Here’s the lowdown:

• Sales Slump: The California Association of Realtors® (C.A.R.) reported a seasonally adjusted annualized rate of 262,050 home sales in August – a 6.3% drop from July and the 23rd consecutive month below the critical 300,000 mark.
• Price Plateau: The median home price in California plateaued at $888,740, a negligible increase from July’s $886,560. While still a 3.4% jump from August 2023, it’s the smallest year-over-year gain since September last year.
• Interest Rate Rollercoaster: Though interest rates dipped to their lowest since spring, buyers seem hesitant. However, the Federal Reserve’s signal to potentially lower rates further could rekindle buyer enthusiasm.

Key Factors Influencing Predictions of No Possible Housing Crash in the California

• Stricter Lending Standards: According to the California Association of Realtors (C.A.R.), unlike the loose lending practices that fueled the 2008 housing bubble, today’s stricter regulations make it much more difficult for unqualified borrowers to obtain a mortgage. This helps prevent a similar scenario from unfolding again, where a large number of homeowners default on their loans, leading to a sharp decline in home values. Potential homebuyers must now go through a more rigorous qualification process, ensuring they have the financial stability to handle mortgage payments. This reduces the risk of widespread defaults, which could trigger a housing market crash.
• Low Inventory, High Demand: The supply of houses for sale in California has been consistently lagging behind buyer demand for quite some time. This imbalance is expected to continue in 2024, putting upward pressure on housing prices and preventing a significant drop. With more buyers competing for a limited number of houses, sellers are in a strong position and can command higher prices. This lack of inventory is a major reason why a crash is unlikely.

When Will the Housing Market Crash Again in California?

According to C.A.R.’s 2024 California Housing Market Forecast, the market will experience a significant recovery in 2024, as mortgage rates are expected to decline and more homes become available for sale.

The forecast predicts that existing single-family home sales will increase by 22.9 percent in 2024, reaching 327,100 units, up from the estimated 266,200 units sold in 2023. The 2023 figure represents a 22.2 percent drop from the 342,000 units sold in 2022, which was a record-breaking year for the market.

Home Prices Will Rise in 2024

The median home price, which is the point at which half of the homes sold for more and half sold for less, is also projected to rise by 6.2 percent in 2024, reaching $860,300, up from the estimated $810,000 in 2023. The 2023 figure reflects a 1.5 percent decrease from the $822,300 recorded in 2022, which was also a historic high for the state.

The forecast attributes the price growth to the persistent housing shortage and the competitive market conditions that will continue to put upward pressure on prices.

Factors Behind the Rebound in 2024

The forecast also provides some insights into the factors that will shape the market dynamics in 2024. One of the main drivers of the market recovery will be the lower mortgage interest rates, which are expected to average 6 percent in 2024, down from the projected 6.7 percent in 2023.

The lower rates will make borrowing more affordable and attractive for homebuyers, especially first-time buyers who were squeezed out by the high rates and prices in the previous years.

Another factor that will boost the market activity will be the increase in housing supply, which has been a major challenge for the state for many years. The forecast expects that more homes will come on the market in 2024, as sellers who have overcome the “lock-in effect” will take advantage of the favorable market conditions and list their homes for sale.

The “lock-in effect” refers to the phenomenon where homeowners are reluctant to sell their homes because they fear they will not be able to find or afford another home in their desired location.

The forecast also notes that housing affordability will remain a key issue for the market, as only 17 percent of households will be able to afford a median-priced home in 2024, unchanged from the projected figure for 2023. This means that many potential buyers will be priced out of the market or have to look for alternative options such as renting or moving to more affordable areas.

So, is the California dream of homeownership turning into a crash nightmare?

Not quite. While a market correction is on the cards, a full-blown crash seems unlikely. Here’s why:

• Inventory Inches Up: Although still tight, housing inventory is slowly increasing, offering buyers more options and potentially easing price pressures.
• Affordability on the Horizon: Anticipated lower interest rates promise a much-needed boost to affordability, potentially luring hesitant buyers back into the market.

The post When will the housing market crash again in California? appeared first on The Hemet & San Jacinto Chronicle.

The abnormal scarcity — compounded by the region’s long-running underproduction of housing — emerged when homeowners chose not to sell and give up pandemic-era mortgage rates. The so-called seller strike helped pushed home values to new records, despite rising borrowing costs.

Now the inventory picture might be changing.

“It’s getting a little bit better,” said Eneida Contreras, a Compass real estate agent who specializes in the San Fernando, Santa Clarita and Antelope valleys.

In April, the number of homes listed for sale in most Southern California counties rose from the same month a year earlier, according to data from Zillow.

Los Angeles, Riverside, San Bernardino and Ventura counties turned positive for the first time since the first half of 2023, each recording an increase of at least 5%.

Orange was the only county to see a decline, while in San Diego, inventory has risen for two consecutive months and is 18% above what it was a year ago.

To be sure, the availability of homes remains at historically low levels. But as it rises, it opens the possibility that prospective buyers will have an easier time making the largest purchase of their lives.

Jordan Levine, chief economist with the California Assn. of Realtors, said more homes are coming onto the market because owners are increasingly accepting that the new normal is interest rates in the 6%-7% range.

As people get married, divorced and have children, the “benefit of the low rate starts to be outweighed by having a house that doesn’t work,” Levine said. “Ultimately, these are people’s homes, too, and they are not just straight-up investments.”

Levine said he expects inventory levels to increase and home prices to be lower than they would have been if inventory continued to shrink. However, he and other experts said home prices are unlikely to decline. That’s because though more owners are coming to terms with high rates, many will likely choose to keep their sub-4% mortgages — a phenomenon known as the lock-in effect.

Other factors are at play. The economy is growing, and while most Southern California households can’t afford to buy, there’s a sizable population of techies, Hollywood types and other white-collar workers who can funnel excess cash into large down payments that offset high mortgage rates.

“The current level of inventory rise — which is a little bit, but not a lot — is likely to slow price appreciation but not turn it negative,” said Mike Simonsen, founder of Altos Research, a real estate data firm.

The rise in inventory is providing opportunities for buyers with means, but the market is still tough.

Interest rates are above 7%, and even if home prices rise at a slower pace, they will set records.

In Los Angeles County, the average home price in April was $890,516, an increase of 1.4% from March and surpassing the previous record, set in June 2022.

The six-county Southern California region climbed above its 2022 average home price record in March. It set another all-time high last month, reaching $875,388.

If mortgage rates noticeably decline, the lock-in effect could lessen and bring more homes onto the market. Falling mortgage rates would also immediately make housing more affordable.

Whether falling rates provide much relief is another question. Lower borrowing costs may bring a flood of additional buyers who quickly gobble up new listings and supercharge price growth.

“Building more housing is really what is going to break that cycle,” said Nicole Bachaud, a senior economist with Zillow.

According to the latest forecast from the Mortgage Bankers Assn., rates will remain high but will drop to 6.4% by the end of 2024.

Carol Otero of Rodeo Realty is among the Los Angeles agents seeing an increase in inventory. She estimated that the number of homes for sale in some San Fernando Valley neighborhoods has at least doubled in the past few weeks.

Buyers are eager.

Last Friday, Otero listed a four-bedroom home in Northridge. She said she has received six offers, all above the $869,000 asking price.

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