Home sales May

January home sales improve with lower mortgage rates and prices

Prices drop below $800,000 for the first time in 10 months

A dip in mortgage rates and home prices created a much-needed lift for home sales in January, with the first year-over-year increase since summer 2021.

Mortgage rates have declined about 1 percentage point in the past three months, generating some homebuying interest across the state. Sales reached an annualized rate of 256,000 homes in January, a 14.% increase compared to December and up 5.9% from a year ago, according to the California Association of Realtors.

(Note: The annualized rate is how many homes would sell if the January pace was maintained throughout the year. Or, in other words, about 21,300 homes were sold in January.)

All seven regions in the state reported annual sales increases in January, with the Central Valley leading the way at 12.5%. Southern California, from Los Angeles to San Diego, had the smallest gains, below 3%.



But after a challenging couple of years, those in the real estate industry are ready to cheer any glimmer of hope for a solid spring homebuying season.  

“It’s encouraging to see California’s housing market kick off the year with positive sales growth in January,” says CAR president Melanie Barker. “While we’ll likely experience some ups and downs in home sales in the coming months as rates continue to fluctuate, the lending environment is expected to be more favorable in 2024, so the market should see more pent-up demand translate into sales.”

But back-to-normal sales – think pre-pandemic – could be several months or more away. The annualized home rate was below the 300,000 mark for the 16th straight month in January, the latest evidence that the market continues to struggle. CAR expects home sales to remain below the 300,000 mark, considered the threshold for a healthy market, for at least the first quarter.

PRICES DIP, NEW ACTIVE LISTINGS INCREASE

Another bright spot comes from an increase in new active listings, which improved for the first time in 19 months in January. But overall active listings dipped for the 10th straight month, though the decline was the smallest over that period.

California’s median home price – meaning half the homes sold for more, the other half for less – dropped below $800,000 for the first time in 10 months, giving homebuyers able to buy some financial power. The median price was $788,940 in January, a 3.8% drop from a year ago but up 5% from a year ago. The Bay Area had the biggest annual price increase at 10.6% to $1.1 million.

Six of the seven regions reported price increases from a year ago. The Far North had a 2% decline from January 2023.

“The increase in new active listings for the first time in 19 months was great news for the California housing market,” says Jordan Levine, CAR senior vice president and chief economist. “With rates climbing back up to a two-month high earlier this week due to the latest inflation concerns, potential home sellers could hit the pause button on listing their house on the market and wait until rates begin to ease again. In general, rates are expected to decline later this year, and available inventory should slowly improve through 2024.”

Home prices and sales in January compared to a year ago

RegionMedian home price% gain or loss vs. a year agoHome sales vs. a year ago
California$788,940+5.0%+5.9%
Bay Area$1.1 million+10.6%+6.2%
Central Coast$926,000+3.5%+5.2%
Central Valley$460,000+6.8%+12.5%
Far North$361,500-2.0%+6.8%
Inland Empire$599,280+3.6%+5.3%
Los Angeles$750,000+7.1%+2.8%
Southern California$790,000+7.0%+2.2%

Source: California Association of Realtors