In May, California home sales rose to the highest level in eight months, and the statewide median price remained above $800,000 for the second straight month, according to a California Housing Market Update report from the California Association of Realtors.
The San Francisco Bay Area continued to post the biggest sales lag (-23.8%) and price drop (-11.3%) of all regions in the state compared to the same time last year, but month-over-month sales and prices bounced back for most parts of the Bay Area in May.
While it appears that the market is making a rebound, experts caution not to expect a rapid recovery due to an ongoing imbalance between inventory and demand.
"The severe lack of inventory accounts for fewer home sales and recent price gains. There are more homebuyers than homes for sale," Jim Hamilton, president of the Silicon Valley Association of Realtors, said.
San Mateo County saw the number of homes sold in May drop 27.3% compared to the same time last year but rise 49.2% compared to the previous month of April.
The county's median home price in May was $2,075,000, a 7% drop compared to the median home price of $2,231,500 during the same time last year and a 5.3% increase from the previous month of April, which saw the median home price hit $1,970,000.
In Santa Clara County, May home sales were down 15% compared to the same time last year but escalated 41.4% above April's sales pace. The median sales price for a Santa Clara County home in May was $1,788,000, a 7.2% drop compared to the median home price of $1,927,500 during the same time last year and a slight dip of 0.7% from April's home median price of $1,800,000.
In both counties, the median amount of days homes stayed on the market dropped in May. Homes stayed on the market for an average of eight days in Santa Clara County and nine in San Mateo County, compared to 11 days last month.
"Many homeowners with low-interest mortgages, which they obtained a couple of years ago, are comfortable staying in place for the time being and are not wanting to sell, given higher interest rates today -- even if they feel they need an extra bedroom or larger yard for their growing family," Hamilton said. "On the other hand, demand by financially ready buyers competing for fewer homes for sale will likely continue to push prices upward and accounts for multiple offers that are still occurring in some places in our region."
The California Association of Realtors' report shows that a total of 289,460 single-family homes sold in California in May, a sales pace up 9.8% compared to the previous month's sales in April when 263,650 homes sold and down 23.6% compared to a year ago. California’s median home price of $836,110 in May increased 3% compared to April’s median price of $811,950. May's median home price, however, dipped 6.4% compared to the same time last year when the median price was $893,200.
“The bounce back in May’s home sales and prices (compared to earlier this year) shows the resilience of California’s housing market and is a testament to the value that consumers place on homeownership,” said Jennifer Branchini, president of the California Association of Realtors. “The housing market is stabilizing and even showing signs of improvement as competition is on the rise again; Nearly half the homes (on the market) are selling above asking price, fewer sellers are reducing listing prices, and homes for sale are going into pending status in just two weeks compared to more than 30 days early this year.”
Despite mortgage rates rising sharply since mid-May and peaking late last month at the highest point in six months, the number of pending sales recorded in May remained steady and only dipped slightly by less than 2% compared to the prior month. The consistent level of open-escrow sales, or sales that are not yet final, suggests that the California housing market will register closed sales in June at around 275,000, a level that falls between what was recorded in April and May.
For the first time since January 2022, the Federal Reserve made no rate change following the latest committee meeting. However, Jerome Powell, chair of the Federal Reserve Board, suggested that they are prepared to raise rates a couple of more times, or another 50 basis points this year to tame stubborn inflation. Interest rates have been moving sideways since the announcement but are expected to stay elevated longer than previously anticipated.
According to Jordan Levine, senior vice president of the California Association of Realtors, it's the imbalance between supply and demand that has continued to put upward pressure on home prices and nudge the median price up month over month since the beginning of the year.
“While home sales rose solidly in May, we don’t expect to see a rapid recovery because of the 'lock-in effect' that’s keeping prospective sellers with low-interest rate mortgages from listing their homes on the market and keeping inventory extremely tight," Levine said. "Consequently, we expect prices to continue to rise on a month-to-month basis for the next few months because of the shortage of homes for sale."
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.
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