The sizzling summer homebuying season fizzled in June, as higher mortgage rates and a severe shortage of homes continued the deep freeze of the housing market.
And the cool housing market is expected to remain for the foreseeable future, with supply and demand playing a major role as wanna-be buyers are competing against each other for the few homes on the market, raising prices to the highest level in 10 months.
Existing sales totaled a seasonally adjusted rate of 277,490 homes in June, a 4.1% decline from May and down 19.7% from a year ago, according to the California Association of Realtors. The annual decline was the smallest since May 2022, the first time the figure was less than 20% in a year.
‘APPEARS TO HAVE FOUND ITS FOOTING’
However, sales were below the 300,000-home pace for the ninth straight month. A healthy market – good for the buyer and the seller – should have at least 300,000 and preferably 350,000 sales, according to industry experts.
Home sales were down across all seven regions, including a 26% drop in the Far North, from about Chico to Crescent City. Los Angeles had the smallest drop at 18.% compared to a year ago.
“California’s housing market has improved since the winter and appears to have found its footing as sales declined at the slowest pace in over a year,” says CAR president Jennifer Branchini, Bay Area REALTOR. “Despite elevated interest rates, the demand for housing continues to outpace the availability of homes for sale, as buyers slowly adapt to the new normal under the current housing market conditions.”
The annual comparison is better because home sales have been slow for more than a year after the Federal Reserve began hiking mortgage rates to combat the highest inflation since the Reagan administration.
PRICES REBOUND AS FEW OWNERS LOOK TO SELL
The crunch to find homes has helped home sellers, as home prices have increased for three consecutive months to $838,260 in June, a 0.3% increase compared to May but down a modest 2.4% from a year ago.
Only the Central Coast – Santa Barbara to Santa Cruz – eked out a small gain of 0.4% from a year ago.
“Buyer demand appears to have stabilized after rates doubled last year, though rates could still move higher in the coming month,” says Jordan Levine, senior vice president and chief economist for CAR. “As inflation finally subsides later this year, the market could see some improvement as rates and supply conditions start turning around.”
Perhaps, but the Federal Reserve has hinted that a drop in rates is unlikely any time soon. And many homeowners who are locked in with mortgage rates of less than 4% are in no hurry to sell in favor of higher interest – and larger monthly payments.
SAN JOSE HAD THE FEWEST HOMES CHANGE HANDS IN THE FIRST HALF OF THE YEAR
Northern California had the fewest homes listed for sale in the nation during the first half of the year, according to a new Redfin report. Only six in 1,000 homes in San Jose changed hands between January and June, with about eight homes selling in Oakland, San Diego, Los Angeles, Sacrament and Anaheim. Those figures are about half the national average of 14 homes per 1,000.
Only 1% of the nation’s homes sold during the first six months of the year, the fewest in at least a decade.
“The quick increase in mortgage rates created an uphill battle for many Americans who want to buy a home by locking up inventory and making the homes that do hit the market too expensive,” says Taylor Marr, deputy chief economist with Redfin. “The typical home is selling for about 40% more than before the pandemic. Mortgage rates dropping closer to 5% would make the biggest dent in the affordability crisis by freeing up some inventory and bringing monthly payments down.”
Redfin: Homes that changed hands per 1,000 homes in the first half of 2023
- Anaheim: 8.6
- Los Angeles: 7.9
- Riverside: 10.3
- Sacramento: 8.0
- San Diego: 7.8
- San Francisco: 9.1
- San Jose: 6.1
For now, it’s a wait-and-see on a number of fronts, as home sales plummet to the lowest level in years.
“It’s a perfect storm with high rates, low inventory and high prices,” says Todd Teta of ATTOM Data.
Home prices and sales in June vs. a year ago
|Bay Area||$1.32 million||-2.7%||-19.2%|
Source: California Association of Realtors