Iran war is ‘creating some uncertainty’ for the economy and housing market
A dip in mortgage rates and stagnant prices gave a much-needed lift to home sales in February, but the love could be short-lived with the war in the Middle East.
The better-than-expected February could give way to a few months of lackluster sales, as consumers deal with a weakening economy and job-growth, and rising prices at the pump from the war with Iran.
“The conflict in the Middle East is creating some uncertainty for the broader economy and financial markets, which could lead to some short-term hesitation in the housing market,” said Tamara Suminski, president of the California Association of Realtors and a Southern California broker. “We remain hopeful that the situation will stabilize in the weeks ahead, allowing market fundamentals and buyer and seller confidence to reassert themselves.”
BETTER BUT NOT GOOD WHEN IT COMES TO HOME SALES
The housing market enters the all-important spring homebuying season with a month of solid though not spectacular sales.
A seasonally adjusted annualized rate of almost 275,000 homes sold in February, a 7% increase compared to January and off 0.3% from a year ago. (If the annual rate is annoying, think about 23,000 homes sold in February.)
Home sales remained below the 300,000 level – considered the base for a healthy housing market – for the 41st straight month.
Six of the seven regions – from the north state to San Diego – reported month-over-month sales, with the Bay Area leading the way at 44%. The Far North, from about Chico to Crescent City, had an almost 13% drop in sales.
But annual sales – a better barometer of the market — were less impressive statewide.
The Central Coast and Bay Area home sales increased 6% and 4%, respectively. The five other regions had little movement.
And that could become the norm during the next few months, say housing experts.
‘A BIT OF CHAOS’
Fast-rising gas prices, dismal job growth and the war have created a “bit of chaos,” said Mike Simonsen, chief economist for Compass Real Estate. Housing could face “maybe a double whammy of a cooling jobs market and higher interest rates.”
That one-two punch could stagger a still-weak housing market that got off the mat in February thanks largely to lower mortgage rates in recent months. Wanna-be buyers jumped off the fence with the almost half-point decline in mortgage rates that improved affordability, but now as rates rise to the highest level in months, the financial fight for homeownership returns.
“While mortgage rates remain below year-ago levels, they recently jumped to their highest levels in months and could temper buyer momentum as we head into the spring homebuying season,” said Jordan Levine, senior vice president and chief economist for CAR. “However, many homeowners remain locked in to historically low rates, and inventory remains tight, so any stabilization in rates could help bolster home prices in the spring market despite ongoing affordability and economic challenges.”
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BAY AREA BOOMS BUT HOUSING OVERALL HAS ‘A LONG WAY TO GO’
California’s median-home price – meaning half the homes sold for more, the other half for less – inched up to $830,370, a 0.9% increase from January and miniscule gain of 0.2% from a year ago.
The Bay Area, the priciest region in the state, had the only significant boost in prices, with a month-over-month gain of 14% to $1.29 million. San Mateo and Santa Clara counties had median prices of more than $2 million.
Bay Area buyers, many enjoying hefty paydays from AI-related positions, are competing for homes, sometimes paying hundreds of thousands of dollars more than the listing price.
But for most home sellers and shoppers in California, housing will likely remain stuck in a standstill, with few homes on the market, affordability a big hurdle for buyers and many owners looking to sell hoping for higher prices and lower mortgage rates.
San Francisco has become one of the hottest housing markets in California and the U.S. ADOBE STOCK
“This market is improving, but we have a long way to go,” Simonsen said.
Home prices and sales in February compared to a year ago
| Region | Median home price | % gain or loss vs. a year ago | Home sales vs. a year ago |
|---|---|---|---|
| California | $830,370 | +0.2% | -0.3% |
| Bay Area | $1.29 million | +2.8% | +4.0% |
| Central Coast | $1.05 million | +0.8% | +6.2% |
| Central Valley | $485,000 | -2.0% | +0.6% |
| Far North | $378,000 | -2.1% | -2.9% |
| Inland Empire | $601,350 | -1.6% | -3.7% |
| Los Angeles | $812,950 | -1.4% | -1.8% |
| Southern California | $861,680 | -0.5% | -0.6% |
Source: California Association of Realtors