June 2023 Real Estate Outlook
According to a news release from the California Association of Realtors, California’s housing market rebounded in May. Home sales surged to the highest level in eight months. The statewide median price was above $800,000 for the second straight month.
“The bounce-back in May’s home sales and price shows the resilience of California’s housing market and is a testament to the value that consumers place on homeownership,” said C.A.R. President Jennifer Branchini. “The housing market is stabilizing and even showing signs of improvement as competition is on the rise again; nearly half of homes 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.”
Inventory dipped again in May, after a brief rise in April. Sales improved, but supply remained tight. We are seeing a similar trend in the Lake Tahoe and Truckee markets. Demand is high, while new listings are not coming onto the market fast enough to meet the demand. This is holding home values relatively steady.
Key metrics show that the median number of days it took to sell a California single-family home was only 17 days in May of 2023. Compare that to 11 days in May 2022 and the days on market figure is still low. While the number of sales are lower from last year, homes are selling faster because of a reduction in available inventory.
Lower inventory, not lower demand, is key to lower sales numbers, year over year.
Additionally, the statewide sales-price-to-list-price ratio* was 100 percent in May 2023, compared to 103.4 percent in May 2022. We were still seeing multiple offers last year at this time. On some popular listings, we’ve also had a few multiple offer scenarios in May and June 2023.
Last week, the FED kept interest rates unchanged for the first time after 10 straight hikes. They indicated that they needed time to gauge the impact of higher borrowing costs, and how this is affecting the economy.
According to Freddie Mac, the current 30-year fixed-rate mortgage is averaging at 6.67%. Many potential homebuyers are taking advantage of the rates, which have come down since their high point at 7%. The FED chairman indicated on Wednesday that they may still need to raise rates in the future to combat inflation.
“Mortgage rates slid down again this week but remain elevated compared to this time last year,” said Sam Khater, Freddie Mac’s Chief Economist. “Potential homebuyers have been watching rates closely and are waiting to come off the sidelines. However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.”
While many people were predicting that interest rates would stall the real estate market, that is clearly not happening at this time.
Last week, the 30-year fixed rate mortgage was at 6.69%. As we move deeper into the year, comparing last year’s mortgage rate of 5.81% to today's rate, doesn't reveal a stark difference. Even while buyers are growing more comfortable with the higher mortgage rates, inventory levels are just not increasing to meet the demand.
If you are thinking of listing your home for sale, this is a great time to do so. Contact me today for a free property analysis of your home.