Hi, I’m Warren Oberholser. I’m a realtor in the East Bay Tri-Valley area in Northern California. My goal is to help both buyers and sellers get maximum results for one of their biggest investments, their home.
California Housing Market: Are home prices about to fall?
Well, just since my latest BLOG/video, which I posted last week, I’m seeing some early signs in the market that things are leveling out and possibly going down a bit. This information I’m going to review with you comes from the California Association of Realtors. They just released their latest market update report.
Overall, the California housing market is solid. However, home sales did dip below 2% for the first time in 12 months. Compared to last year, the price is up 21.7%. This makes the median home price $811,170. But July sales price compared to last month is down 1%.
Keep in mind, last year was far from a typical California housing market, starting with the complete shutdown of COVID in March and April, then a slow pickup in June, ending in a sprint to the finish line in December. In fact, December was the highest month in sales, which is normally the slowest. As noted in my last week’s California housing market video update, the new buyer profile is a long-term renter who can work from home and is able to take advantage of cashing in their stock for a down payment.
The California housing market regional sales for July:
- Southern California and the Bay area both dropped 1.4%
- The Central Valley, far north counties, and others dip between 12 and 19%
Here are the specific stats for the California housing market for July:
- Pending home sales, declined by 15.9% for the second consecutive month.
- Days on the market is only eight days. Just for reference, in a normal market homes that are priced correctly, which should be around the last sold COP, will usually go pending within 12 to 15 days.
- Sales price to list price ratio. Reduced downward from the all-time high price, which was 3.8% over the asking price. So seven out of 10 offers were above the list price.
Now compared to the last six months, we’re seeing a slight increase in inventory. So we’re headed in the right direction, but we still have a ways to go when looking at the active inventory we had in 2019.
Overall, the California housing market appears to be strong and appears to be more of normal pattern, which is a busy spring, a quieter summer, because vacations, parents getting kids ready for school. Based on this information, I expect there to be more inventory in the fall and the buyer still may be pretty.
As I noted in my last California housing market BLOG/video, I don’t anticipate the buyer paying a lot over the asking price. If they do, it’ll be more like in the range of 3% to 5%. I also feel we’ll start to see property stay active longer, and a small percentage will have price reductions.
Will more California housing market inventory reduced buyer competition? Possibly. However, if a property is in good order and is priced right, it will get the attention of other buyers. So the sooner the buyer’s agent reaches out to the listing agent to establish communication, like I’ve discussed in my previous videos, will increase the chance of getting the property for more favorable price and terms.
So the bottom line or the goal is to get the property before it goes into a bidding war. However, there is a lot on the horizon that has the potential to drastically change our shift the residential real estate landscape.
California Housing Market Wild Cards
1 The new COVID cases– New CODID cases are made up of 80% of the Delta variant. Apparently we’re seeing the fastest amount of new cases, over 4 million since last Thanksgiving. With as many as 15,000 recent new cases per day, hospitalizations are up almost 70% from just two weeks. This affects businesses, especially service, retail, airlines, et cetera. We are already seen an increase in unemployment rate. California unemployment claims are back up above 100,000 new claims.
Keep in mind, COVID is difficult to predict what kind of effect it’ll have on the real estate market. If you look at what happened from the middle of last year to now, the real estate market is at an all-time high. I do feel as these cases increase and because of the fears of how much stronger the Delta variant is, the open house will go way. Even if it does, I don’t see it affecting the amount of sales. It just makes it more difficult to view the properties.
2 Interest rates Interest rates have slowly crept up from 2.77 to 2.87. Obviously still very low, but as interest rates climb, it will affect the buyers DTI, debt to income ratio. Now the buyer still can qualify, but for a less loan amount, forcing the buyer to purchase cheaper homes.
3 Moratoriums The moratoriums on loan forbearance and evictions. Will it resolve in the next couple of months? It’s hard to say again, especially with the surge in the COVID cases. I do feel once this is over, there will be some kind of government subsidy, not sure how this will work or affect the real estate market.
4 Housing affordability Buyer sediment is at an all time low and has deepened in the second quarter to 23%. This means 77% of all California residents can not afford to purchase a median priced home in California. This dip equals the lowest level of the fourth quarter in 2007.
5 Buyer fatigue According to an article by CNN, many home buyers have just dropped out completely. Only 32% of consumers believe it’s a good time to purchase a home, according to Fannie Mae’s Home Purchase Sentiment Index.
So of you look at the national number of just 32% of buyers feel this is a good time to purchase a home, and then view the dismal 23% of Californians who can actually purchase a home, which again, reflects the lowest dip we’ve had since the fourth quarter in 2007. I think the biggest wild card is the buyer’s will to purchase a home.
As Californians, we need to be aware of our surroundings, or those wildcards I just mentioned, as well as others so we’re aware of how they can affect the real estate market.
I hope you enjoyed this article. Please let me know if you have any questions. Warren
Hello…I work with both buyers and sellers in the Tri-Valley area of Northern California. The Tri-Valley is comprised of 6 cities: Pleasanton, Livermore, Dublin, San Ramon, Danville, and Alamo. To better understand what each city has to offer, I have created a Pros and Cons video and BLOG for each – (Pros & Cons for Pleasanton, Pros & Cons for Livermore, Pros & Cons for Dublin, Pros & Cons for San Ramon, Pros & Cons for Danville and Pros & Cons for Alamo). If you are thinking about purchasing or selling a home, please reach out to me by text, phone, or email. If it is convenient, I can schedule a Zoom chat so we can discuss your home goals. Wishing you all the best on your home journey. Cheers!
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