A recent analysis by the Public Policy Institute of California (PPIC) revealed that the state added 677,000 housing units over the past six years, even as its population grew by only 39,000. Despite this increase in housing, the market remains tight. Owner vacancy rates dropped from 1.2% to 0.8%, while rental vacancies stood at just 4.3% in 2024, well below the national average of 5.9%.

“The state has made some headway in adding housing units, but it’s been playing catch-up for so long that the progress hasn’t been enough to significantly ease the market,” said Joel Berner, senior economist at Realtor.com.

California’s housing shortage remains a major issue, with the state needing an estimated 2.5 million more homes, according to a 2022 estimate by the state’s housing agency. PPIC’s report also highlights a demographic shift that’s influencing the market, as household sizes have decreased over time. Between 2019 and 2024, the state lost 82,000 households with children and gained 722,000 households without them.

“Fewer people in each household means we need more households overall,” Berner explained.

The aging population of California is also contributing to this trend, with 16.5% of the state’s population now 65 or older, a figure projected to rise to 24.9% by 2050.

In response, homebuilding has picked up, with accessory dwelling units (ADUs) becoming more common. ADUs are secondary living units on the same property as a primary home, and California has encouraged their construction through policy changes aimed at reducing local restrictions.

“The state has made notable progress in encouraging ADU construction, which should be recognized,” Berner said. “These units are playing an important role in addressing the housing shortage where it’s most needed.”

While these efforts show progress, they haven’t fully addressed the crisis. New homes continue to be quickly absorbed, and vacancy rates remain low. Berner pointed out that despite California housing 11.5% of the U.S. population, the state only accounted for 7.3% of newly permitted housing units last year. “The pace is still not fast enough,” he said.

PPIC’s analysis also noted that household formation among young adults has risen, suggesting more younger residents are starting their own households. However, the state will need more affordable housing to allow these residents to take that next step.

Of the 1.2 million housing units planned for California, only 712,000 are designated for moderate-income or lower households, which is about half of what is necessary to meet demand, according to Realtor.com. This gap could pose a significant challenge moving forward.

The post California Housing Market Faces Slow Progress Despite Increased Inventory appeared first on The Hemet & San Jacinto Chronicle.

Although home prices increased, more listings are finally coming onto the market, giving cash-strapped home buyers more options.

What is happening?

In May, average home prices across the six-county region rose nearly 1% from April to $875,409, according to data from Zillow. It was the third consecutive month that prices hit a record and values are now 9% above May 2023 levels.

Why are home prices rising?

Simply put, there are too few homes for sale in Southern California for all the people who want to buy here.

Economists and real estate agents say the long-running problem was made worse after mortgage rates surged in 2022.

At first, home prices fell as buyers pulled away and the inventory swelled. But prices started rising again last year as homeowners increasingly chose not to sell, unwilling to give up rock-bottom mortgage rates on loans taken out before and during the pandemic.

The pullback among sellers became so prevalent that it even got its own name: the seller strike.

What is happening with inventory?

Things are improving. As interest rates stay higher for longer, more homeowners are deciding to get on with their lives and list their home for sale, deciding additional space, a new job or other factors are more important than keeping a 3% mortgage.

In April, most Southern California counties saw the total number of homes for sale increase for the first time since the first half of 2023.

Last month, inventory jumped again. In Los Angeles County, total listings were 13% higher in May compared with a year earlier; Orange County rose by 6%; in Riverside County, 14%; San Bernardino County, 15%; Ventura County, 18%; and San Diego County, 30%.

“That’s a very positive development,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate. “We have just been incredibly short on supply.”

If I a want to buy a home, what does the inventory increase mean for me?

Well, at the most basic level, there will be more options from which to choose.

Inventory is still very low historically so don’t expect your home search to be a breeze, but it could mean fewer bidding wars and an easier time getting into a house.

Gabriel said the inventory increase probably isn’t enough to send home prices down, but, if the trend holds, home prices should rise less than they are today.

Mike Simonsen, founder of real estate data firm Altos Research, said sellers are already more likely to trim their list prices than last year.

He doubts that overall values will turn negative this year and, like Gabriel, expects only slowing appreciation in the L.A. area. But that could change in 2025.

“If rates are still in the 7s, prices flat or down is a real scenario,” Simonsen said.

On the other hand if rates noticeably drop, Simonsen said, demand is likely to pick up more than inventory, setting the stage for home prices to rise even faster than they are now.

The post Southern California prices are at a record. Could relief be on the way? appeared first on The Hemet & San Jacinto Chronicle.