Positive sign? Double-digit home price gains continue but at the slowest pace in more than a year
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California’s cooling housing market heated up in September, ending four months of declining home sales with the largest monthly increase in more than a year.
An adjusted annualized rate of almost 438,200 homes sold in September, a 5.4% increase compared to August — but off 10.5% compared to a year ago, according to the California Association of Realtors. Despite the annual decline, home sales are up 16.8% for the first nine months of the year compared to the same period in 2020.
More homes listed on the market coupled with mortgage rates creeping higher likely caused some fence-sitting consumers to make the move — and submit more offers. Mortgage rates have climbed from 2.87% to 3.05% for a fixed-rate, 30-year mortgage during the past six weeks, according to Freddie Mac.
“As we move into the off-home-buying season, we should see market competition easing and home prices moderating, giving those who waited out the highly competitive market earlier this year an opportunity to revisit buying,” says CAR president Dave Walsh. “Interest rates are expected to remain low and the availability of homes for sale should improve, which should boost home-buying interest and spur sales.”
Competition for homes remains strong but has slowed some in recent months. For example, more than six of 10 homes sold above their asking price, but that was the lowest level since February 2021. And the average home took 10 days to enter escrow in September, slightly higher than the nine days in August.
Better but not great for home shoppers competing for far-too-few homes in the market.
However, there is one sort of positive sign for those looking to buy — home prices dipped lower, and the double-digit gains compared to a year ago are smaller.
The state’s median-home price — meaning half the homes sold for more, the other half for less — declined to $808,890 in September, down 2.3% from August but up 13.5% from a year ago.
The median home price was above $800,000 for the sixth consecutive month, but the double-digit year-over-year price gain of 13.5% was the smallest in 14 months. For wanna-be buyers, you take the good even when it’s far from positive.
Five of the seven regional markets, from Calexico to Crescent City, reported 15%-plus price gains compared to a year ago, with San Francisco leading the way at 21.7% (see table below).
But the slower-than-expected price gains could simply be more about fewer million-dollar homes selling than an actual price slow down statewide, CAR warns.
Affordability, somewhat muted by near-record-low mortgage rates the past two years, will continue to be a challenge.
“With the economic recovery remaining on course but progressing at a pace slower than anticipated, rates are expected to rise modestly in the next few months but will remain low,” says Jordan Levine, CAR vice president and chief economist. “While statewide home sales are expected to dip slightly next year according to our latest forecast, housing demand will remain solid and post the second-highest level of sales in the past five years. The market will stay competitive in 2022 as the normalization continues and home prices will remain elevated.”Basically, the same housing market of the past 18 months.
California home prices, sales compared to a year ago (ranked by price)
|Region||Price||% Gain/Loss||Sales % Gain/Loss|
|Bay Area||$1.29 million||+21.7%||-7.0%|
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.