Current trends in the California Housing Market indicate a shift to a buyer’s market. Buyers can find better conditions with decreased home sales and an increased median home price.
Although there was a slight dip in the median home price statewide from November to December, the overall trend shows a significant increase year-over-year. California home prices have shown resilience, and projections indicate that the upward trend will continue in 2024.
There are signs of a possible turnaround. The market had many challenges in 2023, including a significant decline in home sales. Recent mortgage rate reductions and projected interest rates in the next year are positive indicators, reducing the risk of a crash in the housing market.
California Housing Market Report
What is the current state of the California housing industry? According to the latest report by the CALIFORNIA ASSOCIATION OF REALTORS (r)(C.A.R.), the California housing market showed signs of stagnation in December. The number of existing single-family homes sold in November was the same as it was in December, with 224,000 sales on an annualized basis, adjusted for the season. This represents a decline of 7.1 percent from December 2022.
The median home price for the entire state was $819.740 in December, a slight decrease of 0.3 percent from November but a significant increase of 6.4 percent compared to December 2020. The statewide median home price in December was $819,740, a 0.3 percent drop from November but a 6.4 percent increase compared to December 2022.
Analyzing Home Sales Figures
Closed escrow sales for existing single-family detached houses in California reached 224,000, a rate adjusted to reflect the season. The figure was the same as November, but it represented a 7.1% decrease compared to last year. In 2023, home sales continued to decline, reaching 257,630 annually, the most significant drop since 2007.
Since September 2022, the market has been below 300,000. Projections suggest it will remain below this threshold in the first quarter of 2024. The market’s slowdown of the loss year-over-year, attributed to a low level of pending sales a year earlier, raises concerns about the possibility that the market has turned a corner. Despite challenges, the recent drop in mortgage rates is seen as positive for a possible rebound in home sales over the next few months.
California Median home price trends
California’s median home price in December 2023 was $819,740. This is a 6.4 percent increase compared to the previous year. In December 2023, the median home price was revised up from $770.490 one year earlier. The housing market will continue to grow with mortgage rates falling. This is projected to be a growth rate of mid-to-single-digits in California’s medical price by the first half of 2024.
Expectations for 2024 are positive despite a slight drop in the median price of a home for the year 2023. It went from $818.900 in 2022 down to $813.980. The median home price is projected to rise from $818,900 in 2022 to $813,980 by 2024, showing a positive trajectory of the real estate market.
Economic Outlook & Interest Rates
C.A.R. Jordan Levine, Senior Vice President and Chief Economist at C.A.R., provided insight into the economy and its impact on housing. A softening economic outlook and decreasing inflationary pressure suggest that interest rates could be cut in the coming year. The market is becoming more optimistic as rates fall to a seven-month low by late 2023. Levine predicts that the market will gradually improve in 2024. However, a tight housing supply will remain a constant.
Regional Dynamics: Trends in Sales and Prices
When examining regional differences, the data for December reveal a general decline in sales annually across major regions. Central Valley experienced the most significant drop, a 14.8% decrease from last year. San Francisco Bay Area was close behind with an 11.4 percent drop. The Far North, Southern California, and Central Coast regions also experienced sales declines but at a slower pace.
C.A.R. tracks 52 counties, but 37 have been tracked at the county level. Sales decreased from the prior year. There were notable drops in 23 counties of more than 10% and 14 counties greater than 20%. Trinity experienced the most significant drop in sales at 45.5%, followed by Yuba (41.9%) and Calaveras (39.5%). Some countries defied the trend. Glenn led the way, registering a staggering 112.5 percent increase in sales year-over-year, followed by Lassen (69.5 percent) and Madera (51 percent).
Home prices in the region have shown consistent growth despite the sales challenges. In December 2023, the Central Coast and San Francisco Bay Area recorded an impressive 12.6% increase year-over-year. Santa Cruz, the only county in the Central Coast area that saw a decline of 10.6 percent, was an exception. Southern California, Central Valley, and the Far North all saw increased median prices but at a slower pace.
Median price trends at the county level
In California, 44 counties saw their median prices increase over the past year. Lassen was the first with a 60.3 percent rise, followed by Del Norte (47.0%) and Mono (37.3%). Six counties saw a decrease in the median price. Lake showed the most significant drop, at 14.9%, followed by Santa Cruz (10.6%) and Plumas (8.9%).
Unsold Housing Inventory & Market Outlook
Unsold inventories statewide decreased by 16.7% month-over-month and by -3.8 % from December 2022. The unsold Inventory Index, which measures the months required to sell existing homes at current sales rates, dropped from 3,0 months to 2,5 months in December. Comparatively, the index stood at 2.6 months for December 2022. The market is hopeful that more properties will be listed for sale as the year begins, with mortgage rates at their lowest level since early August.
In December, California’s active listings decreased from the year before in 32 counties. Of these, 27 experienced a double-digit decline. Shasta had the most significant year-over-year drop at -65.5 percent, followed by Alameda (41.4 percent) and Contra Costa (39.5 percent). Santa Barbara led the way, with a 36.1 percent increase from the year before, followed by Amador (27.3%) and Lake (24.4%).
Almost all counties except Sutter recorded a decrease in active listings for December. Sutter was only one of the counties to record a monthly rise in the number of for-sale listings during the month.
The number of new active listings in the state continued to decline from the previous month for the 18th time. However, the annual decline was below 3 percent for the second month in a row. Rates will drop at the end of 2023 and stabilize at the start of 2024. This could lead to a slight increase in new listings.
Market Dynamics: Days to Sell and Sales-Price-to-List-Price Ratio
The median number of days to sell a Californian single-family house in December was 26. This is a drop from 33 days in December 2022. This indicates a quicker pace in home sales for the current market.
C.A.R.’s statewide sales price-to-list-price ratio was 99 percent in December 2023, indicating a strong correlation between the listed and sold prices. Comparatively, the ratio in December 2022 was 96.1 percent, which highlights a tighter relationship between buyers and sellers in the current market.
In December, the average price per square foot for a single-family existing home in California increased from $373 to $398. This is up from $373 a year earlier. The upward trend of the average price per sq. foot indicates a positive trajectory for home values in the state.
California’s housing market continues its struggle with active listings and the number of new listings. The dynamics vary from county to county. A decline in active listings across several counties and a long-term decrease in new listings on a state level highlight the ongoing inventory shortage. A slight rise in new listings supported by stable mortgage rates could provide some relief in the next few months.
California Housing Market Rebounds in a Positive Way
The California housing market will rebound in 2024 due to the decline in mortgage rates. The forecast projects a significant increase in single-family existing home sales of 22.9% compared to 2023’s projected pace.
Projection of Sales and Prices
The forecast predicts 327.100 units of single-family home sales in 2024. This is a significant increase from the projected 266,200 in 2023. California’s median house price is expected to rise by 6.2% to 860,300 in 2024.
Factors affecting the forecast and the market environment
Mortgage interest rates are expected to drop due to factors such as slower economic growth and a cooling of inflation. This will create a favorable market for California home sales to increase in the next year. The housing shortage and the competitive market will continue to exert upward pressure on home values.
Economic Indicators & Job Growth
The forecast is based on economic indicators and predicts a modest U.S. Gross Domestic Product 2024 increase. The estimated growth in non-farm jobs for the state is 0.5 percent. The unemployment rate will increase slightly to 5 percent by 2024 from the projected 4 percent.
Impact of Mortgage Rates on Housing Supply
Due to the anticipated economic softening, the Federal Reserve Bank will likely loosen its monetary policies in 2024. This will lead to a downward trend in mortgage rates for the entire year. The Federal Reserve Bank could loosen its monetary policy in 2024, leading to a downward trend in mortgage rates throughout the year. The housing supply will remain below normal despite an increase in active listings.
The “2024 California Housing Market Forecast” by C.A.R. The “2024 California Housing Market Forecast” by C.A.R. paints a positive picture of the housing market in California, anticipating an increase in home sales and a noticeable rise in median home prices. This forecast considers various economic factors and market conditions and provides valuable insight for both buyers and sellers. The market’s performance will undoubtedly shed light on these projections as the year unfolds.
Where will home prices drop in California?
Zillow’s latest data shows that by November 30, 2023, the average California home value will be $746.055. This represents an increase of 2.3% in the last year. The state’s homes reach a pending status within 16 days. This shows a competitive and dynamic market.
Key Metrics November 30, 2023
- For Sale Inventory: 64,262 homes
- New Listings – 22,062 Homes
- Median list price: $729.600
These metrics provide a snapshot of available inventory and new listings in California, highlighting the vibrant real estate market.
Median sale price and Sale-to List Ratio (October 31, 2023)
- Median Sale Price: $697,167
- Median sale-to-list ratio:
The median price and the sale-to-list percentage provide essential insights into pricing dynamics. They highlight the correlation between the listed and actual prices on the market.
Sales Price Distribution (October 31, 2023)
- Percentage of sales above list price: 49.4%
- Percentage of sales below list price: 37.2%
The distribution of prices above and below the list price sheds some light on the competitiveness and negotiation dynamics of the market.
Market dynamics: Is California Buyers’ or Sellers’ Market?
It is essential to make informed decisions if you want to know if the current housing market is a buyer’s or seller’s market. Data shows that 49.4% of sales occur above the list price. This suggests a buyer’s market. 37.2% of sales below the list price indicates a balance and buyer opportunities.
Are home prices dropping?
According to the most recent data, home prices have mostly stayed the same. The 2,3% average home value increase in the last year shows a steady rise rather than a drop. The stability of home values is a significant factor in the confidence of the California real estate industry.
Top 10 California Areas for Home Prices Decline in 2024
Ukiah, CA
The Metropolitan Statistical Area of Ukiah in California is expected to experience a decrease in home prices. Forecasts indicate a decline of -1% at the end of December 2020, followed by an even more significant drop of -3.1% in February 2024. This trend is expected to continue, with a decline of 7.8% in November 2024. These projections indicate a problematic environment for homeowners and a possible opportunity for buyers looking for more favorable prices.
San Jose, CA
San Jose is another important economic center in California that will also see a drop in home prices. Forecasts show a modest rise of 0.3% at the end of 2023. This will be followed by a decline of 2.8% in February 2024. By November 2024, the downward trend is expected to continue, with a decrease of 6.1%. These projections show potential challenges to homeowners in the San Jose region.
Eureka, CA
The M.S.A. in Eureka, California, is expected to see a drop in home prices. This will begin with a -1.7% at the end of 2023. This decline is expected to continue with a drop of 2.4% in February 2024 and an even more dramatic decrease of 5.8% in November 2024. This forecast indicates a shift in the market that could impact both buyers and sellers in the Eureka area.
San Francisco, CA
San Francisco is known for its vibrant property market. However, it is expected that home prices will decline. Forecasts indicate a modest decline of 0.3% at the end of 2023. This will be followed by a significant decrease of 1.6% in February 2024. By November 2024, a decrease of 4.8% is expected. These projections indicate a possible adjustment in the San Francisco Housing Market.
Sonora, CA
Sonora is located within the M.S.A. of California, and home prices are expected to decline. Forecasts predict a drop of 0.8% at the end of 2023. This will be followed by a predicted drop of 2.4% on February 2024. By November 2024, the downward trend is expected to continue, with a decrease of 4.8%. These projections indicate a change in market dynamics for the Sonora area.
Santa Rosa, CA
Santa Rosa, California’s Metropolitan Statistical Area, is also among the areas where home prices are expected to decrease. Forecasts begin with a modest decrease of 0.3% at the end of 2023. This is followed by a significant decline of 1.4% in February 2024. By November 2024, a decrease of 4.7% is expected. These projections indicate that Santa Rosa homeowners may face some challenges.
Clearlake, CA
The Metropolitan Statistical Area of Clearlake (M.S.A.) in California is one of the areas where home prices are forecast to decrease. Projections indicate that -6.6% will decrease by the end of December 2023. The downward trend is expected to continue, with a drop of 1.8% in February 2024 and a more significant decrease of 4.5% in November 2024. These forecasts indicate a possible market adjustment for Clearlake that could impact both buyers and sellers in the area.
Chico, CA
Chico is another M.S.A. with an expected decrease in home prices. The forecast starts with a decrease of -0.6% at the end of 2023. The trend is expected to continue downward, with a predicted drop of -2 % in February 2024 and an even more significant decrease of 4.3% in November 2024. These projections show potential challenges to homeowners in the Chico region.
Truckee (C.A.)
Truckee is located in California’s M.S.A., and home prices are predicted to decline. The first projection is a drop of -0.5% at the end of December 2023. This will be followed by a fall of -1.9% between February and November 2024. This forecast indicates a shift in the market that could impact both buyers and sellers.
Napa, CA
Napa in California is also included in the areas where home prices are expected to decrease. The forecast starts with a modest drop of -0.4% at the end of 2023. The trend is downward, with a predicted drop of 1.5% in February 2024 and a more significant decrease of 3.8% in November 2024. These projections indicate that the Napa housing markets could be undergoing a change, which may present some challenges to homeowners.
When is a good time to buy a house in California?
When examining the weekly activity that ended on January 13, 2024, observed the following average daily figures:
- Closed sales: 349 dollars per day
- Sales Pending: 414 per Day
- New Listings: 544 per day
In light of the current trends, it is evident that a significant volume of sales have been closed or are pending. This indicates a dynamic market. A significant number of newly listed also indicates that the market is active.
However, it’s important to note that only 19.4% of realtors predict an increase in prices, while 36.8% anticipate a rise in sales. This divergence of expectations shows the complexity of the market.
When deciding whether now is an excellent time to purchase a home in California, prospective buyers should consider these factors carefully. Consult a real estate professional for more information on the local market.
Key Statistic:
- Median home price: 843,600
- Minimum Annual Income Required: $221,200
- Monthly Payment: 5,530 $
- Interest rate: 7.144%
This quarter was a turning point as the effective interest rate soared to a 2-decade high of 7,14 percent. It was 6.61 percent during the second quarter of 2023 and 5.72 in the third quarter of 2022. This rise in borrowing costs contributed to the fall in housing affordability. It has now reached its lowest level since 2007.
Single-Family Homes:
In the third quarter of 2023, less than one-fifth of California’s homebuyers (15%) could afford an existing single-family house priced at the median price. This is a significant drop from the peak of 56 percent in the first quarter of 2012. A minimum annual income of $221.200 was required to qualify, and monthly payments, including taxes and insurance, amounted to $5.530.
The fact that the compelling composite rate has crossed the 7 percent threshold for the first time in more than two decades has only added to the difficulties. There is still hope that an economic slowdown will result in a rate drop, providing relief for both supply and demand in the housing market and improving affordability.
Townhouses and Condominiums:
The scenario for condominiums and townhomes is slightly different. Twenty-three percent of buyers could afford a $650,000 condo or townhome. This is a decrease from 25 percent in the previous quarter and 28 percent in the third quarter of 2022. To make a $4,260 monthly payment, a minimum annual income of $170400 was required.
Nationwide Comparison:
California is above the national average in affordability. More than one-third of households can afford a median-priced home of $406,900. This requires a minimum income of $106,800 and monthly payments of $2670. The affordability of homes has dropped from 39 percent to just 29 percent in a year.
The third quarter of 2023 will be challenging for the California housing industry, as affordability has reached a record low. The interplay between rising interest rates and home price increases has created a complicated landscape for prospective homebuyers. The state navigates these challenges and hopes economic factors will contribute to a positive change, improving housing affordability.
California Housing Market Challenges
The California housing market has faced many challenges. Here are some factors that work together to create a dynamic and complex housing market in California.
High demand and limited supply
California has a large population and a strong economy, which leads to a demand for housing. A limited amount of housing is available, especially in the most desirable areas. The imbalance between housing supply and demand is driving up prices. Many prospective homebuyers are unable to afford a home because of this.
The Affordability of the Product
California’s high housing costs have made home ownership less accessible for many residents. The median home value in California is much higher than the average national price. High home prices, rising rates of interest, and strict mortgage qualification requirements have created affordability issues for prospective buyers.
Strict Land Use and Zoning Regulations
California has some of the nation’s strictest land use and zoning regulations. These regulations restrict new construction, making increasing the housing supply hard. The result has been a housing crisis and a rise in prices.
Lack of affordable housing
California is facing a severe housing shortage, especially in the major cities. The costs of building affordable housing and the complicated process of getting approvals and permits have hindered the development of affordable units. The affordability crisis has been exacerbated, and the number of renters has increased.
Economic Factors
The housing market is affected by economic conditions such as wage growth, job growth, and interest rates. Slowing growth and stagnant wages may dampen the demand for housing. Meanwhile, rising interest rates could increase borrowing costs. In combination with the high cost of housing, these factors have made it difficult for Californians to enter the housing market.
Impact of natural disasters
California is susceptible to natural disasters such as wildfires and quakes, which can cause damage or destruction of homes and disrupt the housing markets. Housing availability and affordability can be affected by the cost of insurance and rebuilding efforts following these disasters.
Migration Patterns
The housing market is also affected by migration patterns. California has seen both domestic and foreign migration, which led to an increase in housing demand. In recent years, there has been an increase in net migration, as some residents have left the state because of affordability issues, congestion, and other factors. This can impact the dynamics of supply and demand in the housing market.