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September 27, 2021

California’s broader economic environment continues to show signs of gradual improvement, but the housing market continued to subside from the red-hot levels it began the year with. Home sales in September are on track to corroborate the decline in August pending sales, but prices remain relatively stable from where they were last month. An encouraging sign for buyers is that slightly fewer homes are selling above asking price and homes are staying on the market for slightly longer as well, so previously discouraged would-be homeowners may be beginning to see some signs of hope.

California Homebuying Sentiment Improved for 2nd Consecutive Month: Although both the sales and the mortgage applications continue to disappoint, California consumers reported that they were more optimistic about purchasing a home for the second month in a row. Roughly 19% of Californians responded to C.A.R.’s monthly Consumer Housing Sentiment Survey and said that they thought September was a good time to purchase a home. That still represents less than 1 in 5 Californians, but it marks an improvement from the all-time low of just 17% a few months ago.

New COVID Cases Still Trending Down: California continues to show signs of progress on the public health front with new coronavirus cases, hospitalizations, and deaths all trending downward. The state is currently averaging just over 6,100 new cases over the past week—half as many as at the end of August.

Interest Rates Stable Despite Tapering Hints: Rates for 30-year fixed-rate mortgages has been remarkably stable within a 2-basis-point band for the better part of the last two months. Last week, rates averaged just 2.88%. Initial fears over a sustained increase in inflation appear to have eased as core inflation subsided to below-target levels again in August. In addition, Evergrande, and the associated global economic contagion fears that it has stoked, may continue to keep bond rates from rising as quickly in the U.S. However, the Fed has suggested that it may be open to tapering in the near future, but this has yet to have an impact on interest rates. 

Mortgage Application Still Lackluster: Mortgage applications nationwide for new home purchases posted their 18th consecutive year-to-year decline, and this critical metric of demand fell by double digits again as well. Despite stable interest rates and slightly less market competition, buyers have yet to re-enter the market in significant numbers. 

Weekly Market Tracking with Mortgage Applications: Weekly closed sales data shows that the housing market in California is generally tracking with the broader mortgage applications metric that we report on each week. Through the first 4 weeks of September, sales have been down roughly 11% from both August and the first 4 months of September 2020. This is also consistent with the pending sales data from August, which suggested that the pace of transactions would continue to ease from the 15-year highs California began 2021 with.

Market Competition Continues to Moderate: Although the market remains far from cool, things have dialed back from the ferocious imbalance between supply and demand to a more “normal” imbalance. More than 62% of transactions that have closed thus far in September have closed above asking price , but that number is down from a peak of more than 70% in June. Similarly, the transactions that have closed this month took a few extra days to go pending than during the summer. Home are still selling in less than 2 weeks, but buyers have a little bit more time and a little bit less competition for each listing.

California REALTORS® Reporting Seasonal Slowing: REALTORS® in California reported a quieter week last week and this continues a month-long trend for September 2021.  Just 40% of members reported doing a listing appointment last week, and less than 25% reported listing a property on the MLS. In addition, fewer entered escrow as we near the end of September and fewer closed a transaction. Fortunately, the percentage of transactions falling out of escrow remains low, but looking ahead, REALTORS® were also more pessimistic on prices and sales.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Weekly Data WE 2021-09-25

 


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