Rising interest rates are improving California’s home sales totals, according to a recent housing market report from the California Association of REALTORS® (C.A.R.). The number of existing home sales statewide was higher in February, said C.A.R. Also, to no one’s surprise, sales prices are higher in San Diego County, said C.A.R.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 422,910 units in February, according to C.A.R. February’s sales figure was up 3.3 percent from the revised 409,520 level in January 2018 and up 5.4 percent compared with home sales in February 2017 of a revised 401,060. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
February’s statewide median home price was $522,440, down 1.0 percent from January 2018 ($527,780) and up 8.8 percent from February 2017 ($480,270). In San Diego, the median selling price of an existing single-family home was $605,000 in February 2018, up from $590,000 for January 2018 and $559,590 for February 2017.
While the statewide median price slipped from January, it continued to grow at a strong year-over-year pace and has remained above the $500,000 mark for a full year. The year-over-year price gain has been growing at or above 7 percent for eight of the past nine months.
The number of days for single-family home remaining unsold on the market in California varied from 26.1 days in February 2018 to 28 days in January 2018 to 33.3 days in February 2017. In San Diego County, homes sold much faster, including 13 days in February 2018, 21 days in January 2018 and 19 days in February 2017.
“February’s solid market performance was likely fueled by rising interest rates, which motivated buyers to rush in and close escrow before rates move even higher as they’re anticipated to do in the coming months,” said C.A.R. President Steve White. “Despite losing ground in January, February’s strong sales gain more than covered the loss, resulting in a 1.1 percent increase so far this year.”
Condo and townhome prices have been growing at a robust pace, said C.A.R. The statewide condo-townhome median price has been growing faster than that of the existing single-family homes with a 13.3 percent year-over-year increase, as compared to 8.8 percent for existing single-family homes. At $461,400 for February 2018, the statewide condo-townhome median price set a new peak price, exceeding the previous high of $451,450 registered in June 2017.
Numbers for C.A.R.’s housing market report are based on information collected from more than 90 local REALTOR® associations and MLSs.
Meanwhile, mortgage rates have been on the rise since breaking the 4.0 percent barrier in January. The 30-year, fixed-mortgage interest rates averaged 4.33 percent in February 2018, up from 4.03 percent in January 2018 and from 4.17 percent in February 2017, according to Freddie Mac. The five-year, adjustable mortgage interest rate also edged higher in February to an average of 3.60 percent from 3.47 percent in January and from 3.24 percent in February 2017.
Earlier this month, the Federal Reserve raised its key interest rate from 1.5 percent to 1.75 percent, the highest level since 2008. It also said it would raise rates two more times this year. This indirectly affects mortgage rates, which could make homeownership more expensive in the long run, because rates typically track the yield on the U.S. 10-year Treasury.
In other real estate industry news on the local housing market, recent news reports include a number of interesting statistics.
According to S&P CoreLogic Case-Shiller, a respective real estate tracker, San Diego County home prices rose 7.4 percent in a year as of January, which was among the biggest increases nationwide. The San Diego region had the seventh-highest price gains out of the 20 cities in the Case-Shiller Indices. In February, home prices jumped 8.6 percent compared to a year ago.
In another report, Redfin said median home values nationwide leaped by 8.8 percent in February to $285,700, the largest price appreciation in four years. The upward pull in median home values marks the 72nd consecutive month of year-over-year price increases and comes as the housing market faces its 29th month of declining inventory.
Clearly, a low inventory of homes for sale and a low vacancy rate among owner-occupied housing are forcing higher prices. The San Diego housing market led the nation in price growth in January with a rise of 0.8 percent from December. For the last 12 months, San Diego prices are up 7.4 percent, well above the national average of 6.2 percent but still below the double-digit increases in Las Vegas, Seattle and San Francisco.
“Existing homeowners may be reluctant to list their home for sale, fearful of joining the ranks of frenzied buyers themselves and-or perhaps increasingly unwilling to let go of a home financed with a loan at an interest rate lower than that offered today,” said Zillow’s Senior Economist Aaron Terrazas.
Terrazas also said increased home shopping this spring could be exceedingly competitive for first-time buyers. “This year’s buyers may be competing against some of those buyers who have been unsuccessful during the past few months,” he said.
Also, according to CoreLogic, homebuyers may be competing with slightly fewer investors in the coming year. In February, 22.9 percent of home sales went to absentee buyers, typically investors who don’t intend on living in the home as a primary residence, which was down from 23.8 percent at the same time last year.
Meanwhile, according to Realtor.com, a portal website operated by the National Association of REALTORS®, the inventory shortage is driving up both home prices and mortgage payments. The average price of a home for sale on Realtor.com has gone up by nearly 10 percent between 2017 and 2018. At the same time, average mortgage payments rose nationally by approximately 13 percent a month, adding up to an extra $168 a month in mortgage payments for a median price home.
“Buyers can expect to see more of their paychecks go to their mortgage payments this year,” said Danielle Hale, Realtor.com’s chief economist. “Tight inventory has limited options for buyers and sent home prices soaring in many markets. Now, home buyers will also have to factor in higher mortgage rates. Despite mortgage rates still being historically low, the combination of higher prices and rising rates, will further challenge trade-up and first-time buyers, usually millennials or gen-‘X’ers. They will have to borrow more money at a higher rate to close on a home in this market.”