Housing demand in California cooled further in July 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, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 295,460 in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and 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, a Bay Area real estate broker and REALTOR®. “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:
- At the regional level, sales continued to decline sharply with three of the five major regions dropping more than 30 percent from last year. The Central Coast region experienced the biggest drop of all regions, with sales plummeting 37.3 percent from a year ago. The San Francisco Bay Area followed closely with the second largest decline (-37.2 percent), as sales in eight of the nine counties in the region fell more than 30 percent in July. Southern California also recorded a 36.9 percent drop from July 2021, while the declines in Central Valley (-27.3 percent) and the Far North (-19.0 percent) were less severe.
- All but three counties tracked by C.A.R. posted sales drops from a year ago in July 2022.Of the 48 counties that experienced a sales decline, 40 of them fell by more than 20 percent from last year, and sales in 30 counties plummeted more than 30 percent year-over-year.Santa Barbara experienced the biggest sales drop from last July at -50.3 percent, followed by Santa Clara (-46.1 percent) and San Bernardino (-42.3 percent). Counties that experienced a sales decline decreased an average of -30.2 percent in July. The number of counties with a year-over-year sales increase remained at two in July, the same as in June.Lassen recorded the largest sales increase of the two counties at 52 percent, while Plumas posted a sales gain of 9.1 percent from last year. For the first seven months of 2022, San Luis Obispo had the sharpest sales drop of -28.9 percent, while Yuba (+17.7 percent) continued to have the best sales performance of all counties.
- Nearly 80 percent of all California counties continued to record an increase in their median prices on a year-over-year basis. Price growth rates, however, were more moderate compared to a couple of months ago when the state set its new record high. Sixteen counties recorded double-digit price surges from a year ago but was less than half of the 31 counties recorded in May. Mariposa (57.3 percent) had the biggest increase in price of all counties, followed by Lassen (20.9 percent) and Napa (17.9 percent). Eleven counties recorded a dip in their median price from July of last year, with Tehama dropping the most at -19.3 percent, followed by San Francisco (-8.2 percent) and San Mateo (-6.9 percent).
- The overall supply conditions in California loosened again, with the statewide unsold inventory index (UII) rising from 1.9 months in July 2021 to 3.2 months in July 2022, the highest level since May 2020. The improvement in the index was primarily due to a pullback in demand. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
- Forty-six of the 51 counties tracked by C.A.R. registered a year-over-year increase in active listings in July, compared to 44 counties in June. Five counties had triple-digit year-over-year gains in for-sale properties, with Yuba leading the pack with a growth rate at 169.8 percent, followed by Merced (157.0 percent) and Solano (129.5 percent). On the other end of the spectrum, five counties experienced a decline in active listings from a year ago, with Del Norte dropping the most again at -45.7 percent, followed by Plumas (-11.8 percent) and Lassen (-7.5 percent).
- The median number of days it took to sell a California single-family home was 14 days in July and 8 days in July 2021.
- C.A.R.’s statewide sales-price-to-list-price ratio* was 100 percent in July 2022 and 103.8 percent in July 2021.
- The statewide average price per square foot** for an existing single-family home was $413, up from $394 in July a year ago.
- The 30-year, fixed-mortgage interest rate averaged 5.41 percent in July, up from 2.87 percent in July 2021, according to Freddie Mac. The five-year, adjustable mortgage interest rate averaged 4.29 percent, compared to 2.49 percent in July 2021.