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Prices top $700,000 in August as buyers compete for homes

What pandemic or recession? Home prices reach a new record, thanks to the lowest-ever mortgage rates.

Fast-rising demand coupled with dramatically fewer homes on the market raised the state’s median home price to a record $707,000 in August — about $110,000 more than the peak during the housing boom that led to the market slide more than a decade ago.

Record-low mortgage rates, below 3% for almost two months, have attracted buyers and made home buying possible, offsetting the head-turning rise in prices during the past year, according to the California Association of Realtors. The state’s median home price — meaning half the homes sold for more, the other half for less — climbed to $706,900 in August, a 6.1% increase from July and up 14.5% from a year ago. The annual percentage price increase is the largest since March 2014.

Home prices soared throughout the state, with the Bay Area leading the way with an 18.7% increase compared to a year ago. The Central Coast, Southern California and the Central Valley (12.2%) enjoyed double-digit price gains from a year ago.

“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,” said Leslie Appleton-Young, CAR senior vice president and chief economist. “A change in the mix of sales is another variable that keeps pushing median home prices higher, as sales growth of higher-priced properties continued to outpace their more affordable counterparts.” 

‘Motivated buyers are eager to purchase homes’

Despite the record-high prices, consumers bought at an annualized rate of 465,400 homes in August, a 6.3% increase from July and up 14.6% from a year ago. It’s the first time sales have increased for three straight months since summer 2016. The Bay Area and the Central Coast — some of the priciest regions in the state — reported double-digit gains in sales compared to a year ago.

“California’s strong housing recovery in terms of sales and price over the past few months is encouraging as motivated buyers are eager to purchase homes amid the lowest interest rates ever, which led to the fastest sales growth in a decade,” says CAR president Jeanne Radsick, a second-generation REALTOR in Bakersfield. “However, persistently low housing inventory will continue to push up home prices due to heavy buyer competition, which is starting to outweigh the benefits of record-low interest rates and hamper housing affordability.”

Active listings plummeted 50% from a year ago, the ninth consecutive month where listings have dropped at least 25%. The decline is most obvious for homes of less than $1 million, where active listing plunged 58% in August compared to a year ago. Bottom line: Good luck finding a home and those who do will likely have to compete with other home shoppers.

Santa Barbara home prices soared 42% in August compared to a year ago.
August home sales, prices compared to a year ago by county

San Francisco: Sales up 28.9%; $1.66 million, up 3.8%
Santa Barbara: Sales up 20.2%; $1.02 million; up 41.7%
Orange County: Sales up 13.7%; $930,000, up 14.8% 
Los Angeles: Sales down 5.2%; $677,260, up 7.9%
Sacramento: Sales down 1.9%; $425,000, up 10.1%
Fresno: Sales down 5.1%; $322,000, up 13%
Source: California Association of Realtors

The Bay Area, as always, remained the priciest region in the state. San Mateo County is the most expensive at $1.81 million, followed by San Francisco at $1.66 million. And a fifth county — Alameda — joined the $1 million-plus parade. Glenn County was the most affordable of the major counties in the state at $263,500.

Ron Trujillo

Longtime business journalist-turned-public relations executive who enjoys reporting on residential real estate in his spare time. He can be reached at ron@calhomenews.com.