Listings tumble 40%, homes enter escrow in record 10 days
California’s red-hot housing market cooled a bit in October but still managed almost 20% gains in price and sales compared to a year ago.
Record-low mortgage rates continue to attract buyers, including many who are looking for more space with the pandemic and work-from-home options. An annually adjusted rate of 484,510 homes sold in October, a 1% dip from September but a 19.9% increase compared to a year ago, according to the California Association of Realtors. It’s the fourth consecutive month of at least 400,000 homes sold, considered the barometer for a healthy sellers’ market.
Six of the seven regions in the state had double-digit gains in home sales compared to a year ago, with the Central Valley — Bakersfield to Sacramento — falling just short at 9.9%. The Central Coast, from Santa Barbara to Santa Cruz, had the largest increase at 28% (see below for details).
“California’s housing market continues to exceed expectations as this year’s traditional home-buying season has shifted into late summer and fall instead or spring and early summer,” says CAR president Dave Walsh, vice president and manager of the Compass San Jose office. “The market is unseasonably strong, as motivated buyers continue to take advantage of the lowest interest rates in history. The ongoing momentum will keep home sales elevated for the next couple of months, and the housing market will remain a rare bright spot in a struggling economy.”
‘Renewed attitude towards homeownership’
Well, a bright spot for homeowners looking to sell. The median home price was $711,300 in October, basically flat compared to the record set in September but up 17.5% gain from a year ago — and the second-highest increase since February 2014. Home prices have enjoyed double-digit gains for three consecutive months.
The Central Coast, where demand has soared as listings tumble, had the largest annual price increase at 25.9% to $850,000, thanks largely to million-dollar-plus deals in Santa Barbara and Monterey counties. But across-the-board double-digit gains dominated from the Bay Area to Southern California.
The Bay Area, the nation’s priciest major housing market, has five counties with a median price of $1 million, led by San Mateo at $1.68 million, followed close behind by San Francisco at $1.63 million.
“An extremely favorable lending environment and a renewed attitude towards homeownership is prolonging the homebuying season and extending the market’s V-shaped recovery to the off-season,” says Leslie Appleton-Young, CAR senior vice president and chief economist. “The question that remains to be answered, however, is whether the strong market is sustainable in the longer term as market fundamentals continue to be tested by tight supply, eroding housing affordability and, most of all, the rising number of coronavirus cases.”
Affordability is definitely an issue, as only 28% of consumers could afford to buy the median-priced home in the state during the third quarter, down from 31% a year ago, according to CAR. And the average household income necessary to qualify for a mortgage for the median-priced home — even at the record-low rates — is $127,000.
Affordability is greatly affected by the critical shortage of homes on the market. Active listings plummeted 40% in October, compared to a year ago. Homes listed are entering escrow in 10 days, easily a record and down from 24 days in October 2019.