The lowest mortgage rates in five months improved California home sales in February for the first time in four months, according to the California Association of Realtors. Meanwhile, the state's median price was at the lowest level in two years.
Closed sales of existing, single-family homes in California totaled 284,010 in February 2023, rising 17.6% from 241,520 in January. Home sales were down 33.2% from February 2022, when a revised 425,120 homes were sold.
"A brief interest rate reprieve and softer home prices during January created a window of opportunity for homebuyers to dip their toes into the homebuying waters," said C.A.R. President Jennifer Branchini. "However, with the availability of homes remaining extremely tight and housing supply conditions not expected to improve any time soon, prices should find bottom later this year as interest rates stabilize."
California's median home price of $735,480 in February declined by 2.1% from January's $751,330, and was down 4.8% year-over-year from $772,180 in February 2022. With home prices expected to remain soft throughout the rest of 2023, C.A.R. expects the market will see larger price drops moving through the spring homebuying season.
C.A.R indicates the uncertainty in the tech sector was partially responsible for the home price declines. "The recent failure of a handful of tech-focused banks caused an unexpected drop in interest rates, which could offer an opportunity in the near term for homebuyers who have been waiting on the sidelines to lock in a lower rate," said C.A.R. Vice President and Chief Economist Jordan Levine. "However, any decline in rates is not likely to be sustainable since inflation remains high, and the Federal Reserve is willing to take some calculated risks in order to keep inflation under control."
At the local level, sales in San Mateo County declined 17.2% from a year ago, but saw a gain of 19.4% from January 2023. Sales in Santa Clara County were down 37.9% from February last year, but recorded a month-over-month increase of 13.5%.
"With the lower interest rates, we saw month-over-month sales gains in February in the Silicon Valley region, and home prices in the region continue to hold their own," said Jim Hamilton, president of the Silicon Valley Association of Realtors. "According to MLSListings, the February sales-to-list price ratio, which reflects the negotiation power of homebuyers and home sellers under current market conditions, was in the range of 100 to 101 percent in both counties. This indicates buyers are paying equal to or more than asking."
San Mateo County's February median price was $2,080,000, down 1% from $2,100,000 in February 2022 and 28% higher than the median of $1,625,000 in January 2023. Santa Clara County's February 2023 median price was $1,500,000, 17.6% lower than $1,820,000 in February last year, and 2% below January 2023's median price of $1,530,000.
According to Freddie Mac, the 30-year, fixed-mortgage interest rate averaged 6.26% in February, far below the peak of 7% a few months ago. "With the expectation that the Fed will continue to raise interest rates in an effort to tame stubborn inflation, the lower rates create a window of opportunity for buyers," added Hamilton.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 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.
Variations of this article have appeared in local area newspapers.
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