What's keeping buyers from looking?
California’s housing market experienced a slowdown in January as elevated mortgage rates and the aftermath of Southern California wildfires dampened buyer demand, according to the California Association of Realtors (CAR).
Statewide sales of existing single-family homes fell to a seasonally adjusted annualized rate of 254,110 in January, marking a 10% decline from December and a 1.9% decrease from January 2024. CAR said this represents the lowest level of home sales in over a year and the sharpest month-over-month drop in 30 months.
Meanwhile, the median home price in California dipped 2.6% from December to $838,850, but remained 6.3% higher than the same period last year. The decrease was attributed to seasonal trends and a shift in the mix of homes sold. CAR officials expect prices to moderate further in February before rising again in the spring.
Impact of high rates and wildfires
High mortgage rates continued to suppress market activity. The average 30-year fixed mortgage rate stood at 6.96% in January, up from 6.64% a year ago. However, rates have been gradually declining in recent weeks, which could provide some relief to the market in the coming months, CAR noted.
The wildfires that swept through parts of Southern California in early January also contributed to the slowdown. Cities such as Malibu, Pasadena, and Topanga saw a steep drop in home sales, with transactions plunging nearly 70% in the last two weeks of the month compared to early January. In contrast, other parts of the state, excluding Los Angeles County, saw a slight 2% increase in sales over the same period.
Market trends
Regional trends showed mixed results. Four of California’s five major regions saw year-over-year growth in home sales, though at a mild pace. The Central Coast led the gains with an 8.3% increase, followed by Southern California (1.8%), the Central Valley (1.1%), and the San Francisco Bay Area (0.2%). The Far North region was the only area to post a decline, with sales dropping 11% from last year.
Housing inventory showed signs of improvement, with active listings increasing at the fastest annual rate in two years. The statewide Unsold Inventory Index, which measures the months needed to sell available homes at the current pace, rose to 4.1 months in January, up from 3.2 months a year earlier. More sellers appear to be listing their homes as they adjust to the reality that ultra-low mortgage rates from past years are unlikely to return soon.
Despite the current slowdown, industry experts remain cautiously optimistic. “While sales are expected to remain soft this month and next, it is encouraging to see an uptick in new listings as the market gears up for the spring homebuying season,” said CAR president Heather Ozur. “The improvement in supply conditions will offer buyers more options to choose from and allow some demand to be fulfilled as competition heats up in coming months.”
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