Home sales slide as buyers compete for fewer listings, giving prices a lift in April
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Higher mortgage rates are creating a complex supply-and-demand issue in the housing market in California, generating competition for the few homes for sale and pushing prices past $800,000 for the first time in half a year.
Homeowners with near-record-low mortgage rates are holding off on selling, greatly affecting the home-shopping experience and significantly limiting the number of homes for sale, according to the California Association of Realtors.
The so-called “lock-in effect” has kept many homeowners from listing and selling, while wanna-be buyers are left scrambling for homes. Blame one-time mortgage rates of 3% two years ago that have jumped to 6.5% today, encouraging many homeowners to stay put, at least for now.
“High mortgage rates continue to dictate the housing market,” says Taylor Marr, deputy chief economist for Redfin. “Although a lot of homebuyers have acclimated to rates in the 6% range and many are finding ways to lower their monthly payments … high rates are handcuffing potential sellers. It’s hard to imagine a flood of new listings until rates come down at least into the 5s. For those who are selling now, the silver lining of giving up a low rate is that hardly anyone else is doing the same thing. That means buyers, who are hungry for new listings, will bite — and they don’t have much power to negotiate the price down.”
FEWEST NEW LISTINGS IN THREE YEARS
The critical shortage of available homes has stalled the market.
April home sales declined to an annualized rate of 267,880, a 4.7% drop from March – and off 36.1% from a year ago. The annualized figure would be the total number of homes sold if the pace remained the same throughout the year. It was the seventh-consecutive month of home sales below the 300,000 mark, often considered a balanced and healthy market for buyers and sellers.
All seven regions had 36%-plus declines in home sales in April compared to a year ago, with the Central Coast’s 43% tumble the worst (see table below for metro data).
And the dismal sales will likely continue for at least the next few months, as new listings plummeted more than 30% in April compared to a year ago – the largest year-over-year decline since March 2020, when the COVID- pandemic shutdown promptly slammed the door on sales for several weeks.
“Home sales remained soft as the lock-in effect continued to tighten housing supply and keep would-be sellers from listing their homes for sale,” says Jordan Levine, senior vice president and chief economist for CAR. “A surge in borrowing costs as mortgage rates surpassed 7% in late February and early March also contributed to the market weakness, as many transactions that opened in those two months were closed in April.”
PRICES TOP $800,000 FOR THE FIRST TIME IN SIX MONTHS, BUT DOWN 8% FROM A YEAR AGO
Cold feet led to the cool market. But the competition for homes helped jump-start prices, which exceeded $800,000 for the first time since October 2022, according to CAR.
The state’s median-home price – meaning half the homes sold for more, the other half for less – was $815,340, a 3% bump from March but off almost 8% from a year ago.
It’s the sixth-consecutive month of year-over-year price declines, but Levine adds that April 2022 was when The Federal Reserve started its rate hikes to combat inflation, causing many consumers to jump into the market before mortgage rates skyrocketed.
The Bay Area had the largest annual price decline at 16.7%, more than double the second-largest drop of 8% in the Central Valley, one of the most affordable housing markets in the state. The Central Coast and the Inland Empire (Riverside and San Bernardino counties) had the smallest price drops of just under 3%.
Home shoppers able to buy are competing for fewer homes, with the average days on the market falling to 20, compared to 33 days in March. And about 40% of the homes sold in April were above the listing price, says CAR president Jennifer Branchini, a Bay Area Realtor.
With the fast-changing market, CAR has revised its forecast for the remainder of the year. Home sales are estimated to reach 279,900 this year, an 18% drop from 2022. The median price is projected at $776,600, off 5.6% from a year ago.
Home prices and sales in April vs. a year ago
|Bay Area||$1.25 million||-16.7%||-38.5%|
|Central Coast||$1.02 million||-2.9%||-42.8%|
Source: California Association of Realtors