California's Housing Market Continues to Demonstrate Strength

Although there may be some short-term cooling due to higher rates. However, Mr. Levine remains hopeful, anticipating a rebound once the market adapts to evolving economic factors like inflation.

Data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) portrays a resilient yet challenged California housing market in 2024. March witnessed a slight deceleration, with existing single-family home sales totaling 267,470, a 7.8% decline from February. This represents the first year-over-year decrease in three months, following increases in January and February. Despite this, year-to-date sales remain modestly up by 0.7%.

The median home price in California surged to $854,490 in March, a substantial 6.0% leap from February and a robust 7.7% increase year-over-year. This marks the ninth consecutive month of annual price growth, indicating the enduring strength of the state's housing market amidst economic fluctuations.

Despite the slight sales dip, California's housing market remains fiercely competitive, with homes selling rapidly, surpassing last year's pace and indicating sustained demand. C.A.R. President Melanie Barker underscores this competitiveness, noting that properties are selling faster than the previous year, highlighting the allure of California's real estate market despite fluctuations in sales volumes.

On the supply side, there are signs of improvement, with more properties being listed as sellers adjust to the "new normal." However, the pace of new listings may not fully match demand, leading to a persistent supply-demand imbalance. Sales of homes priced at or above $1 million have remained relatively stable, while those below $500,000 have experienced slight declines, contributing to upward pressure on the statewide median price.

Regional trends reveal variations across major regions and counties:

• Sales Volume: Unadjusted sales declined year-over-year in most regions except the Central Coast, with the Central Valley experiencing the steepest decline (-9.6%).
• County-Level Sales: While many counties saw sales decline, others like Plumas, Mono, and Mariposa saw significant gains.
• Median Prices: All regions witnessed year-over-year increases, with the San Francisco Bay Area leading.
• County-Level Prices: Some counties experienced significant price hikes, while others saw declines.
• Inventory Dynamics: Unsold inventory decreased month-over-month but increased year-over-year, indicating tight inventory. However, active listings showed promise, particularly in Solano and Santa Barbara counties.

While these trends offer optimism, rising mortgage rates may prompt potential sellers to delay listings, affecting inventory. However, the increase in new listings coupled with a slight demand slowdown suggests a potential for achieving more balanced supply-demand dynamics in the future.

Regional Market Data for March 2024

Illustrates varied trends in the California real estate market, discernible through the median sold prices of existing single-family homes.

In March 2024, the Los Angeles Metro Area observed a 9.0% year-over-year increase in median price, reaching $801,000. Similarly, the Central Coast saw a 3.0% year-over-year price hike, reaching $950,000. Conversely, the Far North region experienced a 5.6% year-over-year price surge, reaching $374,950.

Sales performance varied across regions, with some witnessing growth and others experiencing declines. For instance, the Central Coast region noted a significant 7.2% year-over-year increase in sales, whereas the Central Valley region saw a decline of -9.6% compared to the previous year.

These regional insights offer a comprehensive view of the California real estate market's dynamics in March 2024, highlighting both price appreciation and fluctuations in sales volume across different areas.

California's Housing Market Prediction: Expecting a Recovery

p = projected

f = forecast

* = % of households who can afford median-priced home

Source: C.A.R.

California's real estate market appears primed for a resurgence in 2024, as outlined by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) in their eagerly anticipated "2024 California Housing Market Forecast." Let's delve into the main forecasts:

Positive Projections: Sales and Prices

The forecast anticipates a significant surge of 22.9% in existing single-family home sales compared to 2023, estimating around 327,100 units sold in 2024, a notable increase from the projected 266,200 units in 2023.

California's median home price is predicted to rise by 6.2% to $860,300 in 2024.

Driving Factors Behind the Revival

The forecast relies on a decrease in mortgage rates due to slower economic growth and cooling inflation, creating a more favorable environment for buyers and stimulating housing demand.

While housing supply is expected to remain below normal levels, a slight uptick in active listings could provide some relief.

Economic Considerations and Market Dynamics

The forecast takes into account economic indicators, including a modest 0.7% increase in the U.S. gross domestic product for 2024.

California's nonfarm job growth rate is projected at 0.5%, with the unemployment rate potentially seeing a slight uptick to 5.0% in 2024.

Despite potential economic softening, a persistent housing shortage and competitive market are anticipated to keep pushing home prices upward.

The anticipated relaxation of monetary policy by the Federal Reserve Bank is expected to lower mortgage rates throughout 2024, potentially offering buyers more financial flexibility.

Conclusion: Insights for All

C.A.R.'s forecast presents an encouraging outlook for the California housing market in 2024. However, it's essential to remember that these are forecasts. As the year progresses, actual market performance will provide a clearer assessment of the accuracy of these predictions. Nonetheless, this information provides valuable insights for both homebuyers and sellers navigating the market in the upcoming year.

California Home Prices - Recent Updates - April 2024

• Market Endurance: Despite increasing interest rates, California's real estate sector demonstrates sustained expansion, as per Zillow. The mean home value stands at $783,666, marking a 6.4% year-over-year uptick.

• Swift Market Activity: Properties are swiftly transitioning, averaging just 15 days to go pending. This accelerated pace mirrors robust buyer interest.

• Inventory Update: As of March 31, 2024, there are 57,154 properties available for purchase, presenting a range of choices for buyers. Furthermore, 22,984 new listings debuted on the same date, indicating ongoing market dynamism.

Key Metrics Deep Dive:

• Median Sale-to-List Ratio: Standing at 1.000 (as of February 29, 2024), this indicator suggests a balanced market where list prices closely match final sale prices.

• Price Overview: The median sale price stands at $673,333 (as of February 29, 2024), while the median list price is $720,933 (as of March 31, 2024). This variance underscores the importance of strategic pricing for sellers.

• Negotiation Dynamics: With 41.1% of sales exceeding the asking price and 44.4% falling below (as of February 29, 2024), negotiation assumes significant importance. Variables such as location, property condition, and overall market demand influence the ultimate sale price.

Analyzing the week's activity up to March 16, 2024, the following daily average statistics were recorded:

• Closed Sales: 518 per day

• Pending Sales: 621 per day

• New Listings: 746 per day

Insights from Realtors

• Realtors Expecting Rise in Sales: 37.3% (+0.5%)

• Realtors Predicting Growth in Prices: 39.1% (+19.7%)

• Realtors Foreseeing an Increase in Listings: 46.7% (+2.7%)

Evaluation

Considering the provided data and realtors' perspectives, let's evaluate the viability of purchasing a home in California:

• Closed Sales: The consistent daily average of closed sales signifies ongoing activity within the housing market.

• Pending Sales: The volume of pending sales indicates sustained interest in properties.

• New Listings: The significant daily average of new listings suggests a sufficient inventory for prospective buyers to explore.

• Realtors' Outlook: Realtors' optimistic expectations regarding sales, prices, and listings signal a favorable market sentiment.

Source: CAR

Trends in Housing Affordability in California - Fourth Quarter

Source: Housing Affordability Index By C.A.R.

In the final quarter of 2023, a combination of elements greatly affected housing affordability. Heightened interest rates and an enduring scarcity of available homes have led to a housing affordability level hitting a 16-year low, as outlined in the most recent report by the California Association of Realtors (C.A.R.).

Present State of Affordability

During the fourth quarter of 2023, just 15 percent of California households could afford the median-priced home, valued at $833,170. This percentage remained unchanged from the previous quarter and represented a decline from 17 percent in the same quarter of the prior year. These figures underscore the ongoing challenge faced by Californians aiming to purchase a single-family residence.

To provide context, a minimum annual income of $222,800 was necessary to cover monthly payments of $5,570. These calculations factored in principal, interest, and taxes on a 30-year fixed-rate mortgage with an interest rate of 7.39 percent. Notably, this interest rate marks the second consecutive quarter where it surpassed 7 percent, a level not seen in over two decades.

Comparison Study: Condos/Townhomes vs. Single-Family Homes

While the affordability of single-family homes experienced a decline, there was a relatively more favorable situation for condominiums and townhomes. In the fourth quarter of 2023, 22 percent of potential homebuyers could afford the median-priced condo or townhome, valued at $650,000. To meet a monthly payment of $4,350, a minimum annual income of $174,000 was necessary.

This trend contrasts with the broader housing market, where single-family homes encounter more significant affordability obstacles. The median price of condos and townhomes held up better compared to their single-family counterparts, presenting a nuanced perspective of the real estate scenario in California.

Insights from C.A.R.'s Traditional Housing Affordability Index (HAI)

C.A.R.'s Housing Affordability Index (HAI) offers a comprehensive perspective on the housing landscape for potential homebuyers in California. The index, which gauges the proportion of households able to afford a median-priced single-family home, currently stands at 15 percent for the fourth quarter of 2023. This represents a significant deviation from the peak high of 56 percent observed in the first quarter of 2012, highlighting the enduring challenges in housing affordability over the long term.

The required minimum annual income of $222,800 to qualify for the purchase of a median-priced home at $833,170 underscores the financial hurdles confronting many Californians. The ensuing monthly payment, inclusive of taxes and insurance, has evolved into a substantial financial commitment for prospective homeowners.

Market Trends: Interest Rates and Economic Conditions

Despite a slight downturn in interest rates towards the end of the fourth quarter of 2023, the overall trajectory remains elevated. Rates decreased by approximately 100 basis points from their peak in mid-October but have since stabilized. This stability, combined with unexpected economic resilience, has led to speculation that the Federal Reserve may refrain from further rate cuts at their upcoming March meeting.

This scenario implies that heightened interest rates are likely to persist through the first half of the year, exerting continued downward pressure on affordability. California's real estate market is grappling with a complex interplay of economic factors influencing households' ability to enter the housing market.

National Comparison: California vs. the Rest of the Country

When compared to the national average, California's housing affordability presents a daunting picture. While 15 percent of households could afford the median-priced home in the state, over a third of the nation's households could afford a median-priced home valued at $391,700, requiring a minimum annual income of $104,800 to make monthly payments of $2,620. This disparity underscores the unique challenges faced by Californians in the real estate arena.

Regional Disparities: Examining County-Level Housing Affordability

The housing affordability landscape in California is marked by significant regional variations, as evidenced by the county-level analysis in the fourth-quarter 2023 report. Notable findings highlight the fluid nature of affordability, illustrating differences between counties and the impact of shifting market dynamics.

Quarterly Shifts

In comparing the fourth quarter of 2023 with the preceding quarter, housing affordability declined in 15 counties, remained unchanged in 17, and improved in 19. This nuanced interplay between counties underscores the localized nature of challenges encountered by potential homebuyers.

Yearly Trends

On a year-over-year basis, the report reveals that five counties saw an increase in affordability, while 39 experienced a decline, and seven remained steady. These trends offer insights into the evolving nature of housing affordability, with certain regions facing more pronounced challenges than others.

Most and Least Affordable Counties

Lassen County retained its position as the most affordable county in California, with an affordability index of 49 percent. In contrast, Mono County, Monterey County, and San Luis Obispo County emerged as the least affordable, requiring a minimum income of at least $242,800 to purchase a median-priced home. San Mateo County commanded the highest minimum qualifying income, exceeding $500,000, followed by Santa Clara County and Marin County.

Yearly Changes in Affordability

Examining year-over-year shifts, Mariposa County experienced the most significant decline, dropping nine points from the fourth quarter of 2022 to the same period in 2023. Kings, Stanislaus, and Yuba followed closely, recording a six-point decrease in affordability. Despite higher household income, elevated home prices, and increased mortgage rates, several counties, including San Bernardino, Glenn, Merced, Sacramento, and Lassen, saw a notable decline in affordability, highlighting broader challenges across the state.

As borrowing costs remain near historical highs and housing affordability faces challenges, understanding these county-level dynamics becomes crucial for policymakers and prospective homebuyers navigating California's diverse real estate landscape.

Are Rental Prices Decreasing in California?

As per the recent California rent report for the third quarter of 2023 by Rentometer, the average rental prices for three-bedroom (3-BR) single-family rentals (SFRs) in five cities were analyzed: Los Angeles, Sacramento, San Diego, San Francisco, and San Jose. San Diego saw the largest year-over-year rent hike of 8%, whereas San Jose experienced the smallest increase of 2%.

In the third quarter of 2023, rental prices in these five California cities displayed the following year-over-year rent increases:

• The average rent price in San Diego is $4,595, marking an 8% increase compared to the previous year.

• The average rent price in San Francisco is $5,431, reflecting a 5% year-over-year rise.

• The average rent price in Los Angeles is $5,172, showing a 5% year-over-year increase.

• The average rent price in Sacramento is $2,550, indicating a 4% year-over-year increase.

• The average rent price in San Jose is $4,061, with a 2% year-over-year increase.

City/State	Q3 2022 Average Rent	Q3 2023 Average Rent	YoY % Change
San Diego, CA	$4,262	$4,595	8%
San Francisco, CA	$5,166	$5,431	5%
Los Angeles, CA	$4,949	$5,172	5%
Sacramento, CA	$2,457	$2,550	4%
San Jose, CA	$3,981	$4,061	2%

#CaliforniaHousing #RealEstateCA #HomePrices #Affordability #RentPrices #HousingMarket #PropertyMarket #HouseHunting #Homebuying #Renting #RealEstateTrends #CaliforniaLiving