Home-shoppers took a cautious approach to a dip in lower mortgage rates in recent weeks, as home sales dropped to a seven-month low in August – and closing the door on what has been a lukewarm summer home-buying season.
With fewer than one of every five households able to buy given the current mortgage rates and home prices, many home shoppers are playing the waiting game.
The wait could be over. The Federal Reserve cut interest rates by a half point Wednesday (Sept. 18) and that could help jump-start home sales, say some economic and housing experts. The cut is the first in four years.
“Housing affordability will improve in the fall, and buyers will benefit from lower costs of borrowing in the coming months,” says California Association of Realtors president Melanie Barker.
‘HOUSING DEMAND HAS BEEN SLOWLY IMPROVING’
But are there enough buyers on the sidelines able to get in the game to have a significant impact? Some housing experts say high prices are as much of a challenge as mortgage rates, which have been coming down for several weeks in anticipation of the Fed’s cut on interest rates.
August sales may back that up. Annualized sales on a seasonally adjusted basis totaled 262,050 homes in August, a 6.3% decline from July – but up 2.8% from a year ago, according to the California Association of Realtors. It’s the fewest homes sold since early 2024.
August was the 23rd straight month that home sales were below the 300,000-threshold, the minimum amount considered for a healthy market for buyers and sellers.
Annual home sales activity was a mixed-bag, with the Bay Area enjoying a 5% increase from a year ago, while the Far North – from about Chico to Eureka – had a 5% drop.
“Despite a slightly better lending environment in recent weeks, closed home sales pulled back in August as buyers evaluated whether to wait for the Federal Reserve to cut rates before entering the market,” says Jordan Levine, CAR senior vice president and chief economist. “Pending sales, along with mortgage rate trends, however, suggest that housing demand has been slowly improving in the past few weeks. If mortgage rates remain at their current low or dip further in the coming weeks, homes sales should rise steadily as we move toward the end of the year.”
GOODBYE SUMMER, HELLO FALL
Maybe, but prices will remain a significant stumbling block for many wanna-be homebuyers, even as prices were basically flat at $888,740 in August compared to July – and up a modest 3.4% from a year ago. The year-over-year increase was the smallest since September 2023.
The Central Coast and the Far North – one of the most expensive and lowest-priced markets, respectively – had an 8% increase in sales from a year ago. The Bay Area was the only one of the six regions with a price decline, falling a modest 1.6%.
“Home price growth in California continued to moderate in August as the market neared the end of the traditional home-buying season,” Barker says.
Home prices and sales in August compared to a year ago
| Region | Median home price | % gain or loss vs. a year ago | Home sales vs. a year ago |
|---|---|---|---|
| California | $888,740 | +3.4% | +2.8% |
| Bay Area | $1.24 million | -1.6% | +6.2% |
| Central Coast | $1.04 million | +8.9% | +3.0% |
| Central Valley | $500,000 | +3.1% | +0.8% |
| Far North | $397,250 | +7.7% | -5.0% |
| Inland Empire | $585,260 | +2.7% | -3.4% |
| Los Angeles | $827,000 | +4.4% | -3.5% |
| Southern California | $863,500 | +4.0% | -2.3August |
Source: California Association of Realtors
