#United States #California #Housing Market #C.A.R.

California Home Sales Decline Amid High Mortgage Rates

In a recent report, the California Association of Realtors (C.A.R.) highlighted a significant retreat in home sales across the state during January. Existing single-family home sales plummeted to an annualized rate of 254,110 units, marking a 10% decrease from December's figure of 282,490 and a 1.9% decline from January 2024's revised total of 259,160. This dip represents the lowest sales volume observed in over a year, stirred largely by the effects of elevated mortgage rates, which have dampened housing demand considerably.

The statewide median home price was reported at $838,850, which reflects a 2.6% decline from December's price of $861,020. However, this price is up 6.3% compared to January 2024's median price of $789,480. The dual phenomena of rising interest rates and the impact of wildfires in the Los Angeles area contributed to a dramatic slowdown in market activity, particularly in Southern California where sales in areas intensely affected by the fires dwindled sharply—nearly 70% since early January.

C.A.R. President Heather Ozur stated, "Home sales slowed last month, impacted by high mortgage rates and the devastating wildfires in Southern California." She expressed cautious optimism, noting the uptick in new listings as the market prepares for the upcoming spring buying season. This could potentially lead to more choices for buyers and a slight revival in market dynamics.

In recent months, mortgage rates have begun to trend downward. According to Freddie Mac's calculations, the average 30-year fixed mortgage rate was recorded at 6.96% in January, slightly rising from 6.64% in the same month last year. With this recent decline, there is hope that home sales could see a revival, albeit the effects of the Los Angeles wildfires may linger for a considerable time.

Moreover, January's conditions indicated a turnaround in the number of new active listings, reflecting a growth not seen since before the pandemic. C.A.R. Senior Vice President and Chief Economist Jordan Levine pointed out that many sellers are listing their homes, realizing that the low mortgage rates from prior years are unlikely to return.

For most regions within California, median prices have also shown resilience year-over-year. All five major regions witnessed increases, with the Central Coast region seeing the most significant growth at 14.5%. However, the sales rates showed mixed results. Regions like the Far North experienced a decrease of 11% from the previous year.

Looking further into the data, it was noted that the Unsold Inventory Index, gauging the number of months needed to sell off existing housing stock, ticked up to 4.1 months in January, illustrating a shift in supply dynamics possibly as a result of improved listing conditions since last year. Active listings have surged at the fastest annual rate since adequate tracking began two years ago, driven primarily by homeowners adjusting to new market conditions.

The challenging economic environment paired with high interest rates will likely keep home sales subdued in February and March. Nevertheless, great movement is anticipated as we approach spring, a traditionally active time for home buying in California. As potential buyers begin to react to more favorable mortgage rates coupled with increased inventory, the California housing market could indeed see a gradual rebound in the immediate months ahead.

It’s important for buyers to remain informed about market conditions, as they can fluctuate significantly over short periods due to external economic factors. If prospective buyers can approach the market with ample knowledge and timing, opportunities may arise even in this current economic climate. Homeowners considering a sale must now navigate this changing landscape, carefully evaluating their options amidst ongoing market pressures.