California’s housing market backpedaled in July on an annual basis for the third consecutive month as higher interest rates and rising home prices eroded housing affordability and dampened demand, the California Association of Realtors said Thursday.
San Diego was a bright spot, however, with sales increasing 0.7 percent in July after two months of declines.
Closed escrow sales of existing single-family detached homes in California totaled a seasonally adjusted annualized rate of 406,920 units in July, according to information collected by CAR from more than 90 local Realtor associations and multiple leasing services statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
July’s sales figure was down 0.9 percent from the revised 410,800 level in June and down 3.4 percent compared with home sales in July 2017 of 421,460, CAR said in a statement.
“In the midst of the peak home-buying season, high home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,” said CAR President Steve White. “Some of the reluctance by buyers appears to be driven by fears that the market may be peaking. Additionally, the lack of a federal tax incentive for homeownership could be at play given that much of the weakness is in the lower-priced, first- time buyer segment of the market.”
The statewide median home price decreased to $591,460 in July. The July statewide median price was down 1.9 percent from $602,760 in June and up 7.6 percent from a revised $549,470 in July 2017.
“While home sales continued to decline in recent months, the softening of the market is more indicative of a market shift rather than a major market correction,” said CAR Senior Vice President and Chief Economist Leslie Appleton-Young. “Despite the slowdown, there were some silver linings in the market in July. For example, homes priced between $500,000 and $1 million posted modest gains of about 5 percent in July thanks to growing inventory. Additionally, every price segment above $1 million continued to enjoy double-digit sales gains.”