Rising rates, inflation still hobbling California's housing market this summer
According to the California Association of Realtors, housing demand in California cooled further in July 2022, as the effects of rising interest rates and high home prices hit would-be homebuyers, dragging home sales below the annualized 300,000 benchmark level for the first time since May 2020.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 295,460 in July 2022, according to information collected by C.A.R. from 90 local MLSs statewide.
The statewide annualized sales figure represents what would be the total number of homes sold during 2022 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. July's sales pace was down 14.4 percent on a monthly basis from 344,970 in June and down 31.1 percent from a year ago, when 428,980 homes were sold on an annualized basis. July marked the fourth consecutive monthly decline and the 13th straight annual decline.
"In the midst of the peak home-buying season, high home prices and rising interest rates depressed housing affordability to the lowest level in nearly 15 years, which in turn dampened home sales," said C.A.R. President Otto Catrina. "However, buying opportunities remain in the coming months for those who have been waiting on the sideline as more listings become available, competition continues to cool off and rates begin to stabilize."
California's median home price declined 3.5 percent in July to $833,910 from the $863,790 recorded in June. The July price was 2.8 percent higher than the $811,170 recorded last July and was the smallest year-over-year price gain in more than two years. The price moderation is largely attributed to a change in the mix of sales in July, as million-dollar home sales plummeted nearly 25 percent from June.
"Home sales have taken a trouncing as the market has shifted in response to the recent surge in interest rates, and pending sales suggest that the market could remain soft in August," said C.A.R. Vice President and Chief Economist Jordan Levine. "The pace of sales declines is expected to slow in the coming months, however, as rates continue to stabilize, market volatility begins to subside and supply conditions further normalize."
With the market shifting, consumers were less positive in July about the state's housing market conditions, according to C.A.R.'s monthly Consumer Housing Sentiment Index.
Conducted in July, 76 percent of respondents believed that the overall economic conditions in California will not improve in the next 12 months, while 81 percent believed that interest rates will not fall within a year. Only 16 percent of the respondents thought it was a good time to buy a home, a slight increase from 14 percent in June, and slightly down from last July's 17 percent. Nearly two-thirds (60 percent) believe it is a good time to sell a home, pushing the Housing Sentiment Index to 59, which was significantly lower than the Index of 71 in July 2021
Other key points from C.A.R.'s July 2022 resale housing report include:
C.A.R.'s statewide sales-price-to-list-price ratio* was 100 percent in July 2022 and 103.8 percent in July 2021.