership,” said C.A.R. President Jennifer Branchini

What’s Happening in June?

Realtors appear positive on sales, pending sales even though they’re seeing less currently.  They expect flat prices, and both sales and listings will lag.

California Realtor sentiment June 2023.

Pending sales growth is well down, yet it hasn’t impacted price of houses or condos in the Golden State. A telling state is the big rise in asking price by homeowners this year, likely driven by the hope that buyers have no options but to accept at those prices — or have no options. Reduced price listings headed downward in May.

California Housing Regions Price Sales Report. Screenshot courtesy of CAR.org

Competitiveness has improved and the number of sales above listing price has grown month to month adding to a trend for the year to date. Days on market is up a surprising 54.5% year over year.

A quick look at CAR’s charts shows just how far the California market has tumbled from last spring’s FED generated collapse. With rates remaining due to sticky inflation, it’s bound to impact sales going forward. Southern California, Central Valley, Far North, Central Cost and the Bay Area saw solid month to month gains in sales.

California home sales growth trend. Screenshot courtesy of CAR.

The Bay Area, Alameda, Santa Clara, San Mateo, Contra Costa and San Francisco counties saw the highest levels of homes sold at above asking price.  As this CAR chart reveals, higher priced homes are in demand, and perhaps are the price points where there is any availability.

Screenshot courtesy of California Realtors. Sales growth for high priced properties.

Active listings continue to fall to similar levels to last year, as high mortgage refinance rates discourage anyone from moving and selling. Unsold inventory dropped as spring progressed. That will ensure home prices either rise or are resistant to any decline.

Screenshot courtesy of California Realtors. Active listings fall In May.

Once again, we’re reminded how devastating antiquated laws regarding land use and housing development are to an economy and the quality of life within California.

May’s Housing Report by Region

Regionally across California, Los Angeles, home prices grew by 3.4%, while the Bay Area grew by 4%.  Central grew faster last month at 4.8%, while all of So Cal lagged behind at 1.9%.

With respect to top price growth at the county level, Santa Barbara jumped by 18% over April, presumably because high-end homes have been in demand. Merced saw its median price rise by 8.2%, Mendocino rose by 9.8% while Tehama had a jump of 10.5%.  The Far North saw a big reduction in prices such as Siskiyou down 11.4%, Plumas down 11.2%, and Lassen down 11.1%. Sales are down 41% in Plumas by 41.4% year over year.

Prices in Alameda Country dropped 16.7% in May vs April, while in San Francisco County, prices dropped a strong 17.9% from April. Sales are down 33.9% year to year in SF County.  Nearby NAPA saw median house prices rise 9% from April, but are still down 15.2% from last May.

House Prices and Sales May. Screenshot courtesy of CAR. Housing Market Report.

House Prices and Sales May. Screenshot courtesy of CAR.

California Home Price History. Screenshot courtesy of C.A.R.

This last stat shows sellers are asking for and getting their price or they’re not selling. Staying put is the trend that many in the media won’t comment on.

It makes buying and selling and moving a tough challenge which alone may suppress the residential real estate market and lead to economic stagnation.

Mortgages in California

Mortgage payment growth continues to decline despite the 30 year fixed rate mortgage is at 6.43%.

Mortgage Payments Drop. Affordability Up. Screenshot courtesy of C.A.R.

Also, see the sales/price trends in other markets including the Atlanta Housing market, New Jersey Housing market, Nashville housing market, Denver Housing market, and Las Vegas housing market.

*  Many thanks to CAR for the market info and graphics.

Will California Home Prices Fall in 2024?

Buyers and even renters are curious about whether prices might fall.  Yet as we saw above, and despite economists and analysts speaking of a 2023 recession with no recovery until 2024, there is low housing and rental supply. That has to translate to higher home prices as buyers give in to homeowners asking prices.  This could also mean higher rent prices.

Is it a good time to buy a rental property in the Golden State in 2023?  Most Millennial-aged Californians will prefer to continue renting until there is more economic certainty and numbers to justify the buy decision.

The biggest factors for the housing market forecast:

• rising interest rates (25 basis points expected in May)
• home prices appear to be rising although not at the pace of 2022
• supply continues to weaken encouraging price to rise
• tech sector uncertainty will weaken demand
• China’s economy reopening which could stimulate California’s economy

Forecasted for This Year

Unexpectedly for most Realtors, homeowners and home sellers, the debt ceiling crisis may result in upward pressure on interest rates.  If rates persist, it could deflate many of the optimistic projections for sales.  And prices would like still rise given the severe housing shortages.

C.A.R. Vice President and Chief Economist Jordan Levine predicted that “High inflationary pressures will keep mortgage rates elevated, which will reduce homebuyers’ purchasing power and depress housing affordability in the upcoming year. With borrowing costs remaining high in the next 12 months, a pull-back in sales and a downward adjustment in home prices are expected in 2023.”

Levine added, “Home prices will also moderate further over the next several months as interest rates remain elevated in the near term and seasonal factors come into play.”

CAR in its 2023 California Housing Market Forecast report, had predicted a 7.2% drop existing single-family home sales in 2023.  They believed it would reach 333,450 sold unit units, down from their projected previous sales volume of 359,220 units for this year (19.2% less than the 444,520 homes sold in 2021).

The median home price outlook was for a decline of 8.8% to $758,600 next year following a projected 5.7% growth this year to $831,460. CAR adjust the forecasts each month as new economic events and factors come into play.

California Realtors Housing Forecast to 2023. Screenshot courtesy of California Association of Realtors.

The rental market however appears to be a different story from the home resales market. Rental property investors have a completely different opportunity to recover their costs (with well selected properties).

CAR Realtors Survey November

California Realtors polled in November were bleak about their prospects, but this month’s survey shows buyer cold feet down, Realtor optimism up, and seller activity is up.

Realtor Survey for June 2023. Screenshot courtesy of California Association of Realtors.

Hottest Cities in California

Those cities with the highest price growth reported by Redfin for March 2023:

March hottest cities in California. Screenshot courtesy of Redfin.

Cities with highest price growth. Screenshot courtesy of Redfin.

Californians Looking Elsewhere

California has the highest percentage of people looking to buy elsewhere.  California, New York, District of Columbia, Massachusetts, and Illinois were the top 5 states homebuyers searched to move from. The top 5 states homebuyers searched to move to were Florida, Texas, Arizona, Maryland, and South Carolina.

The combination of housing market downturn risk, rising interest rates, and inflation are making more Californian homeowners consider selling their property this fall. That selling intention is lessened by desires to get a comfortable price, having to make extreme relocation choices, and entering into a new, more expensive mortgage.

Buyers in many states are still walking away from deals at a faster pace too given they can now walk away if they can’t get the right financing, don’t like inspection reports, and other reasons.  The desperate bidding war environment where they waived inspections, etc. has ended. According to Redfin, nationwide, buyers walked away from 15% of deals in August.

As layoffs in the corporate sector grow against fast rising mortgage rates, August and September’s housing market decline may worsen the October and December outlook.

 California Condo/Townhouse Prices Rise

Condo prices dropped steeply in NAPA (-31.9%), SF Bay Area (-3.4%), Santa Barbara (-22%), Fresno (-17%), and San Mateo (-7.9%) while prices rose in Monterey (+16.9%), Solano (+21.7%), and San Bernardino (+14.5%). This month’s stats don’t help to answer the much asked question in the past ten years about will prices drop?.

The forecast for landlords and the rental sector is a little better. Those rental managers who use a next generation  property management software are most likely to generate the best profitability in 2023. See more on the rental market forecast. Find the best rental properties in California.

September Housing Stats for Major Metros

The Los Angeles Metro Area in September suffered a 1% drop in price or $7,430 on average on the sale of a single family houses to $742,570.  Sales in Metro LA fell 12.% from September and are down 40.8% from 12 months ago.

The Central Coast region saw its average price rise 1.9% or $17,500 while sales fell 22% vs September and were down 38.8% from 12 months ago.

The San Francisco Bay Area saw prices rise .5% to $1,250,500 while sales declined 3.4% vs September — down 26% year over year.

In San Francisco itself, home prices rose $42,500 or .2.6% vs September while sales increased 7.4%.

Orange County saw house prices fall $35,000 or 3.1% to $1,165,000, which is up 4% from one year ago. San Bernardino County saw house prices fall 3.1% or $15,000 to a new median of $480,000.  Riverside home prices stayed even at about $600,000 while sales declined 19.2% vs last month.

In San Diego County, home prices rose $4,000 to $899,000, a 1.6% jump while sales fell 15.6% in October.

In Sacramento County, existing home prices fell 1.4% or ($7,500) in October, while sales grew 4.7% fell 19.2%.

California Exodus Pushing Prices up Elsewhere?

California is being blamed for fast rising housing prices in other states such as Utah and Idaho. An exodus of people and businesses might sound threatening but it may be that this state’s housing market is invincible. People want to live or rent in California.

There’s always buyers for California properties in any of its cities. If high taxes, regulations, fires, floods, inflation and high prices can’t scare buyers away, what could?

Looking for the best cities to buy a rental property and need to learn more about property management services? Get more insight and tips on the rental market on the ManageCasa Blog.

Calls for an economic recession and flat 2023 sales year would have most experts seeing reduced sales and prices in California which is seeing businesses and residents flee to more tax and cost-riendly states such as Texas and Florida.

Inflation came in at 8.2% in September.  If energy prices rise this fall, it’s easy to predict stronger Fed rate hikes to slow inflation further so they can meet their 2% inflation rate goals. Some are hoping the Fed will capitulate and pivot to avoid further hikes.<

California Rent Prices

11 California cities ranked as most expensive for renters out of top 70 in the US according to a new report from Zumper. Here are the mid July California rent price stats provided by Zumper.com.

	1 Bedroom			2 Bedrooms
Rank	City	Price	M/M%	Y/Y%	Price	M/M%	Y/Y%
2	San Francisco, CA	$3,000	3.4%	7.5%	$3,950	-1.3%	7.0%
3	San Jose, CA	$2,570	3.6%	19.0%	$3,130	2.0%	15.9%
6	Los Angeles, CA	$2,360	0.0%	18.0%	$3,200	0.6%	16.4%
7	San Diego, CA	$2,320	-6.1%	20.8%	$2,910	-6.1%	14.6%
9	Santa Ana, CA	$2,110	3.4%	24.1%	$2,770	-3.5%	23.7%
10	Oakland, CA	$2,100	2.4%	5.0%	$2,800	1.1%	10.7%
14	Anaheim, CA	$1,860	-2.6%	12.0%	$2,470	-6.1%	22.3%
18	Long Beach, CA	$1,710	-1.7%	6.2%	$2,280	-5.0%	7.5%
24	Sacramento, CA	$1,600	0.0%	8.8%	$1,980	1.0%	7.6%
31	Fresno, CA	$1,520	6.3%	25.6%	$1,680	5.0%	15.1%
69	Bakersfield, CA	$1,060	-1.9%	9.3%	$1,380	0.7%	15.0%

CAR stats show lower income Californians were hurt by the pandemic and aren’t participating in the recovery as yet. See more on the 2022 rental market forecast and the US rental market report.

California Rent Prices

Most CA city’s rent prices declined during the month, although not as fast as other US cities. California cities took 6 out of the top 10 rankings for top prices in the US. Given housing prices are so high, buyers are into the rental market firmly now.

	1 Bedroom			2 Bedrooms
City	Price	M/M%	Y/Y%	Price	M/M%	Y/Y%
San Francisco, CA	$3,020	-2.6%	7.9%	$4,060	-2.6%	5.2%
San Jose, CA	$2,600	-6.1%	12.6%	$3,230	-2.1%	13.3%
San Diego, CA	$2,500	-4.6%	21.4%	$3,210	-6.1%	17.6%
Los Angeles, CA	$2,410	-2.4%	12.6%	$3,300	-0.9%	11.9%
Oakland, CA	$2,200	0.0%	10.0%	$2,770	-3.1%	4.5%
Santa Ana, CA	$2,150	-0.5%	20.8%	$2,770	-4.5%	9.1%
Anaheim, CA	$1,950	-2.5%	4.8%	$2,530	-3.8%	12.4%
Long Beach, CA	$1,800	0.0%	11.8%	$2,420	-3.2%	12.6%
Fresno, CA	$1,420	-4.1%	16.4%	$1,620	-5.8%	2.5%

Sales growth normally recedes in the fall months, but this fall season, the decline could be much steeper. Pending sales have been dropping even in the luxury home market. Pending sales of condos and townhomes have continued to drop.

California real estate is always a hot topic.  Find out more about rental property investment is wise and how  property management software is providing the foundation for profitable rental portfolios.

Read more on the San Francisco Market, San Diego market, and Los Angeles market.

Please note that CAR designates the Los Angeles Metropolitan Area as a 5- region that includes Los Angeles, Orange, Riverside , San Bernardino , and Ventura.  The Bay Area includes: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma.  And the Inland Empire includes Riverside and San Bernardino counties.

Is it a Good Time to Buy a Home in California?

According to C.A.R.’s monthly Consumer Housing Sentiment Index, in April, 59% of consumers said it was a good time to sell, up from 55% the previous. Only about 25% feel it is a good time to buy a home, unchanged from last year.

Homeowners may be very cautious about relinquishing their valuable property when moving is difficult and costly, and homes are very hard to find.  Without certain places to go, listings don’t grow as expected.

It’s absolutely the biggest seller’s market ever across California. And perhaps more so for the pandemic destination cities within the state.

The top challenge to the housing market in CA now as the coming end of pandemic stimulus payments to homeowners, renters, and small businesses.  The end of the eviction moratorium could throw a large number of homes onto the market as owners can’t meet their mortgage obligations.  The state’s unemployment rate improved to 7.9% in May but remains one of the highest unemployment rates in the nation.

Relocating to New Cities for Safety, Room and Improved Lifestyle

CAR’s forecast report shows the reasons people are relocating and buying, See some of that info below.

Sales and especially prices for condos in NAPA have rocketed (condo prices, see below, shot up almost 30% and sales rose 33% over February number). Condo prices in Shasta were up 81% over February and in Monterrey, were up 48%.

Although apartment rent prices are heading downward in the Bay Area as vacancy rates climb, other housing markets in the state are thriving. The demand is for single-family houses.  It may be that when the pandemic is over, both the big cities and the rural regions will have evolved considerably.

Home listings continue to plummet which means price pressures could be intense as stimulus money arrives and the recovery begins.  New funds would certainly help save landlords and the rental market, and support suburban housing markets around San Diego, Los Angeles, and San Francisco. See more on the Bay Area rental market.

Will California’s Home Prices Continue to Rise into 2022?

A lot of buyers are asking whether home prices will rise or fall?  Renters are wondering if rent prices will fall? High demand, low mortgage rates, and low inventory will likely skew homes and condo prices higher.  The trend is here and the return of buyers is here.  A number of factors are contributing to California’s positive sales stats:

• desire to live away from the city in suburbs and rural regions and willingness top pay top dollar or homes
• record-low mortgage rates
• moving to regions (pandemic destination) that offer more room perhaps with an office or garden>
• wealthy buyers have the funds ready

“Low rates and tight housing inventory are contributing factors to the statewide median price setting a new record high three months in a row from June to August. A change in the mix of sales is another variable that keeps pushing median prices higher, as sales growth of higher-priced properties continued to outpace their more affordable counterparts,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young.

California Realtor’s Survey

The latest survey of Realtors shows fewer are withdrawing offer, more are listing new properties, and are not optimistic about sales or prices.

California Housing Market Forecast

C.A.R. Predicted More Home Sales and Higher Prices for 2021: Leslie Appleton-Young delivered her updated California housing market forecast for 2021.  She expected sales to continue to improve through 2021.

The prediction is based on growing buyer demand that’s pushed California’s median price above $700,000 and low inventories that will cause price increases. As know now, sales have declined.

California’s weekly showings index rose to 182.3% higher than it was in September of 2019.  Mortgage rates have dropped back down and purchase applications rose 24.2% on an annual basis last week.

As the graphic shows, affordability has jumped back up the top reason for relocating in California.

California Economic Forecast

Car predicts a J-shaped economic recovery extending over the next 12 months. Of course this trend will affect home prices in the coming 6 months.

This article originally appeared here: https://managecasa.com/articles/california-housing-market-report/