SoCal’s Housing Market is First to Dip
California's housing market has continued to decrease across the board. Decreasing buyer demand has been consistent with rising mortgage rates and record low supply. Southern California and the Bay area have been hit the hardest, with slumps in both home sales and home prices.
California’s Housing Market Seeing Shift
Home prices and sales have dropped during what is typically the hot season for real estate. Home sales in California dropped in June by 21% year-over-year, according to a report from the California Association of REALTORS®.
What’s shocking, is that this drop in home sales is the worst since 2008.
Along with the home sales drop, the median sale price in California was also down 4% from May to June for the first time since 2010.
“California’s housing market continues to moderate from the frenzied levels seen in the past two years, which is creating favorable conditions for buyers who lost offers or sat out during the fiercely competitive market,” said California Association of REALTORS® President Otto Catrina in the report.
Most industry experts would agree that this does not signal a “market crash,” but it does signal an adjustment.
Having dealt with low supply and high demand for the past two years, buyers are now being turned off by rising mortgage rates across the country.
After hitting record lows during the pandemic, mortgage rates have almost doubled since the beginning of 2022. The current average 30-year fixed rate is about 5.6%, up from 3.2% in January. For buyers who need financing, monthly house payments rose 24% for the first three months, which is decreasing demand quickly.
Throughout California, real estate professionals have noticed a change in buyer behavior. Listings that normally would attract 10+ bids are now receiving two or three bids. Buyers are more cautious throughout the process and are holding firm on appraisals, inspections, and other contingencies. Who can blame them? Buying a home is a major investment, especially in California, where the median home price is $813,800.
“The buyers have a little bit more leverage,” said Erin Stumpf, broker associate with Coldwell Banker in Sacramento. “They don’t have to be as accommodating or give up quite as much on the front side that they may have had to get into contract six months ago.”
Bay Area Market Hit Hardest in California
The Bay Area market has taken the biggest hit in home sales, as this number dropped a staggering 29% over the past year. Decreases in home values from April to June have also created some concerns. Now, home prices in San Francisco still remain high at $1,525,000, but this is a noticeable decrease from April’s high of $1,612,500.
“Because the combination of [prior] home price growth and the recent rise in mortgage rates are pushing monthly payments past what many buyers can afford, you’re seeing inventory gains in these markets and competition among buyers ease the fastest,” said Matt Kreamer, data spokesman for Zillow.
Southern California includes six counties, with each seeing a rise in median home prices but a decline in home sales.
Here’s a county-by-county breakdown of changes in home prices and home sales, according to the OC Register:
- Los Angeles County’s median home price increased 8.9% to $860,000; sales were down 22.9% to 6,628 transactions.
- Orange County’s median home price increased 13.9% to $1,025,000; sales were down 33.5% to 2,767 transactions.
- Riverside County’s median home price increased 16.6% to $594,500; sales were down 21.1% to 3,815 transactions.
- San Bernardino County’s median home price increased 16.9% to $517,750; sales were down 19.5% to 2,866 transactions.
- San Diego County’s median home price increased 10.1% to $825,000; sales were down 31.8% to 3,275 transactions.
- Ventura County’s median home price increased 10.1% to $810,000; sales were down 20.9% to 938 transactions.
We'll continue to track the state's housing market, as this downturn might be a continuing trend not only in California but the rest of the nation.