June 26, 2022
California Housing Market
Once again, during May 2022, the housing market in California has seen a reduction in home sales while prices continue to rise.
House prices rose in May by 1.6% and that is up 9.9% in the last 12 months. Condo sales declined too, and in fact condo prices bucked the upward trend by falling 3.1%, although still up 14.5% vs last May of 2021.
California home prices soared 4.1% higher than March’s levels to a new record again at $884,890. Sales are slowing and fell 1.9% from March and are down 8.5% from last April.
Judging by declining sales which are uncharacteristically slow at peak buying season, Realtor’s latest outlook this month, and expected rising interest rates, the prediction is for a cooling California real estate market. Market velocity is falling at a faster rate.
The average price of a house sold in California reached another all time peak at $898,980.
When Will Home Prices Drop in California?
Californians are constantly asking if and when home prices will drop, just as the outlook for the summer is perhaps for further new records. Mortgage rates have doubled, pushing up mortgage payments, and it is hurting homeowners besieged with other record high costs. Inflation and a souring economic outlook will begin to show in home prices by summer’s end.
Rent prices too, having reached record heights are beginning to show slower growth. The rental market suffering from exceptionally low inventory will likely not show mercy to Californians for sometime. New housing development is once again slowing.
Higher priced homes in the state continue to sell well, while the low supply of affordable homes continues to shrink, making purchases less likely. The share of million-dollar home sales rose again in April to reach the highest level on record at 34.7% Homes sold below $500,000 hit and hit the lowest level recorded.
Supply is still a key matter even as prices and mortgage payments soar. California Realtors are reporting increased activity up to the week ending June 25th. Looks like a rise in new listing so the picture may be brighter for buyers desperate for a home.
Home sellers are cutting list prices as more buyers take pause: ‘The market is not the same’
Home sellers are increasingly cutting their asking prices as buyers, constrained by higher mortgage rates and overall inflation, have become less willing to jump into the housing market at any cost.
The growing number of price cuts, a trend showing up in data from Southern California and across the nation, is one of the strongest signs yet that the previously red-hot market, fueled by low mortgage rates and all-cash bidding wars, is cooling.
The price reductions don’t mean overall home values are dropping. In Southern California and the wider U.S., they make up a minority of listings, and most homes still sell for more than the list price.
Industry experts, for now, do not see a plunge coming in the housing market, catapulted to record-high prices in the first two years of the pandemic as many people sought out more space and had new savings to spend.
Values could come down modestly, some experts said, if the Federal Reserve’s actions to tame inflation send mortgage interest rates significantly higher — or tip the economy into recession.
For buyers, the market already feels significantly different from the frenzied competition of several months ago.