There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize,
Real Estate News
Affordability Crisis Deepens as California Home Prices Hit New High of $908,040
In a challenging landscape for homebuyers, California’s real estate market has hit another milestone. In May, the median price for existing, single-family homes soared to a record-breaking $908,040. This figure represents a 9% increase over the past year and a staggering 56% rise compared to the 2018-19 average. It’s the second consecutive month of record highs, with previous peaks set in March, April, and May of 2022.
So, who can afford these sky-high prices, especially with mortgage rates hovering around 7%? Not many. Calculations show that even California’s highest earners can only afford 61% of the typical home. This affordability crisis is reflected in the statewide sales rate, which ran at an annual pace of 272,410 in May. This rate is not only 6% lower than the previous year but also among the slowest since 1990, with just 6% of all months recording a slower pace.
Buyer reluctance is evident, with May sales 32% below the 2018-19 average. The Federal Reserve’s interest rate hikes, starting in March 2022 to cool an overheated economy, effectively doubled mortgage rates and dampened homebuying activity. The last time California’s sales pace exceeded 300,000 was in September 2022, making this the 20th consecutive month below that threshold. Historically, there have only been 36 months below the 300,000 pace since 1990.
Despite these challenges, home prices remain firm, driven by a limited supply of available properties. In May, the inventory of listings was down to 2.6 months’ worth, a 24% decrease from the previous year. Only 14% of all months since 1990 have had a thinner supply. Listings were also 24% below the 2018-19 average, further tightening the market.
This scarcity of options has created an urgency among buyers who can afford to participate in the market. The typical California home spent just 16 days on the market in May, one day less than the previous year. Only 8% of all months since 1990 have seen homes sell faster. The days on market in May were seven days below the 2018-19 average, underscoring the brisk pace of sales in a highly competitive environment.
In summary, California’s housing market remains robust yet inaccessible for many, driven by high prices, limited inventory, and swift sales despite elevated mortgage rates.
Real Estate Blog
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