Prices remain below $800,000 for third straight month
Higher mortgage rates cooled down the red-hot housing market in December, giving wanna-be buyers a holiday gift with fewer home sales and smaller price gains.
But the biggest issue – a booming demand of buyers and a limited supply of homes on the market – remains, as homes listed plummeted 24% from a year ago. With the current number of homes on the market and at the latest pace of sales, the state had only 1.2 months of inventory in December, the lowest figure since January 1988.
A seasonally adjusted annualized rate of about 430,000 homes sold in December, down 5.4% compared to November – and off 15.7% from a year ago, according to the California Association of Realtors. But the decline is more about a critical shortage of homes on the market rather than fewer home shoppers. At least three of every five completed sales had multiple offers in December, Redfin says.
All seven regions endured sales declines in December compared to a year ago, with sales tumbling 23% in the Bay Area, the largest drop in California. But home sales statewide were up 7.9% for the year compared to 2020.
“Despite signs of moderating in the second half of the year, California’s housing market continued to outperform last year’s level and remained competitive even as home prices rose at a double-digit pace – a testament to the imbalance of high demand and not enough homes on the market,” says CAR president Otto Catrina, a Bay Area real estate broker. “For the year as a whole, the market turned in its best performance in more than a decade, as buyers took advantage of historically low-interest rates and continued to value the benefits of homeownership amid another year of the pandemic.”
Double-digit home price gains continue, but increases are smaller
California’s median home price – meaning half the homes sold for more, the other half for less – inched up 1.8% to $796,570 in December compared to November, and an 11% increase from a year ago. But the much-larger double-digit gains of the past 18 months have definitely slowed, and home prices were below $800,000 for the third straight month.
Home prices in the Inland Empire (Riverside and San Bernardino counties) increased 20% in December compared to a year ago, the largest gain among the seven regions in the state. The Central Coast – Santa Barbara to Santa Cruz – had the smallest increase at 9.1%.
Despite the smaller home price gains, prices have increased by 10% or more for 17 straight months. For the year, the median home price reached a record $786,750, a 19.3% increase.
The Bay Area’s $1.2 million median home price is the highest in the state, with six of the nine counties in the region topping $1 million-plus. San Mateo and Santa Clara counties are the most expensive at $1.95 million and $1.74 million, respectively.
“The state’s housing market is expected to perform solidly this year as the economy recovers further and consumers’ desire to buy remains elevated,” says Jordan Levine, CAR vice president and chief economist. “However, with COVID cases surging and inventory constraints remaining an issue, the housing market will see headwinds of ongoing high inflation, which will put pressure on the Fed to raise rates sooner than previously expected. These factors will increase the cost of borrowing and put more affordability burden on potential homebuyers who want to purchase in 2022.”
CALIFORNIA HOME PRICES, SALES IN DECEMBER COMPARED TO A YEAR AGO (RANKED BY PRICE)
|Bay Area||$1.2 million||-13.4%||-23.1%|
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.