June 21, 2023 – California’s housing market rebounded in May, with home sales reaching their highest level in eight months and the statewide median home price surpassing $800,000 for the second consecutive month. The market showed resilience and signs of improvement, with increased competition and decreased price reductions. However, the tight supply of homes continues to put upward pressure on prices.
California Housing Market Rebounds with a Flourish, Surpassing $800K Median Price Mark Again
The California housing market made a stunning recovery in May, with home sales reaching their highest level in eight months. In addition, the statewide median home price climbed above $800,000 for the second consecutive month, signaling a solid resurgence in the market. According to the California Association of REALTORS® (C.A.R.), existing single-family home sales soared to a seasonally adjusted annualized rate of 289,460 in May. This figure represents the total number of homes sold during the year if the May pace were maintained. While sales were down 23.6 percent from May 2022, they jumped an impressive 9.8 percent from April, giving a much-needed boost to the market.
Jennifer Branchini, a Bay Area REALTOR® and C.A.R. President, expressed her enthusiasm about the bounceback, stating, “The housing market is stabilizing and even showing signs of improvement as competition is on the rise again.” She pointed out that nearly half of the homes were sold above the asking price, indicating strong demand. Sellers are also becoming more confident, with fewer price reductions and homes going into pending status within just two weeks, a significant improvement compared to earlier this year.
Median Home Price Hits New Heights
California’s median home price reached a remarkable $836,110 in May, marking a 3.0 percent increase from April. This steady upward trend reflects the tight housing supply and a higher number of high-end homes sold. Although the median home price experienced a year-over-year decline of 6.4 percent for the seventh consecutive month, it stabilized. However, experts anticipate further negative annual price changes as interest rates are expected to remain high in the third quarter of 2023.
Supply and Demand Imbalance Persists
Despite the rise in mortgage rates, pending sales remained steady in May, only dipping slightly compared to the previous month. The shortage of available homes for sale has created an imbalance between supply and demand, putting upward pressure on prices. C.A.R.’s Chief Economist, Jordan Levine, acknowledged the ongoing challenge: “Even with reduced homebuyer demand, California still has more homebuyers than homes to put them in.” Levine expects prices to continue rising in the coming months due to the scarcity of inventory.
In terms of regional sales performance, all major regions experienced less than 24 percent declines compared to the same month in the previous year. The San Francisco Bay Area had the most significant drop at 23.8 percent, followed by Southern California and the Far North. However, the Central Coast and Central Valley fared better, with declines of 17.3 percent and 20.0 percent, respectively. County-level data revealed that most areas declined sales, with Mariposa, Siskiyou, and Mendocino experiencing the steepest drops.
Stabilizing Home Values
Despite the market challenges, there are positive signs indicating the stabilization of housing values. Several counties recorded an increase in median home prices compared to the previous year, while a significant number of counties saw a month-over-month price improvement. The encouraging trend suggests that the market gradually finds its balance as the home-buying season progresses.
Inventory Levels and Mortgage Rates
Housing inventory in California dipped in May after a brief rebound in April, as improved sales outpaced supply. The unsold inventory index declined 16 percent month-over-month, suggesting a potential minor inventory improvement in the coming month. However, this change would primarily result from shifts in demand rather than an increase in supply. On the other hand, mortgage rates have been rising but are expected to remain elevated longer than initially anticipated.
The California housing market showcased its resilience in May, with robust home sales and a rising median price. Despite ongoing challenges related to supply and mortgage rates, the market is showing signs of improvement, instilling optimism among industry professionals and homebuyers alike.
Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state and represent statistics of existing single-family detached homes only. County sales data is not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed by a relatively small share of transactions at either the lower end or the upper end. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. The change in median prices should not be construed as actual price changes in specific homes.
*Sales-to-list-price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its original list price and is expressed as a percentage. A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.
**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property. It is calculated as the sale price of the home divided by the number of finished square feet. C.A.R. currently tracks price-per-square foot statistics for 50 counties.