Home sales drop as mortgage rates rise in November

A big bump in mortgage rates closed the door for many home shoppers in November, as sales plummeted to the lowest level since the Great Recession.

Climbing mortgage rates and still-rising prices compared to a year ago have greatly affected the number of families that can buy a home in California, if they can even find a home to purchase amid the ongoing shortage of listings. 

November sales declined to an annualized rate of 223,940 homes, a 7.4% decline from October – and off 5.8% from a year ago, according to the California Association of Realtors

It’s the third consecutive month of sales below the 250,000 level, and the 29th straight drop on a year-to-year basis. The Central Valley and the Central Coast – one of the most affordable and priciest markets, respectively – had double-digit sales drops from a year ago.

“Elevated interest rates and a persistent shortage of homes for sale hindered home sales in November,” says CAR president Melanie Barker. “With mortgage rates dropping to the lowest level in four months in recent weeks and the Federal Reserve indicating it plans to cut rates more than previously anticipated in 2024, more prospective homebuyers could reenter the market early next year.”

POSSIBLE FED CUTS IN 2024 COULD BOOST SALES

Indeed, the Federal Reserve announced plans to cut interest rates three times in 2024, as the economy cools and inflation has eased in recent months. 

But even 6.5%-range mortgage rates could be a difficult payment for many households. Fewer than one of every six households could buy the median-priced home during the third quarter, the lowest rate since 2007, according to CAR.

November’s median home price was $822,200, a 2.2% dip from October but up 6.2% from a year ago – the fifth straight month with a year-over-year increase. The annual percentage increase was the highest in 18 months. Southern California had the largest percentage price increase from a year ago.

The Bay Area continues to boast the highest-priced market at $1.25 million – with five counties of more than $1 million – and the Far North was the most affordable at $375,000. 

“While sales have been weak for the past several months, a tight supply of homes for sale is keeping home prices from falling,” says CAR chief economist Jordan Levine. “Going into 2024, the recent decline in mortgage rates, along with the upward momentum in home prices, could motivate more would-be sellers to list their homes for sale in the spring homebuying season.”

The so-called locked-in effect of homeowners has iced the housing market during the past year. Homeowners are reluctant to give up their 3% mortgage rates and much lower payments after buying – and financing – a new home.

Housing inventory improved in November, but that was largely because of the sluggish sales. Active listings declined for the eighth consecutive month, including seven months of 10%-plus drops, according to CAR.

Home prices and sales in November compared to a year ago

RegionMedian home price% gain or loss vs. a year agoHome sales vs. a year ago
California$822,200+6.2%-5.8%
Bay Area$1.25 million+4.4%-6.2%
Central Coast$955,000+6.1%-10.4%
Central Valley$474,800+5.5%-14.4%
Far North$375,000-4.3%-2.3%
Inland Empire$561,410+2.7%-5.5%
Los Angeles$785,000+9.0%-6.3%
Southern California$824,500+9.9%-5.6%

Source: California Association of Realtors