The California housing market experienced a rebound in July, with home sales reaching a five-month high. This surge in activity was largely driven by a decline in mortgage rates, which fell to their lowest point since spring. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported that existing single-family home sales totaled 279,810 on a seasonally adjusted annualized rate in July, representing a 3.6% increase from June and a 4.1% increase from July 2023.
Key Takeaways:
California housing sales rebounded in July, fueled by declining mortgage rates.
The statewide median home price dipped slightly, but remained elevated year-over-year.
Inventory levels continued to improve, with both active listings and new listings increasing.
The market is expected to remain moderate in the coming months, with continued growth in sales and prices.
Let’s delve deeper into the factors shaping the California housing market in July:
California Housing Market in July: A Resurgence Fueled by Lower Mortgage Rates
The Rise of Home Sales
The upswing in sales is a welcome sign after a period of relative stagnation in the market. The seasonally adjusted annualized sales figure signifies the total number of homes that would be sold if the July pace persisted throughout the year, accounting for seasonal variations in sales. This metric rose 3.6% from June and 4.1% from the same period last year. Despite the improvement, sales remained below the 300,000 threshold for the 22nd consecutive month, indicating that the market is still navigating a delicate balance between buyer and seller activity.
The Impact of Lower Mortgage Rates
The key driver of the July surge was the decline in mortgage rates. C.A.R.’s Senior Vice President and Chief Economist, Jordan Levine, attributed this positive development to the “cooling economy” in recent months. With lower borrowing costs, homebuyers who had been sidelined due to higher rates found themselves in a more favorable position to enter the market. The allure of lower monthly payments, combined with the potential for price softening, motivated buyers to take the plunge.
Median Home Prices: A Mixed Bag
While sales picked up, the statewide median home price dipped slightly in July, marking the second consecutive monthly decline after reaching a record high in May. The median price fell from $900,720 in June to $886,560 in July, representing a 1.6% decrease. However, year-over-year, the median price remained elevated, reflecting a 6.5% increase from July 2023. This positive annual trend suggests that while prices may have started to soften, they are likely to continue on an upward trajectory for the remainder of the year, albeit at a more moderate pace.
Regional Variations in the Housing Market
The performance of the housing market varied across different regions of California in July. Here’s a breakdown by region:
Sales Performance:
San Francisco Bay Area: Experienced the most significant year-over-year sales increase at 19.2%.
Southern California: Followed closely with an 11.4% annual increase in sales.
Central Valley: Also saw double-digit growth in sales, rising 10.3% from the previous year.
Central Coast: Sales grew by a more modest 5.8% from July 2023.
Far North: Was the only region to record a decline in sales, dropping by 0.5% year-over-year. This drop was partially attributed to the Park Fire, which began in late July.
Price Performance:
Central Coast: Posted the largest year-over-year price increase at 8.0%.
Southern California: Came in second with a 6.1% increase in median prices.
San Francisco Bay Area: Experienced a 3.6% annual price growth.
Far North: Saw a 3.1% increase in median prices.
Central Valley: Registered the smallest annual price gain at 2.2%.
Inventory: A Growing Supply of Homes
The statewide unsold inventory index (UII), a measure of the number of months needed to sell the available inventory at the current sales pace, showed mixed results in July. While the index declined from 3.0 months in June to 2.9 months in July, it was higher than the 2.5 months recorded in July 2023. This indicates that while the inventory is growing, it is still not at a level that would drastically shift the balance of power in favor of buyers.
The number of active listings at the state level rose significantly by 39.0% from a year ago, marking the sixth consecutive month of annual gains in available properties. This upward trend is likely to continue, particularly as the lock-in effect of low interest rates gradually dissipates, leading to more homeowners considering putting their properties on the market.
New Listings: Reflecting Market Sentiment
New active listings at the state level increased for the seventh straight month, with the pace of growth accelerating to 19.5% in July. This indicates that sellers are increasingly confident in the market, emboldened by the recent decline in interest rates and the potential for continued price appreciation.
Days to Sell: A Faster Pace
The median number of days it took to sell a California single-family home in July was 20, down from 16 days in July 2023. This decrease suggests that the market is moving at a slightly faster pace, driven by the increased demand and improved inventory levels.
Sales-Price-to-List-Price Ratio: A Steady Market
The sales-price-to-list-price ratio remained at 100.0% in July 2024, indicating that homes were selling at or close to their asking price. This stable ratio highlights the relative balance between buyer and seller activity, suggesting that neither party holds a significant advantage in negotiations.
Average Price Per Square Foot: Reflecting Demand
The statewide average price per square foot for an existing single-family home rose to $437 in July, up from $408 in the same month of the previous year. This increase reflects the continued demand for housing in California, particularly as buyers seek out more value in a competitive market.
Looking Ahead: A Moderate Forecast
The California housing market is likely to continue on a moderate path in the coming months. Lower mortgage rates and an improving inventory situation provide a positive outlook, but the market is still expected to be influenced by economic uncertainties and potential fluctuations in interest rates.
C.A.R. President Melanie Barker, a Yosemite REALTOR®, emphasized the importance of continued improvement in the availability of homes for sale and further moderation in mortgage rates in the third and fourth quarters to maintain the market’s vibrancy.
The California housing market is showing signs of resilience, navigating through economic uncertainty and fluctuating interest rates. While the market is not expected to experience a dramatic upswing, the combination of lower mortgage rates, improved inventory, and continued demand suggests a moderate and balanced path forward.