Winter’s deep freeze continued in January, as home prices dipped lower and sales plummeted compared to a year ago, the latest evidence that higher mortgage rates have cooled the housing market.
A seasonally adjusted 241,500 homes sold in January, a 0.4% increase compared to December – but off 46% from a year ago, according to the California Association of Realtors.
Slightly lower home prices and mortgage rates helped home sales in January compared to December, but sales still tumbled by 200,000 homes from a year ago.
“Thanks to slightly waning interest rates and tempering home prices, California’s housing market kicked off the new year with another step up and continued to improve in January as buyers gained more confidence in purchasing a home and the affordability outlook improving slightly,” says CAR president Jennifer Branchini, a Bay Area REALTOR. “While the monthly sales gains have been nominal over the past two months, the market is moving in the right direction, and more gradual improvements could be coming in the months ahead as the market moves into the spring homebuying season in a few weeks.”
Real estate agents agree, saying there have been more home shoppers at open houses since the start of the year. But will those green shoots grow when mortgage rates are 6.5% to 7%?
So far, it’s more looking than purchasing. Home sales in all seven regions were off at least 35% compared to a year ago, with the Inland Empire (Riverside and San Bernardino counties) tumbling the most at 49%.
And with the highest mortgage rates in a decade, many homeowners considering selling are holding off, favoring their 3% mortgage rates – and smaller payments – to the Federal Reserve-juiced rates of today.
A FROZEN MARKET
For the first time in at least two decades, the housing market has entered a big-time downturn in sales without an uptick in listings. The combo has caused home prices to remain relatively stable.
Californian’s median-home price – meaning half the homes sold for more, the other half for less – dipped to $751,330 in January, a 3% drop compared to December and 1.9% lower than a year ago.
It’s the fifth consecutive month of lower prices, and the trend could continue for the next few months, as cost-conscious buyers look for bargains, says Jordan Levine, vice president and chief economist for CAR.
“With home prices expected to remain soft and the mix of sales continuing to shift toward less expensive housing units throughout the rent of 2023, the market will see more downward price adjustments in the next few months,” Levine says.
- San Mateo: $1.63 million
- Santa Clara: $1.53 million
- San Francisco: $1.39 million
- Marin: $1.2 million
- Orange: $1.19 million
- Alameda: $1.07 million
Plus, the latest job cuts, especially in the tech sector, will hurt higher-end home prices in the Bay Area, the most expensive housing market in the state.
The nine-county Bay Area’s median-priced home declined 15% to $1 million in January from a year ago, easily the largest year-over-year price drop in the state. The Central Valley, Bakersfield to Sacramento, had the second-largest price drop at 7%.
Home prices and sales in January vs. a year ago
|Bay Area||$1.0 million||-14.6%||-36.9%|