Despite promising signs in home sales and employment in California, uncertainty in the banking arena has affected many economic areas, including the housing market.
Pressures in the financial system could cause smaller banks to tighten lending standards and may have an adverse effect on housing demand, according to a recent report from the California Association of Realtors (CAR).
At the same time, the Fed recently issued its ninth rate hike since March 2022, but it may be one of the last before the end of the year, said CAR. The promising news caused mortgage rates to dip for the second consecutive week, reaching their lowest level in a month, as mortgage applications increased for the third week in a row.
For the first time in four months, California home sales are above the 250,000-unit annualized sales pace, while February’s sales pace was up 17.6% on a monthly basis from 241,520 in January and down 33.2% from a year ago, said the CAR report.
Yet despite the third straight monthly improvement, sales of existing single-family homes in California remained below the 300,000-unit pace for the fifth consecutive month. A shift toward more home sales in the lower-price segments is expected to continue to further soften home prices, but with the availability of homes still very tight and housing supply conditions not expected to improve any time soon, prices could find bottom later this year as interest rates stabilize.
Meanwhile, home sales jumped 1.1% from January to a seasonally adjusted annual pace of 640,000 homes in February—the third straight month of growth for sales, new home sales remained 19.0% behind the same month of last year, CAR reported.
The uptick in sales pace in February accounted for 0.7% of the new home inventory, lowering the months of supply to 8.2, if the current sales pace holds.
According to the CAR report, “Builders are being cautiously optimistic however, despite mortgage rate volatility and economic uncertainty. The boost in builders’ confidence is likely attributed to the intensified market competition and solid price growth observed in recent weeks, and resulted from more buyers turning to the new home market as supply remains tight in the existing housing stock.”
