August home sales plummet, prices soar
Home sales cooled again in August, as higher mortgage rates and few listings continued to idle the housing market in California.
Sales dipped to an annual rate of 268,940 homes in August, a 5.3% decline from July and off 18.9% from a year ago, according to the California Association of Realtors. Home sales were below the 300,000 level – considered a fairly healthy market – for the 11th consecutive month and the year-over-year figure has dropped 26 straight months.
Blame higher mortgage rates, which crept close to 7% in late July and topped that figure on August 17, according to the weekly Freddie Mac report. Economic experts believe mortgage rates will likely remain near or above 7% for the remainder of the year, especially with the latest core inflation figure exceeding estimates that could prompt the Federal Reservice to increase rates in November or December.
‘STILL SOLID INTEREST’
Affordability has become a big concern for home shoppers, with only one of every six households able to purchase a home in California during the second quarter, the lowest rate in 17 years, according to the California Association of Realtors.
And buyers in three of every four major markets in the state had $4,000-plus mortgage payments in the second quarter, according to ATTOM Data.
“Despite persistently high mortgage rates and availability of homes remaining extremely tight, there’s still solid interest from prospective buyers,” says CAR president Jennifer Branchini, a Bay Area REALTOR. “The highly competitive housing market continued to provide support to home prices, with the statewide median price steadily improving since early 2023. As California prices continue to stabilize, buyers and sellers on the sidelines will get back into the housing market once interest rates begin to moderate in the fourth quarter.”
Maybe, but bigger monthly mortgage payments – and still-rising home prices – have cooled the market for several months.
HOME PRICES NEAR A RECORD
California’s median home price – meaning half the homes sold for more, the other half for less – inched to $859,800, a 3.3% increase from July and up 3% from a year ago. It’s the highest price since the peak in May 2022.
Home prices are increasing because few home shoppers are competing for even fewer homes, housing experts say. Many homeowners are holding on to their current homes and 2%-3% mortgage rates rather than greatly increasing their housing costs.
“A reacceleration of interest rates since April, combined with tight housing inventory pushed down California home sales to a seven-month low in August,” says Jordan Levine, CAR senior vice president and chief economist. “While rates remain elevated for a little longer, macroeconomic fundamentals are expected to soften starting in the last quarter of this year. Mortgage rates should begin to ease, albeit gradually, in the next couple of months and provide a much-needed boost to both the supply and the demand sides of the housing market.”
Home prices and sales in August vs. a year ago
| Region | Price | % Gain/Loss | Sales |
|---|---|---|---|
| California | $859,800 | +3.0% | -18.9% |
| Bay Area | $1.26 million | +5.0% | -18.3% |
| Central Coast | $950,000 | No change | -17.9% |
| Southern California | $830,000 | +4.4% | -13.9% |
| Los Angeles | $792,500 | +3.6% | -13.4% |
| Inland Empire | $569,990 | +0.8% | -15.7% |
| Central Valley | $485,000 | +3.2% | -19.0% |
| Far North | $369,000 | -2.4% | -15.7% |
Source: California Association of Realtors
