California’s housing market witnessed a slight slowdown in August, marking a seven-month low in home sales. Despite falling interest rates, buyers remained cautious, adopting a wait-and-see strategy, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
The statewide median home price in August stood at $888,740, only marginally higher than July’s $886,560. While this represents a 3.4% increase from August 2023, it indicates a moderation in price growth. Year-to-date, statewide home sales edged up a mere 0.5% compared to the same period last year.
The sales pace in August fell 6.3% from July’s figures, reaching 262,050 homes sold on a seasonally adjusted annualized basis. This marks the 23rd consecutive month that sales remained below the 300,000-threshold. However, there are signs of optimism. Pending sales and mortgage application trends suggest a gradual improvement in housing demand over recent weeks.
Melanie Barker, C.A.R. President, attributed the moderation in home price growth to the market nearing the end of the traditional home buying season. She expressed optimism about improved affordability in the fall as the Federal Reserve signals impending interest rate cuts. Lower borrowing costs are expected to benefit buyers in the coming months.
C.A.R. Senior Vice President and Chief Economist Jordan Levine highlighted that buyers are currently evaluating whether to wait for further Federal Reserve rate cuts before entering the market. He believes that if interest rates remain low or dip further in the coming weeks, home sales should experience a steady climb towards the year’s end.
Regional data highlights the mixed performance of the housing market. Three out of the five regions in California registered sales increases from a year ago, with the San Francisco Bay Area leading with a 4.8% rise. The Central Coast and Central Valley regions followed with 3.0% and 0.8% increases, respectively. Conversely, the Far North and Southern California regions experienced sales declines of 5.0% and 2.3%, respectively.
Home prices showed a more consistent year-over-year growth pattern across the state, with 36 out of 53 counties registering price increases. Trinity County led with a 36.6% increase, followed by Plumas and Imperial counties with 32.9% and 22.0%, respectively. However, 16 counties recorded annual median price declines, with Santa Barbara experiencing the largest drop at 18.0%.
The statewide unsold inventory index, a measure of the time needed to sell available homes, rose both month-over-month and year-over-year. This indicates an improving supply situation. Active listings at the state level rose more than 39% from the year-ago level, marking the seventh straight month of annual gains in for-sale properties. These positive trends suggest continued improvement in housing supply conditions in California in the coming months.
While August saw a slight pullback in home sales, the overall picture suggests a gradual shift towards a more balanced market, driven by increasing housing supply and expectations of further interest rate cuts. The coming months will be crucial in determining the trajectory of the California housing market.
