An increase in mortgage interest rates combined with a shortage of homes on the market suppressed home sales statewide in April, according to a report from the California Association of Realtors.
The number of homes sold statewide dropped 4.7% in April compared to the previous month and was 36% lower than a year ago. In the San Francisco Bay Area, the California Association of Realtors reported declines in all markets, with the overall regional sales volume 38.5% lower compared to April 2022. The sharp decline can be partially attributed to sales surging a year ago when many homebuyers tried to close transactions before mortgage rates climbed higher, according to the report.
In San Mateo County, April home sales were down by nearly half (49%) compared to April 2022 and were 11.8% lower from the previous month. Santa Clara County home sales dropped 44.8% compared to a year ago and dipped 10.9% from this past March.
Jordan Levine, senior vice president and chief economist for the California Association of Realtors, said home sales remained soft as the "lock-in effect" -- a term used to describe when homeowners choose to stay in their homes when they otherwise might have moved -- continued to tighten housing supply and keep would-be sellers from listing their homes for sale. This contributed to a 30% year-over-year drop in new statewide active listings, the largest drop since May 2020 when the pandemic shutdown took place.
“A surge in borrowing costs as mortgage rates surpassed 7% in late February and early March also contributed to the market weakness, as many transactions that opened in those two months were closed in April,” Levine said.
Median home prices see uptick
While April saw sales volumes drop, it also saw the median home price rise: For the first time in six months, the statewide median home price climbed above $800,00. From March to April, the median price increased 3% from $791,490 to $815,340.
April's statewide median price, however, still remains lower on a year-over-year basis for the sixth consecutive month, declining 7.8% compared to $884,680 in April 2022.
All major markets in California saw the median home price drop from a year ago, according to the report. The Bay Area experienced the largest price drop with the overall regional median value declining by 16.7%. Home prices in six out of nine Bay Area counties fell more than 10% year-over-year.
While San Mateo and Santa Clara counties' median home prices were still down compared to the same time last year, they were up by nearly 6% compared to this past March.
In San Mateo County, the April median sales price of $1.97M was an 18% drop from the median price of $2.4M in April 2022, but up 5.9% more than March's median price of $1.86M.
Santa Clara County's median sales price of $1.8M was 8.6% less than the median price of $1.97M in April 2022, and like San Mateo County, it was up 5.9% from $1.7M in March.
Jennifer Branchini, president of the California Association of Realtors, said the market is showing signs of getting more competitive.
"We’re seeing time on the market before selling down to 20 days in April from 33 days in January, and the share of homes sold above asking price double from 1 in 5 at the beginning of the year to more than 2 in 5 in April,” Branchini said.
According to data from MLSListings, Midpeninsula buyers in Palo Alto, Los Altos, Mountain View, Monte Sereno and Los Altos Hills are willing to pay over asking price. In Palo Alto, where April's median home price was $3.1M (down from $3.98M in April 2022), data shows that the sales-to-list price ratio was at 103%. (Anything over 100% indicates that a buyer purchased a home for over asking price.)
"Homebuyers are getting a little bit of a break as home prices are down compared to last year, but even with these declines, homes continue to retain their value," said Jim Hamilton, president of the Silicon Valley Association of Realtors "Inventory is staying low, but there continues to be strong demand in the region, Buyers are competing and still willing to pay over list price. They know a home in Silicon Valley, with all its amenities, has value."
Housing market forecast for 2023
Following the release of April's housing data, the California Association of Realtors. has revised its 2023 Housing Market Forecast and projects the number of single-family homes sold to reach 279,900 in 2023, a decline of 18.2% from the amount sold in 2022. While home prices in general are expected to improve in the second half of the year, the state median home price is projected to decrease 5.6% to $776,600 in 2023, down from the annual median price of $822,300 recorded in 2022. The updated statewide median price projection is an increase from the estimate of $758,600 forecast last October. The association also projects the 30-year fixed mortgage interest rate to average 6.3% for the year.
The Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.