California home sales decline amid rising mortgage rates and limited inventory

Statewide median home price tops $800,000 and hits six-month high

By Dolores Quintana

According to the CALIFORNIA ASSOCIATION OF REALTORS® (CAR) report, a combination of rising mortgage interest rates and a limited inventory of available homes contributed to a decline in California home sales in April. However, during the same period, the statewide median home price topped $800,000, reaching this milestone for the first time in six months.

In April, closed escrow sales of existing detached single-family homes in California reached a seasonally adjusted annualized rate of 267,880, according to data compiled by CAR from more than 90 local REALTOR® associations and MLSs across the state. This number represents the total number of homes that would be sold in 2023 if the April sales pace continued throughout the year, taking seasonal factors into account.

Compared with the previous month, April’s sales pace slowed 4.7 percent from 281,050 in March and 36.1 percent from the same period last year, when 418,970 homes were sold on an annual basis. This marks the seventh consecutive month that sales of existing single-family homes in California have remained below the 300,000-unit pace.

Despite the drop in home sales, market competitiveness increased as the time on the market for homes decreased from 33 days in January to 20 days in April. Additionally, the proportion of homes sold for above asking price doubled from one in five at the start of the year to more than two in five in April. CAR President Jennifer Branchini, a Bay Area REALTOR®, noted that this increased competition contributed to the statewide median home price rising above $800,000 for the first time in six months.

In April, the median home price in California increased 3.0% from $791,490 in March to $815,340, exceeding $800,000 for the first time since October 2022. However, year-over-year, the median price April saw a 7.8% decrease from the revised $884,680. Registered in April of the previous year. This drop in median price compared to last year was partly attributed to significant price increases in early 2022, fueled by homebuyers rushing into the market before interest rates increased.

The lock-in effect and low demand for housing continued to restrict the supply of housing and prevent potential sellers from putting their houses up for sale. This contributed to a 30% year-over-year decline in active new listings across the state, marking the largest drop since the pandemic shutdown in May 2020. Additionally, market weakness was influenced by an increase in borrowing costs as mortgage rates topped 7%. at the end of February and beginning of March. Many transactions that were initiated during that period were closed in April, further affecting market performance.

In light of these factors, CAR revised its 2023 housing market forecast. The projection anticipates an 18.2 percent decline in existing single-family home sales, with 279,900 units expected to be sold in 2023 compared to 342,000 units. in 2022. While overall home prices are expected to improve in the second half of the year, median home prices in California are expected to decline 5.6% to $776,600 in 2023, from $822 300 by 2022. The updated state median price projection represents an increase from the previous estimate of $758,600 forecast in October. In addition, CAR projects the 30-year fixed mortgage interest rate to average 6.3 percent for the year.

Key findings from CAR’s April 2023 Resale Home Report include:

  • Sales declines accelerated in all regions, with the Central Coast experiencing the biggest drop at -42.8 percent. The Far North followed close behind with a 41.8 percent drop. Sales in the San Francisco Bay Area, Southern California and the Central Valley fell more than a third year over year.
  • All 51 counties tracked by CAR reported decreased sales compared to the prior year. Mariposa had the biggest drop at -80.8 percent, followed by Calaveras and Santa Cruz. However, pending sales increased in 39 counties, indicating a potential improvement in closed sales in the coming months.
  • Median home prices fell from a year ago in all major regions, with the San Francisco Bay Area experiencing the biggest drop at -16.7 percent. Thirteen counties saw a decline of more than 10 percent, while 12 counties saw an increase in their median price compared to last April.
  • California housing inventory rebounded after two straight months of decline. The unsold inventory (UII) index for April 2023 increased 38.9 percent compared to the previous year. All price ranges saw an increase in UII of more than 20 percent, with the $1 million sector and higher prices showing the biggest gain.
  • Additional data from the CAR report includes median days to sell a single-family home in California (20 days in April), sales price-to-list price ratio (100 percent in April 2023), median price per square foot ($395 for an existing single-family home) and the 30-year fixed mortgage interest rate (6.34 percent in April).