According to the latest report released by the California Association of Realtors (C.A.R.), the housing sales and prices in California for February of this year saw an increase compared to the previous month due to the decline in mortgage rates. The association’s economists believe that the uncertainty in the Middle East situation may lead to a slight cooling in the California housing market in the short term, with a gradual return to normalcy expected in the months of May and June.
The C.A.R. report indicates that in February of this year, the seasonally adjusted annualized sales of existing single-family homes in California were approximately 274,800, representing a 7% increase from January. However, the seasonally adjusted annualized sales volume has been below 300,000 for the 41st consecutive month, indicating a continued softness in the California real estate market over the past few years.
In terms of prices, the average median home price in California for February was $833,700, a 0.9% increase from January. Jordan Levine, Senior Vice President and Chief Economist at C.A.R., mentioned that once the interest rates stabilize, despite affordability challenges and economic uncertainties, spring prices may continue to rise.
How will the current Iran war and Middle East situation impact the California housing market? Oscar Wei, Deputy Economist at C.A.R., told the media that the impact of the Middle East situation on California real estate depends on factors such as the duration of the war and people’s attitudes and coping abilities towards it.
Many believe that the war will not last long. If the conflict only lasts a few weeks, the California housing market may experience a cooling in April as people opt to wait and observe in the short term. Mortgage rates may not decrease during this period, affecting people’s home buying decisions. However, by May and June, the market may return to normal.
If the war persists, rising oil prices and inflation could lead to an increase in mortgage rates unless economic recession forces rate cuts. Despite high rates affecting buyers, the actual impact depends on people’s acceptance of rate changes. While mortgage rates dropped to 6.05% in February, they rose to 6.4% by March 19, still lower than the 7% in April of the previous year.
San Diego real estate top broker, Gong Zhu Yun, stated that “location” greatly influences the real estate market. In his experience, properties in sought-after school districts favored by the Chinese community, such as those with zip codes 92130 and 92129, remain in high demand. Some houses in the 92130 zip code, priced over $2 million, were sold in just 4 days, with some even selling for more than $200,000 above the asking price. However, properties in less desirable school districts tend to stay on the market longer and experience more price reductions.
He mentioned that May to August is typically the peak season for real estate transactions, with an expectation of more homes being listed. Sellers range from retirees downsizing to those relocating to different states for work or other reasons.
Zhu Yun believes that while the uncertainty of the Middle East war may have some impact on the San Diego real estate market, it is not expected to significantly affect the highly desired properties in good school districts favored by the Chinese community.
He pointed out that San Diego’s thriving tech companies have driven job growth and income levels. Even the lowest hourly wages exceed $17; although prices are rising, the demand for housing remains high, leading to continued high prices in San Diego, inching closer to one of the most expensive areas in California, San Jose. The median price for a single-family home in San Jose exceeds $2 million.
C.A.R. data shows that in February, the average number of days for a home to be sold in California was 29. Homes were sold at 0.7% lower than the asking price (as opposed to 2% lower last year), with a median price per square foot at $424.
On the other hand, many existing homeowners still have historically low locked interest rates, resulting in reluctance to sell their homes during times of interest rate fluctuations, keeping housing inventory relatively tight.
In terms of regional breakdown of home transactions in February, compared to the previous year, the Central Coast and San Francisco Bay Area in California saw the highest growth in sales volumes at 6.2% and 4.0% respectively. Meanwhile, the Far North region of California witnessed a 2.9% decrease, with Southern California experiencing an average decline of 0.6%.
Among the seven counties in Southern California, Ventura, San Diego, and San Bernardino had increased sales volumes compared to the previous year, with increases of 7.3%, 4.6%, and 0.5% respectively. On the other hand, Los Angeles, Orange County, and Imperial County saw decreases in home sales volumes by 0.3%, 3.6%, and 10.4% respectively. Median prices for single-family homes within the same period dropped by 1.1% to $842,660 in Los Angeles, decreased by 2.3% to $1,432,500 in Orange County, and increased by 1.0% to $1,050,000 in San Diego County.