California’s Million-Dollar Homes Are Becoming a Problem for Buyers – Newsweek

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The interest in expensive homes in California is contributing to the rise in house prices to record levels in the state, according to the California Association of Realtors (CAR), even as sales of cheaper homes declined last month.

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Buy/sell, rent/lease residential &
commercials real estate properties.

Home sales dropped by more than 1 percent last month and were down 6 percent compared to the same time a year ago, to about 275,550 houses. CAR said high mortgage rates and elevated prices were part of the explanation behind the slow pace of sales. The median price of a house soared around 9 percent, to about $908,000, a record for the state.

The jump in prices is being driven by stronger sales of homes that cost above $1 million, according to CAR.

“Stronger sales of higher-priced properties continued to contribute to solid median price growth, especially since million-dollar home sales in California have been rising more rapidly than their more affordable counterparts in the state,” Realtors said.

Read more: How to Calculate How Much House You Can Afford

While overall sales declined, the expensive segment of the market saw an improvement. Homes priced at $1 million or more saw an increase in purchases of 15.5 percent in May on a yearly basis. On the flip side, houses valued at $500,000 or below saw sales plunge by more than 12 percent last month compared to the same time a year ago. The sales of pricier homes now make up close to 37 percent of all home sales in California in what is the largest share in five years, according to CAR.

“A persistent shortage of homes for sale, particularly in the more affordable market segments, continued to push up California’s median home price to record highs over the past couple of months,” Jordan Levine, CAR’s chief economist, said in a statement. “With mortgage rates coming back down from their recent peaks and market competition heating up, the statewide median price may have more room to grow before the summer ends.”

Mortgage rates have been trending downward over the past few weeks on the back of inflation data showing that the rate of price increases was slowing down. On Thursday, for the third week in a row, mortgage rates continued its path below the 7 percent range. The 30-year fixed rate mortgage averaged 6.87 percent as of June 20, down from 6.95 percent the week before.

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“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

In California, active listings rose to the largest figure in more than a year, according to CAR.

“With recent economic reports showing some promising signs that inflation could be cooling in a more sustainable fashion for the rest of the year, mortgage rates may moderate in the coming months,” CAR said in its statement. “As such, further improvement on the supply side could be observed in the California housing market before the end of the home buying season.”

california
A property for sale is pictured in South Pasadena, California, on January 17. Prices for homes in California hit record levels in May.
A property for sale is pictured in South Pasadena, California, on January 17. Prices for homes in California hit record levels in May.
FREDERIC J. BROWN/AFP via Getty Images

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