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The number of homes sold in California in November dropped to the lowest level since the Great Recession in the early 2000s, according to a new report from the California Association of Realtors.
Statewide, the number of single-family homes sold last month fell to 223,940, a 7.4% drop from October and a 5.8% drop compared to the same time last year.
The statewide median home price dropped 2.2% from October but was up 6.2% from November 2022.
The California Association of Realtors attributes the drop in sales to higher borrowing costs, along with high interest rates and a limited supply of homes for sale.
“Elevated mortgage interest rates and a persistent shortage of homes for sale hindered home sales in November,” Melanie Barker. president of the association, said.
“With mortgage rates dropping to the lowest level in four months in recent weeks and the Federal Reserve indicating it plans to cut rates more than previously anticipated in 2024, more prospective homebuyers could re-enter the market early next year,” she said.
In San Mateo County, November home sales were up 10.2% year-over-year and down 5% from October. The November median home price of $1,805,000, was 1.3% higher than $1,782,500 a year ago and 14% less than $2,100,000 in October.
In Santa Clara County, home sales in November were 3.2% higher than last year and down 16.3% from October. The November median sales price for a single-family home was $1,717,500, up 7.3% from $1,600,000 in November 2022 and 4.8% lower than $1,805,000 in October.
“Though prices are relatively strong, and buyers are still paying over list price for most homes in both counties, we expect the market to continue soften in December, since it is traditionally a slow month due to the holidays. We also expect we’ll be going into the new year with fewer listings,” Jim Hamilton, president of the Silicon Valley Association of Realtors, said.
Jordan Levine, senior vice president and chief economist of the association, said while sales have been weak for the past several months, a tight supply of homes for sale is keeping home prices from falling.
“Going into 2024, the recent decline in mortgage rates, along with the upward momentum in home prices, could motivate more would-be sellers to list their homes for sale in the spring homebuying season.”
Levine, who was a guest speaker at the local trade association’s recent general membership meeting, told Silicon Valley Realtors that he expects the housing market to improve slowly due to better mortgage interest rates. Housing affordability problems, however, will continue due to high home prices. He indicated sales will continue to be a limiting factor due to the low housing supply and hyper-low interest rates that homeowners already have.
“We are going to be doing a little better than what the (Federal Reserve) would like to believe. It will not be 2008 all over again,” Levine said.
He said consumers sitting on sidelines are “misguided” if they expect interest rates to come down much. That 2%-3% mortgage interest rate is unlikely to happen again for a long time, if ever. Waiting is “wishful thinking” and even if rates come down, it won’t save them money. They would not get the equity they would have received had they bought a home sooner, and they would have to contend with stiffer competition and multiple offers, he said.
Sellers, on the other hand, need to be more strategic and manage their expectations. While transactions above $1 million are still pretty high, there is less buyer demand at every price point due to the higher mortgage rates.
“Tight inventory is the name of the game,” Levine said.
Two-thirds of homeowners have minimal motivation to move because they are locked in low rates. Then there is that one-third of the market with mortgages that are above the 4% interest rate.
Foreclosures are unlikely. Levine explained that unlike the Great Recession, most homeowners today have a lot of equity — 95% have at least 20% equity in their homes and nearly 90% of homeowners have at least 30% equity.
“The data can be your friend,” Levine told members. “The benefits of homeownership are well-documented. It’s about long-term benefits. You don’t get better off (by) not owning a home.”
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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