Median price is below $800,000 for the second straight month
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Homebuyers shrugged off a limited supply of homes and slightly higher interest rates in November, creating a holiday surprise for a market that could face some serious headwinds with inflation concerns and another surge from the Covid pandemic during the next few months.
Annualized home sales reached 454,450 in November, a 4.7% increase from October – but off 10.7% from a year ago, according to the California Association of Realtors. Annual home sales declined for the fifth straight month, but are up 10.6% compared to the same 11-month period in 2020.
The Central Coast – Santa Barbara to Santa Cruz counties – had the largest annual drop at 9.6% compared to a year ago, and only the Far North (Chico to Eureka) eked out a gain at 2.3%.
Higher rates could mean fewer buyers
The Federal Reserve’s announcement of at least three rate increases expected in 2022 could cool the red-hot housing market. Or the additional cost could pause some buyers and encourage others who have been frustrated by too many folks competing for far-too-few homes on the market.
“As we move further into the off-peak homebuying season, slowly rising interest rates will motivate savvy buyers to enter the market,” says CAR president Otto Catrina, a Bay Area real estate broker. “With fewer active buyers in the market during the holidays, prospective buyers who may have taken a breather during the heated peak homebuying months can take advantage of this window of opportunity when there’s less competition and more homes to choose from.”
Perhaps less competition, but far from more homes – active listings were down 22%, according to CAR. The state’s unsold inventory index, how long it would take to sell the homes listed at the current pace, dipped to 1.6 months, down from 1.9 months a year ago.
Still, there are plenty of buyers – many with hefty down payments and high credit scores – and few homes, making home-shopping as challenging as finding a Playstation or an Xbox this holiday season.
“California’s winter housing market remains unseasonably resilient, despite market challenges of a lack of inventory, modest interest rate increases and ongoing affordability issues,” says Jordan Levine, vice president and chief economist for CAR.
California’s median home price was $782,480 in November, down 2% compared to October and up 11.9% from a year ago. It’s the second straight month below $800,000.
The Bay Area, where five counties exceed $1.5 million, boasts the highest price at $1.3 million, an 18% increase from a year ago – the largest gain in the state. The Far North is the most affordable at $380,000, an 11.8% increase from a year ago.
Affordability is the biggest concern for wanna-be buyers and, to some extent, lenders and real estate agents. Fewer than one of every four households can afford to buy a home in California, a dramatic decline from the modern-day record 42% in third-quarter 2012.
“While we believe the market will continue to do well in 2022 as the economy further recovers, a widening imbalance between supply and demand will put upward pressure on prices and create headwinds for housing affordability that could slow sales in the upcoming year,” Levine says.
CALIFORNIA HOME PRICES, SALES COMPARED TO A YEAR AGO (RANKED BY PRICE)
|Bay Area||$1.3 million||+18.2%||-4.8%|
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.