March madness: Sales drop, prices climb as mortgage rates rise

California’s median home price topped $850,000, making the typical home out of reach for most home shoppers

Higher mortgage rates and near-record home prices caused many home shoppers to hold off on making a move in March, while more home sellers are learning the “new normal” of a still-struggling market and much uncertainty.

As the Federal Reserve battles another round of higher-than-expected inflation, many wanna-be buyers are playing the waiting game. The Fed’s earlier comments about three interest-rate cuts this year – and likely lower mortgage rates – have given way to shoulder shrugs in recent months.

With mortgage rates close to 7% and prices topping $850,000, affordability has dropped to the lowest level in almost two decades. Fewer than one of every six households can afford to buy a median-priced home in California, with lower rates in several regions.

Median home price in March:

‘HOME SALES LOST MOMENTUM’

Affordability, thanks to higher mortgage rates and home prices, is hurting the market.

Home sales declined to an annualized rate of 267,740 in March, a 7.8% drop from February – and off 4.4% from a year ago, according to the California Association of Realtors. The closely watched sales pace remained below the 300,0000 market for the 18th consecutive month, the latest evidence of a murky market. 



Housing experts say an annualized rate of 350,000-plus home sales (or at least 29,000 per month) is a healthy figure for home buyers and sellers.

The Central Valley, from Bakersfield to Sacramento, was the hardest-hit housing market, with sales plummeting almost 10% compared to a year ago. Los Angeles and the rest of Southern California also endured an 8% drop in sales from March 2023.

“While home sales lost momentum in March, the housing market remains competitive as we’re seeing the statewide median home price reaching the highest level in seven months, and homes (are) selling quicker than last year,” says CAR president Melanie Barker, a Yosemite-area broker. “On the supply side, the market continues to improve with an increasing number of properties being listed on the market as more sellers begin to accept the new normal.”

‘SALES COULD BE HINDERED BY HIGHER RATES’

That “new normal” is helping drive more homeowners to sell rather than hold out in the hope that mortgage rates dip lower – and maybe even near their 3-4% rates of three years ago. Economists say mortgage rates of 5% or lower could be years away. 

“With mortgage rates reaching the highest levels since mid-November 2023, the housing market struggled to build on the momentum exhibited in the first two months of this year,” says Jordan Levine, CAR senior vice president and chief economist. “While sales could be hindered by higher rates in the coming weeks, the uptick in recent months suggests that we could see a bounce back in housing activity when the market digests the latest inflation report.”



But buyers will need to stomach home prices getting close to $900,000. 

The state’s median home price – meaning half the homes sold for more, the other half for less – climbed to $854,490 in March, a 6% increase from February and up 7.7% from a year ago. Home price gains are easily outpacing pay increases, making the California dream of homeownership less likely.

Bay Area home prices jumped 15.5% to almost $1.39 million, with the Central Coast a distance second at $950,000. The Far North, from about Chico to Yreka, is the most affordable at $375,000 – a bit shy of the $418,000 median price in the U.S., according to the St. Louis Fed.

California’s six other regions – including the Central Valley – top the national figure. And four are above the $800,000 mark.

Home prices and sales in March compared to a year ago

RegionMedian home price% gain or loss vs. a year agoHome sales vs. a year ago
California$854,490+7.7%-4.4%
Bay Area$1.39 million+15.5%+6.2%
Central Coast$950,000+3.0%+7.2%
Central Valley$478,600+5.2%-9.6%
Far North$374,950+5.6%-4.0%
Inland Empire$594,250+7.1%-6.4%
Los Angeles$801,000+9.0%-8.0%
Southern California$850,000+11.1%-7.8%

Source: California Association of Realtors