Largest-ever annual price increase, sales surge 65%
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California’s median home price climbed above $800,000 for the first time in April, the second straight month of a new record high and the latest evidence that the red-hot housing market will likely sizzle all summer.
The booming demand coupled with a dramatic decline in listings — the number of homes on the market dropped more than 50% for the fourth consecutive month compared to the previous year — are causing the record-setting prices, real estate officials say. The Covid pandemic and near-record-low mortgage rates jump-started home sales in spring 2020, and the market has been running at top speed since.
The statewide median home price was $813,980 in April, a 7.2% increase from a month ago — and a 34.2% pop from a year ago, according to the California Association of Realtors. The annual price increase was the largest ever, and the 30%-plus gain was the first since June 2013. Home prices have jumped about $207,000 during the past year, causing homeowners to cheer and wanna-be buyers to jeer the news.
“California continues to experience one of the hottest housing markets as homes sell at the fastest pace ever, with the share of homes sold above asking price, the price per square foot and the sales-to-price all at record highs, while active listings remain at historic lows,” says CAR president Dave Walsh, vice president and manager of the Compass San Jose office. “The high demand and shortage of homes for sale, driven by these market factors, continued to drive up home prices and shatter the record-high set just last month.”
New record-high prices were set in all seven regions, with each increasing at least 20%. The Central Coast — Santa Barbara to Santa Cruz counties — continued to have the highest increase at 41% compared to a year ago, but the Bay Area was close behind at 35.6%.
A lot of homes are selling — and fast
Few homes are on the market, but those available are selling fast — often in a week — and with a large majority fetching multiple offers and buyers paying more than the listing price. More than two of every three deals had bidding wars in San Diego, San Francisco-San Jose and the Sacramento region in April, according to Redfin.
April’s seasonally adjusted sales reached 458,170 homes in April, a modest 2.6% gain from March but a 65.1% increase compared to April 2020. All seven regions had at least a 38% sales jump compared to a year ago, with the San Francisco Bay Area up an impressive 101%, followed by the Central Coast at 81.7%. (The seasonally adjusted figures are how many sales there would be at the current pace over a year.)
California has become a tale of two markets, with high-end homes surging and lower-priced homes struggling, according to CAR. Sales of $2 million-plus homes are up 300% from a year ago, while those less than $300,000 are down 34% from a year ago. Limited inventory at the lower end is likely the cause of the slowdown, but the higher middle-class and rich vs. the middle (and working) class is a real worry.
“Not only do skyrocketing home prices threaten already low homeownership levels and make it harder for those who don’t already have a home to purchase one, it also brings to question the sustainability of this market cycle,” says Jordan Levine, CAR vice president, and chief economist. “As vaccination rates increase and the state reopens fully, higher home prices will hopefully entice prospective sellers who have held off putting their homes on the market during the pandemic to feel more comfortable listing their homes for sale, which would alleviate pressure on home prices.”
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.