Consumers shrugged off concerns about the COVID pandemic and a still-sputtering economy in July, buying the most homes in more than two and a half years and pushing prices to a record for the second consecutive month.
Despite another decline in the number of homes listed, homebuyers completed deals at an annualized rate of 437,890 homes in July, a 28.8% increase from June — and up 6.4% from a year ago, according to the California Association of Realtors. It was the first time home sales topped 400,000 since February, the beginning of the COVID crisis and the pandemic shutdown that paused sales, albeit briefly.
An increasing focus on the importance of owning a house, from having a backyard to a work-from-home space, coupled with record-low mortgage rates helped power the stronger-than-expected sales in July, says CAR president Jeanne Radsick.
“A housing market trifecta of strong pent-up demand, record-low interest rates and a renewed interest in the value of homeownership bolstered July’s home sales,” says Radsick, a second-generation broker in Bakersfield. “With this year’s delayed start of the homebuilding season due to the pandemic, we expect home sales to remain robust in August and September, extending the season later than what’s typical.”
Buyer (and bidder) beware, competition is king
Many consumers are entering bidding wars and competing for the short supply of homes, with inventory falling by 25% for the eighth consecutive month. Bottom line: Demand easily exceeded the limited supply.
And when that happens, prices soar. The median price reached $666,320 in July, a 6.4% gain from June — and up 9.6% compared to a year ago. However, higher-end and move-up buyers account for much of the almost double-digit price increase.
Homes below $500,000 accounted for 40% of sales in July, down from 44% in June. Million-dollar properties were 20.4% of sales in the state in July, up from 18.1% in June. So, three of every five homes sold last month were above $500,000.
“Stronger sales of higher-priced properties continue to propel the statewide median home price, as those who tend to purchase more expensive homes are less impacted by the economic recession,” says Leslie Appleton-Young, senior vice president and chief economist for CAR. “High demand in resort communities is another variable that’s fueling the increase in home prices, as a new wave of remote workers is leaving cities in search of more space and a healthier lifestyle in what used to be the second-vacation home market.”
Think Lake Tahoe and Santa Barbara, popular getaways that have now become permanent addresses for those able to afford the prices. The Central Coast, from Monterey to Santa Barbara, had sales increase 22% in July compared to a year ago, the largest percentage in the state, followed by the Bay Area at 14.8%.
The booming demand helped increase home prices by 14.6% on the Central Coast and 10.5% in the Bay Area.
The Bay Area easily remains the priciest region, with a median price of $1.05 million. San Mateo County had the highest price at $1.72 million, followed by San Francisco at $1.67 million and Marin at $1.55 million.
Looking for a bargain? Glenn County, best-known for the cities of Orland and Willows, is the lowest-priced of the major counties at $257,500 — or about $410,000 cheaper than the statewide average.