California’s median home price reached a new high in May, while home sales retreated both on a monthly and annual basis, wiping out most of the gains posted for the year, the Arcadia Association of REALTORS® recently said.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 409,270 units in May, according to information collected by the California Association of REALTORS® from more than 90 local REALTOR® associations and Multiple Listing Services (MLS) statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
May’s sales figure was down 1.8 percent from the revised 416,750 level in April and down 4.6 percent compared with home sales in May 2017. May marked the first year-over-year sales decline in four months and the lowest sales level in more than a year.
“The softening in May home sales was due in part to the spike in interest rates in mid-April, when the 30-year fixed mortgage rate jumped 20 basis points in just one week to reach the highest level since 2014,” said AAR President, Margaret Garemore. “Homebuyers may have postponed escrow closings to wait out the effects of the rate surge. Additionally, the specter of rate increases earlier in the year may have pulled sales forward into the first quarter, which resulted in the subpar performance in the last couple of months. Looking ahead, higher mortgage rates and elevated home prices will heighten affordability constraints that will likely temper the housing market in the coming months.”
For the first time in 11 years, the statewide median home price surpassed its previous peak price of $594,530. The May statewide median price was $600,860, up 2.8 percent from a revised $584,460 in April and up 9.2 percent from a revised $550,230 in May 2017. The year-over-year price growth pace was the highest rate of growth since May 2014.
The statewide median price per square foot rose to $286 in May, the highest figure since November 2007; and marks “real” growth in home values rather than a shift toward sales of larger or higher-end homes. However, with the Bay Area outperforming the rest of the state, there is undoubtedly some pressure on the median price as the Bay Area made up a larger share of home sales.
“As we predicted last month, California’s statewide median home price broke the previous pre-recession peak set in May 2007 and hit another high as tight supply conditions continued to pour fuel on the price appreciation fire,” said AAR CEO Andrew Cooper. “With inventory starting to show signs of improvement, however, home price appreciation could decelerate in the second half of the year, especially since further rate increases are expected to hamper homebuyers’ affordability and limit how much they are willing to pay for their new home.”