A brief dip in mortgage rates helped boost home sales in October in California, though the much-appreciated jump-start will likely sputter in the next few months with the holidays and higher rates.
A seasonally adjusted annualized rate of 264,870 homes entered escrow in October, a 4.7% increase compared to September and up 9.5% from a year ago, according to the California Association of Realtors. The annual sales increase was the highest in 40 months, but largely because of low sales in 2023.
“Rising rates in the past few weeks have created a less favorable lending environment for the housing market, but many of the homes that went pending in August and September finally closed,” says CAR president Heather Ozur, a Palm Springs-area Realtor. “While market conditions are improving at a slower-than-expected pace, Octobers bounce back in home sales suggests that there’s still solid interest from motivated buyers.”
BAY AREA BOUNCE BACK
The Bay Area, where home prices have fallen, enjoyed the largest annual sales increase at 16%, followed by the Central Valley at 13.7% and Central California at 13%. Only one of the right regions had a decline in sales, with the Far North – Chico to Eureka – off 6.7%.
The state’s median home price – meaning half the homes sold for more, the other half for less – climbed to $888,740 in October, a 2.4% increase compared to September and up 5.8% from a year ago. The September-to-October price gain was the largest in 45 years, or the final months of the President Carter term.
Annual home prices have increased 16 consecutive months.
A HOLIDAY HOME SALES CHEER?
More million-dollar home sales – up 3.9% from a year ago – is the biggest reason for the higher prices. Sales of homes under $500,000, a hard-to-find price point in much of the state, plummeted 8.6% in October from a year ago.
The Inland Empire, also known as Riverside and San Bernardino counties, and the Los Angeles area had the largest annual gains at 6.7% and 6.5%, respectively. Only the Central Coast, from Santa Barbara to Santa Cruz, had the only drop in prices, falling 5.7%.
Home prices and sales in October 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 | +5.8% | +9.5% |
| Bay Area | $1.32 million | +5.5% | +16.2% |
| Central Coast | $990,000 | -5.7% | +13.0% |
| Central Valley | $500,000 | +5.7% | +13.7% |
| Far North | $390,000 | +3.7% | -6.7% |
| Inland Empire | $599,000 | +6.7% | +8.1% |
| Los Angeles | $835,720 | +6.5% | +11.4% |
| Southern California | $865,000 | +5.5% | +11.9% |
Source: California Association of Realtors
“With the elections behind us and the Federal Reserve cutting rates again earlier this month, some buyers will take advantage of the seasonal lull and purchase before the end of the year,” says Jordan Levine, CAR chief economist. “However, rates are also expected to decline only gradually, creating headwinds for consumers. Fortunately, pending sales rose by double-digits in October, which bodes well for closes sales next month.”
Maybe. But higher rates and holiday cheer could cool the market.
“There’s no question we saw homebuying demand bounce back this past weekend, but it’s bouncing back to the level we would expect with 7% mortgage rates and not much higher,” says Chen Zhao, Redfin’s economic research lead. “House hunting activity was much slower than expected this summer and early fall, especially given that rates dropped down to the 6% range. Buyers were waiting for the election to be over, and for the Fed to cut rates for the second month in a row. Both of those things happened last week, and now buyers don’t have much reason to wait, especially because we don’t expect rates to fall significantly anytime soon.”
