Data comparing February 2023 to the same time last year by the California Association of Realtors (CAR) last month reveal continued softness in California real estate markets with double-digit declines in sales across the state.
All regions paint a similar picture, with volume and prices dropping, and the unsold inventory index and median days on market increasing.
Existing home sales statewide are down 33.2 percent year-over-year, and median sales prices have fallen nearly 5 percent to $735,480, according to the association’s latest data.
While the statistics suggest general softness, “the market is very complicated, and the news that everything is down is not entirely true,” said Arvin Taali, president of Orange County-based Elixir Mortgage Lending. “There are areas that have seen an uptick since February.”
Specific sectors in Southern California remain resilient, according to Taali.
“Inventories in Orange County are tight,” he told The Epoch Times. “There are less listings, more cancellations, and investors, foreign money, and first-time home buyers are driving demand of entry-level homes.”
Regional Changes
All regions in the state, in terms of sales, were down by double digits ranging from -28.6 percent for the Central Valley to -39.4 percent for the Far North, which encompasses Butte, Lassen, Plumas, Shasta, Siskiyou, and Tehama counties.Napa Valley was one of the worst in terms of sales, reporting a decline of 43.3 percent. Other areas faring poorly were San Bernardino and Santa Barbara, down 41.6 and 40.2 percent respectively.
Other areas with significant declines in sales year-over-year were the Central Valley area of Glenn, down 65 percent; Lassen, in the Far North, down 73.9 percent and Mono, in Eastern Central California, down 80 percent.
Statewide, prices are down nearly 5 percent, with the region of the San Francisco Bay down the most at -19.2 percent and the city of San Francisco down nearly 23 percent.
San Francisco is unique in that demand has historically supported high prices, but the city was one of the first in the country to put restrictive COVID-19 measures in place and real estate experts note that sales have dropped precipitously since the restrictions went into effect, sliding another 33 percent from last year, according to data released by Norada Real Estate Investments—a real estate investment research firm headquartered in Laguna Niguel, California.
Other notable price declines include the area of Siskiyou, in the Far North region sharing a border with Oregon, which recorded a decline of 38.8 percent, the most according to the association statewide.
In terms of Southern California, overall, prices were down 2 percent and sales were down nearly 34 percent.
Orange County prices in February, compared to the same time last year, slid 8 percent and the number of sales were down 26 percent.
Los Angeles experienced price drops of 2.1 percent, while volume plummeted 34.1 percent compared to the prior year.
Los Angeles suffered the worst February monthly price drop, nearly seven percent compared to January, but values fell six percent annually.
Prices in Ventura were down 9.3 percent since February 2022.
These figures could be “attributed to slow down in the beginning of the year due to seasonality,” Oscar Wei, deputy chief economist for CAR, told The Epoch Times. “Typically, we see an upward trend in price in March.”
March data is expected to be released later this month.
With sales declining year over year, some analysts have suggested weather has been a mitigating factor, with storms pounding California this season, while others point to rising interest rates and the perception of a fragile economy impacting buying patterns.
In contrast to the declining price trend seen in parts of Southern California, San Bernardino, showed a 3.7 percent increase in prices for the year, though closed sales figures were down 41.6 percent.
San Diego showed a modest 1.5 percent price drop comparing February 2023 to the same month last year and a 6 percent increase compared to January.
Wei said San Diego’s short-term trend was a surprise, but Riverside and San Bernardino have historically offered more affordable housing, and hybrid work environments have allowed employees to expand the distance between home and work, so the growth there was more in line with expectations.
San Diego includes many higher-priced homes, and one variable potentially affecting the median price is the impact of high-dollar sales mathematically impacting the totals, Wei said.
Orange County’s housing market represents the most expensive in Southern California in terms of median price, at $1.159 million, according to the association’s statistics as of February 2023. Higher than average median incomes mean buyers can afford to pay higher prices, but recent economic developments are weighing on the market.
Financial Aspects
Rising interest rates are affecting borrowing costs, and recent layoffs affecting tech workers have disproportionately impacted the region.“The cost of borrowing affects everybody, but at the same time, when you have tech layoffs, certain areas may be affected,” Wei said.
The region’s technology sector has proven beneficial to the local economy, occupying office real estate space and bringing high-paying jobs to the area, but the industry is in flux with economic uncertainty this year.
“The tech industry has helped propel the Orange County real estate market in past years,” Mark Coffey, principal and managing broker at Orange County Commercial Real Estate, told The Epoch Times. But, he said, layoffs have hurt local tech and current local “residential markets are pummeled because of interest rate changes.”
In response to high inflation, the Federal Reserve has repeatedly raised interest rates over the past year, with a variety of consequences.
Banks faltered last month due to interest rate-related risk management principles, and analysts say they are concerned such could spread to more regional banks, warning tightness in lending hurts the mortgage market and makes it harder to purchase a home.
The potential for a recession later this year is also a recurring theme, with real estate experts saying lingering doubts are affecting purchasing decisions.
With the arrival of warmer weather and the end of the school year, industry analysts additionally say there is hope for renewed demand, based on seasonal sales data and traditional buying trends.
“April through August is the typical homebuying season, and whether lower interest rates will be the motivating factor, we’ll have to wait and see,” Wei, the CAR economist, said.
