California homebuyers need to be encouraged by the fact that prices in three major California real estate markets have fallen below their springtime peak, even though housing values are still very high from pre-pandemic times.
Case-Shiller confirms that bargains exist in California, providing modest relief for those with tight budgets who dream of homeownership. The prices in San Francisco are the highest among the 20 cities that this math tracks.
The only annual loss among the 20 was the 14% drop in Bay Area values between May 2022-2022. They are down 2% over 12 month. Although prices are at a 17 month low, there is still a 26% increase over three years.
San Diego was the No. 3 price drop – down 10% from May’s record high, but up by 5% over the past 12 months. Although November’s pricing was the lowest in 10 months, shoppers are still navigating a market with a 46% increase in three years.
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Prices in Los Angeles and Orange County are down 7% compared to the May top – No. 6 drop. The prices fell to a nine month low, but are still up by 4% over twelve months and 36% over three years.
Rising mortgage rates last year are another challenge for house hunters. The pandemic era was marked by historically low mortgage rates that inflated values.
Rates rose from 3.45% to begin 2022, rising up to 6.9% in October, effectively reducing borrowing power. According to the California Association of Realtors index, California single-family home sales fell to a 16 year low due to affordability problems.
There has been some rate relief in January with home-loan rates falling to 6.27%. Is this a sign of more affordability or a way to increase prices? It remains to be seen.
Crash, correction, or chill?
What does pricing suggest about the next twist in the house hunting process?
Crash? This argument would focus only on August to November, when all 20 U.S. market suffered month-to-month losses. Since 1991, there had been only 13 instances of across-the-board falls.
The last time there was a losing streak this long was in February 2009. This was back in the Great Recession’s bubble bust.
Or is it a simple correction? CoreLogic’s December median selling prices will show that L.A. prices have fallen 10% from their April peak, while O.C. is still at its highest. Prices are now down 11% from May’s peak.