Home prices dip below $700,000 for the first time in three months, up almost 19% from a year ago
California home sales surged in November to the highest level since 2005, the beginning of the last housing boom that ended with the Great Recession.
November’s near-record home sales were impressive in the best of times, let alone during a Covid pandemic-prompted recession that has left almost 1.8 million Californans jobless and many small-business owners struggling.
Home sales soared to an annualized rate of 508,820 homes in November, the first time above the half-million mark since January 2009 — and an almost hard-to-believe 106,000 more homes than a year ago, according to the California Association of Realtors. The annual 26.3% increase was the fourth consecutive double-digit gain and the largest since May 2009, the final months before the housing market crashed thanks to the mortgage crisis.
‘Upward pressure on prices’
Annualized rates can be a bit confusing for some. Another way to look at the sales in November — about 42,400 homes entered escrow during the month, compared to about 33,575 homes in November 2019. On average, about 1,400 homes entered escrow daily in November, which included the Thanksgiving holiday.
“Home-buying interest is at levels that we have not seen for years, setting the stage for a stronger-than-expected comeback that fully recovered all the sales that the market lost in the first half of the year due to the pandemic,” says CAR president Dave Walsh, vice president and manager of Compass San Jose office. “Housing supply remains an issue, however, as we will likely see a shortage of homes for sale in the near term, which will put upward pressure on prices and dampen affordability for those who haven’t been able to take advantage of low rates.”
Active listings dropped 46.6% in November compared to a year ago, and dropped by more than 40% on a year-over-year basis for the sixth straight month. And homes listed are entering escrow in nine days, a dramatic decline from the 25 days in November 2019.
Double-digit price gains throughout the state
Despite the climbing demand and dwindling supply, the median home price dropped below $700,000 for the first time in three months. Barely. November’s median price — meaning half the homes sold for more, the other half for less — dipped to $699,000, still an 18.5% increase from a year ago.
It’s the fourth consecutive month of double-digit gains and the largest price increase since February 2014. California home prices have averaged a 9.7% increase during the past six months, easily offsetting record-low mortgage rates and making home affordability a major concern (third item in CHN blog) for home shoppers and would-be buyers.
Home prices were flat compared to October in all seven regions of the state. However, all regions reported double-digit price increases compared to a year ago, with the San Francisco Bay Area leading the way at 18.9% to $1.1 million. Five Bay Area counties topped the $1 million mark, with San Francisco reaching $1.7 million (see pullout for regional prices and sales).
But even with near-record prices and sales, CAR chief economist Leslie Appleton-Young warns that Covid remains a concern and could affect the market.
“California’s housing market continues to be the bright spot in the economy, but the direction and pace of the recovery will hinge in the coronavirus pandemic and the distribution of the vaccine in the coming months,” she says. “The rise in Covid-19 cases and tighter constraints on economic activity recently imposed will likely have implications for the housing market as renters and homeowners face adverse impacts to their incomes, which is why Congress should pass additional relief for renters, homeowners and workers as soon as possible.”