HUNTINGTON BEACH, Calif. — The number of homes sold in Orange and Los Angeles counties in April dropped 40% and sales prices by 7.5% and 8.5%, respectively, year over year as high mortgage rates and low inventory curb demand.
The California Association of Realtors reported that all 51 counties posted a sales decline from the previous year, with sales in 44 counties dropping more than 30%. Five counties had more than 50% drop from a year ago. In Southern California, sales have dropped from 35% to 40%.
With fewer buyers and little stock, home prices have fluctuated since the Federal Reserve began hiking rates a year ago.
The median home price in California rose above $800,000 for the first time in six months, according to the California Association of Realtors.
However, it's still an 8% drop from last year's $884,000 median home price. Orange County's median home price was $1.22 million, a 7.55% decrease from the previous year's $1.32 million.
The association said those still in the market for a home in the state continue to see increased competition amid low inventory.
California Association of Realtors President Jennifer Branchini said statewide, "the market is getting more competitive."
Market time, the number of days a home is on the for-sale market, dropped from 33 days in January to 20 days in April, the report states. In Orange County, the median market time was 19 days in April. In March, it was 24 days. Meanwhile, the Los Angeles market time was 22 days in April, a four-day drop from March's 26 days.
Branchini added that the number of homes sold above the asking price doubled from 1 in 5 at the beginning of the year to more than 2 in 5 in April.
"This increase in market competition continued to provide support to the statewide median home price in April, which climbed above $800,000 for the first time in six months," she said in a news release.
The report comes a week after the Federal Reserve squashed optimists' bullish hopes of a housing rebound after increasing interest rates again for the 10th consecutive time earlier this month to curb high inflation.
The Fed is slated to meet again in June, and economists and other housing experts are still determining if the central bank will continue to increase interest rates or pause it.
When interest rates jump, it affects long-term loans such as home mortgages. Some say only a pause in raising interest rates could drop mortgage rates and spur more activity in the housing market.
According to Mortgage Daily News, Tuesday's mortgage rate is 7.1% for a 30-year fixed-rate loan.
"The market is coming to terms with the possibility that the Federal Reserve may not have been that off-base over the past few months as it has maintained the need to keep rates 'higher for longer,' wrote Matthew Graham for Mortgage Daily News. "Recent economic data has confirmed more economic resilience (and more inflation persistence) than initially expected after the Fed's last forecast update in March."
The high rates prevent potential sellers from listing their homes. Low inventory keeps home prices from crashing, said Jordan Levine, senior vice president and chief economist at the California Association of Realtors.
"Home sales remained soft as the lock-in effect continued to tighten housing supply and keep would-be sellers from listing their homes for sale, which contributed to a 30% year-over-year drop in new statewide active listings ― the largest drop since May 2020 when the pandemic shutdown took place," said Levine.
The sudden drop has forced the California Association of Realtors to revise its 2023 Housing Market Forecast. The association now projects an 18% decline in single-family home sales from 342,000 in 2022 to 279,900 units in 2023.
Statewide median home prices, the association projects, will decrease 5.6% from $822,000 in 2022 to $776,600 in 2023.