California Housing Market Slows Down but Home Prices Soar – Norada Real Estate Investments

In March, the California housing market experienced a slight slowdown, with existing single-family home sales dipping for the first time in three months. This deceleration comes after consecutive increases in January and February, according to the latest data released by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

March Sales Figures for California

The figures reveal that existing, single-family home sales totaled 267,470 on a seasonally adjusted annualized rate, marking a 7.8 percent decrease from February’s numbers and a 4.4 percent drop from March 2023. Despite this, year-to-date statewide home sales managed to stay slightly above last year’s levels by 0.7 percent.

The decline in sales pace persisted for the 18th consecutive month, with March’s figures falling short of the 300,000-threshold. However, it’s important to note that the sales pace is adjusted to account for seasonal factors that typically influence home sales.

California’s Median Home Price

Despite the dip in sales, California’s median home price saw a notable surge, hitting a seven-month high at $854,490. This represents a 6.0 percent increase from February and a robust 7.7 percent jump compared to March 2023. The consistent upward trajectory in median prices has been a trend for the past nine months.

Moreover, March marked the 11th time in the last 12 months that the median price for an existing single-family home surpassed the $800,000 mark, underscoring the ongoing strength in California’s real estate market.

Market Segments

A closer look at market segments reveals interesting dynamics. Homes priced at or above $1 million continued to perform well, showing a year-over-year increase of 9.9 percent in March. Conversely, the sub-$500,000 segment experienced a modest decline of 2.4 percent.

This shift in the mix of sales has contributed to the overall increase in the statewide median price, indicating resilience in higher-priced segments despite challenges in the lower end of the market.

Economic Factors

Higher mortgage rates since mid-November 2023 have presented challenges for the housing market to sustain the momentum observed earlier in the year. The recent uptick in rates may have hindered sales, but there is optimism for a potential rebound in housing activity following the latest inflation report.

Despite these fluctuations, C.A.R. remains cautiously optimistic, highlighting the ongoing competitiveness of California’s housing market. Melanie Barker, President of C.A.R., notes that while sales may have slowed, properties continue to sell quickly, and the increasing number of listings indicates an improving supply side.

Regional Trends in California Home Sales and Median Prices

At the regional level, the latest data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) highlights diverse trends in home sales and median prices across different areas of the state. While some regions experienced declines in sales, others saw significant increases, and median prices showed varying levels of growth.

Unadjusted raw sales figures indicate a year-over-year decrease in all major regions except the Central Coast. The Central Valley region witnessed the most significant drop at -9.6 percent, followed by Southern California (-7.8 percent), the San Francisco Bay Area (-5.4 percent), and the Far North (-4.0 percent). In contrast, the Central Coast recorded a notable sales increase of +7.2 percent compared to last March, driven by strong sales in two of its four counties.

Breaking it down further, out of the 53 counties tracked by C.A.R., 33 reported a sales decline from the previous year. Twenty-one counties experienced a drop of more than 10 percent, with eight counties seeing a decrease of over 20 percent. Notably, Tuolumne (-39.2 percent) and Tehama (-37.5 percent) recorded the most significant declines, while Plumas (220.0 percent) saw the highest increase in sales.

Despite varying sales performances, all major regions witnessed an annual increase in median home prices. The San Francisco Bay Area led with a substantial price jump of 15.5 percent from last March, followed by Southern California with an 11.1 percent increase. The Far North, Central Valley, and Central Coast also saw price growth, albeit at relatively milder rates compared to the aforementioned regions.

Across the state, 39 counties reported a median price higher than the previous year, indicating overall improvement in home prices. Mono (66.7 percent) experienced the most significant increase in median price, followed by Siskiyou (45.8 percent) and Santa Barbara (32.0 percent). However, thirteen counties saw a decline in median price, with Mendocino (-23.9 percent) experiencing the largest decrease.

Unsold Inventory

Statewide, unsold inventory experienced a month-over-month decrease of 13.3 percent but showed a substantial increase of 23.8 percent compared to March 2023. The Unsold Inventory Index (UII), which measures the number of months needed to sell the current supply of homes at the current sales rate, dipped from 3.0 months in February to 2.6 months in March. However, it was higher than the 2.1 months recorded in March 2023.

Active Listings

Active listings at the state level increased year-over-year for the second consecutive month, marking the largest increase in 13 months. This trend suggests a potential positive direction for housing supply as the market enters the spring homebuying season. However, concerns about mortgage rate increases may delay some potential sellers from listing their homes.

While two counties experienced a decline in active listings from a year ago, the majority saw gains. Solano, Santa Barbara, and Sacramento led the way with significant increases. On a month-to-month basis, Marin registered the largest increase, while Kings saw the sharpest decline.

New Active Listings

New active listings at the state level increased for the third consecutive month, with double-digit growth compared to the previous year. This surge in new housing supply, coupled with a modest slowdown in housing demand, contributed to an overall improvement in active listings.

Market Performance

The median number of days it took to sell a California single-family home was 19 days in March, slightly lower than the 24 days recorded in March 2023. C.A.R.’s statewide sales-price-to-list-price ratio was 99.1 percent in March, indicating strong buyer demand and competitive pricing in the market.

Additionally, the statewide average price per square foot for an existing single-family home increased to $424, up from $387 in March of the previous year. This upward trend reflects the ongoing strength and resilience of California’s real estate market.

In summary, March saw a moderation in California’s housing market activity, with a slight dip in sales countered by a significant increase in median home prices. Economic factors such as mortgage rates will continue to influence market dynamics in the coming months, but the overall resilience and competitiveness of the market remain intact.

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