UPDATE: California homebuying activity has reached alarming lows, with statewide sales plummeting to their fourth-slowest October in 21 years. In October 2023, there were just 29,379 closed sales of houses and condos, according to real estate tracker Attom. This represents a staggering 22% drop from the monthly average since 2005.
House hunters are showing reluctance to commit, despite a slight decline in mortgage rates. The recent drop offers modest hope, but the underlying economic uncertainty continues to dampen enthusiasm among potential buyers.
While annual sales figures show a slight uptick—totaling 324,475 over the past year, a 2% increase from the previous year—this still falls 26% below the 21-year average. The market’s stagnation is particularly concerning given the persistent high prices that are dissuading buyers.
In October, California’s median selling price was reported at $735,125, marking a 0.5% decline year-over-year. However, this figure remains only $14,875 shy of the $750,000 peak recorded in May 2024. Buyers are struggling to enter a market characterized by inflated prices and economic tension.
Despite a cooling in price appreciation, potential buyers remain hesitant. Prices have surged 9% over the past three years following an eye-watering 35% increase driven by pandemic-era economic trends. The Federal Reserve’s interest rate hikes, initiated in early 2022 to combat soaring inflation, have left buyers grappling with higher mortgage costs.
As of October, mortgage rates averaged 6.4%, stable compared to last year but down from a high of 7.4% in November 2023. This translates to an estimated monthly mortgage payment of $4,597 for the typical California buyer, which is unchanged year-over-year but still 101% higher than six years ago. Moreover, buyers are facing a daunting down payment requirement of $147,025 for a 20% deposit.
The data paints a grim picture for California homebuyers, who are becoming increasingly disillusioned by the combination of high prices and economic instability. As the market grapples with these challenges, the future of homebuying in California remains uncertain.
What’s Next? Experts suggest that unless significant changes occur—such as a sustained drop in prices or further reductions in mortgage rates—the trend of declining sales may continue. The next few months will be crucial for assessing whether California’s housing market can recover from this downturn.
