SUMMARY
The latest housing market report indicates that California’s real estate market is still under pressure, with an uptick in mortgage rates threatening to impact home sales. Sales of existing single-family homes have taken a step back, while mortgage applications have also decreased. Despite this, residential construction, particularly for single-family homes, has picked up as builders grew less pessimistic towards the market. The labor market continued to grow, although growth slowed considerably in March, especially in California. Homeowners have gained significant wealth over the last decade, with middle-income homeowners accumulating $122,100 in wealth as their homes appreciated by 68%.
California’s housing market shows modest growth despite rising mortgage rates and tight inventory
California Housing Market Update: Week Ending April 29, 2023
The California housing market remains steady as buyers navigate higher mortgage rates and a tight inventory. Here are the latest developments:
The uptick in Mortgage Interest Rates Impacts Home Sales.
The recent increase in mortgage interest rates is affecting California home sales, which remained essentially flat in March. The housing market remains competitive, with homes selling quickly and at higher prices. However, inventory continues to tighten, with fewer new listings failing to replenish the available supply. The statewide median home price increased by 7% monthly, indicating solid demand. Nevertheless, the tight inventory will prevent a rapid rebound in sales.
Mortgage Application Activity Declines
Mortgage application activity decreased 8.8% for the week ending April 14, 2023, due to the increase in mortgage interest rates. Demand for home purchases declined, as did refinance activity. Home prices have softened somewhat, but rates remain above 6%, making affordability a significant issue for potential homebuyers. With a limited inventory of homes, buyers will be more selective about when to act.
Single-Family Construction Picks Up
Single-family construction picked up in March, with builders growing less pessimistic about the market. Builder sentiment improved for a fourth consecutive month, and building permits rose 4.1% in March, suggesting an uptick in new construction in the months ahead. On the other hand, Multifamily construction declined, overshadowing the progress made in single-family construction. Despite the decline, multifamily starts advance robustly, recording an annual unit pace higher than in 2022.
Employment Expands, But Growth is Slowing
Employment is expanding in most states, including California, but growth is slowing. Non farm payrolls rose in 36 states and contracted in 14 in March. California added less than half of the net jobs over the month compared to February. Strong payroll growth in January bumped California’s monthly average job gains to 32,700 for the first quarter of this year. However, jobless claims inched up to 245k last week, providing evidence of other labor market softening ahead.
Homeowners Accumulate Wealth
The typical middle-income homeowner accumulated $122,100 in wealth as their homes appreciated by 68% in the last ten years, according to a new housing report by the National Association of REALTORS®.
Homeowners saw their debt drop by 21%, and many could refinance and lock in a rate lower than 4%, helping them save thousands of dollars in interest rates over the life of the loan. While disparities exist between different income levels and race/ethnic backgrounds, all homeowners accrued a minimum of $98,900 in wealth from home price appreciation over the last decade.
In conclusion, the California housing market faces some challenges with higher mortgage rates and a tight inventory, but overall, demand remains solid, and builders are becoming more optimistic. The labor market is growing, albeit at a slower pace, and homeowners continue to accumulate wealth.
Housing Market Analysis – April 29, 2023
