California had a lot working in its favor heading into 2017, but the Federal Reserve’s recent decision to raise interest rates could start to change that.
The Golden State recorded an increase in home sales between December and January this year, which is a major feat given that this hasn’t happened since 2012.
But, according to the latest existing-home sales report from the California Association of Realtors, California home sales and median price backpedaled on a monthly basis in February. However, both still showed strong gains on a yearly basis.
CAR, which puts out the report on a monthly basis, uses information collected from more than 90 local Realtor associations and MLSs statewide to create the report.
Existing, single-family home sales totaled 400,500 in February on a seasonally adjusted annualized rate, down 4.7% from January and up 4.9% from February 2016.
Despite the decline, this marks the 11th consecutive month closed escrow sales of existing, single-family detached homes in California remained above the 400,000 benchmark.
“While it’s encouraging to kick off the year with back-to-back yearly sales increases, moving forward, California’s housing market could lose steam in the long term as the Fed begins to adjust the federal funds rate,” said CAR President Geoff McIntosh. “In the short term, however, the specter of higher interest rates may push buyers off the fence to purchase a home before mortgage rates move even higher.”
If Californians do choose to buy, home prices are getting slightly more affordable. The median price of an existing, single-family detached California home fell below the $500,000 mark for the second straight month. Overall though, home prices remain seasonably strong.
The median price was down 2.2% from $489,680 in January to hit $478,790 in February.
“Despite a strong sales start for the year, the housing supply shortage in California continues to cast doubt on whether the sales momentum can be carried forward into the spring home-buying season,” said CAR Senior Vice President and Chief Economist Leslie Appleton-Young. “The number of active listings has been on a downward trend for the past 20 months and has shown no signs of improvement.”
As it stands, CAR’s unsold inventory index, which measures the number of months needed to sell the supply of homes on the market at the current sales rate, came in at 4 months in February. This is up from 3.7 months in January. The index stood at 4.7 months in February 2016.
“As we move into the spring home-buying season, we should see a marginal increase in listings, which will be offset by a pickup in sales. The inventory level is not likely to get better in the upcoming months,” said Appleton-Young.