Home prices in California have fallen by 18 percent from their all-time high in May 2021. According to data from the California Association of Realtors, the median home price in California fell to $735,480 in February, down from its peak of $900,000. Although prices dipped 2.1 percent from the previous month, sales numbers have ticked up for the past three months.
However, the number of home sales remains concerning. In February, Californians bought 284,010 homes, which was a 17.6 percent increase compared to January. But sales were still off by 33 percent from the previous year, marking the 20th consecutive year-over-year sales decline. Furthermore, it was the third-slowest-selling February and the 27th-slowest month for sales overall since 1990.
A Brief Window of Opportunity for Homebuyers
The recent drop in home prices and interest rates created a window of opportunity for homebuyers to get into the market. Jennifer Branchini, president of the state Realtors’ association, said that “a brief interest rate reprieve and softer home prices during January created a window of opportunity for homebuyers to dip their toes into the home-buying waters, which helped boost home sales to the highest level in five months.”
However, Jordan Levine, the association’s chief economist, pointed out that “any decline in rates is not likely to be sustainable since inflation remains high, and the Federal Reserve is willing to take some calculated risks in order to keep inflation under control.”
The 18 percent drop in home prices from their peak last May varies when compared to a 10-month plunge during two price peaks in 1991 and 2007. In 1991, prices fell 6 percent in 10 months, with losses that grew to 20 percent over 69 months. In 2007, prices fell 30 percent over the same period, with losses that grew to 59 percent in 21 months.
Multiple brokerage reports indicate that home sales have fallen more than 35 percent in the last year in Los Angeles County.
Conclusion
California’s housing market has been experiencing a period of uncertainty in recent times. While the falling home prices may offer some relief to homebuyers, the continuing decline in sales numbers is a concerning trend. Despite the window of opportunity created by falling interest rates, the uncertainty of inflation remains a cause for concern. Californians will have to keep an eye on the market and make informed decisions about buying and selling homes in the current climate.
