LP.com

In May 2023, U.S. mortgage rates rose to their highest levels since late 2023, yet this change did not prompt the Federal Reserve to lower interest rates at its recent meeting. Data shows that high rates not only constrained home sales but also added considerable challenges to overall market stability.

California serves as a typical case, with existing single-family home sales totaling 272,410 units in May, adjusted seasonally down by 1.1% from April and 6% lower than the same period last year. The latest report from the California Association of Realtors (C.A.R.) attributes this decline mainly to reduced buyer confidence due to high rates, resulting in flat home sales.

However, in contrast to sales volume, home prices continued their upward climb: California's median home price exceeded $900,000 for the second consecutive month in May, reaching a historic high. Reports indicate the median price in May 2023 was $908,040, marking an 8.7% year-over-year increase. Additionally, the average price per square foot for detached homes was $446.

Home price performance varied across different regions of California: the San Francisco Bay Area and Southern California saw median prices rise by 11.9% and 10% respectively year-over-year, demonstrating significant growth momentum. The Central Coast, Far North, and Central Valley also showed upward price trends, likely to continue due to seasonal factors and supply shortages in the coming months.

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Chief Economist Jordan Levine of C.A.R. believes that in markets particularly with lower-priced homes, the scarcity of homes for sale continues to drive up California's median home prices. He further predicts that prices in California may continue to rise before the end of summer, with potential easing of mortgage rates and intensified market competition.

However, the pace of overall U.S. home price growth shows slight differences. According to data from real estate brokerage firm Redfin, while prices remain historically high, their growth rate has started to decelerate. As the effects of rising mortgage rates gradually dissipate, an increase in listed inventory is expected.

Economic Research Director Chen Zhao of Redfin points out that recent inflation data suggests mortgage rates may decline by late summer or early autumn. This change is expected to attract more buyers and sellers to the market, potentially further driving up prices or influencing price trends amid the balance of power between buyers and sellers.

On the other hand, the performance of high-priced homes also contributes to steady price growth. The report shows that homes priced at over $1 million accounted for 36.6% of total sales in California, marking the highest proportion in nearly five years.

Redfin's survey also reveals trends in purchasing high-priced homes, such as buyers' preferences for homes with modern amenities like dual vanities in bathrooms, island kitchens, and walk-in pantries. Conversely, outdated kitchen renovations, visually unappealing exteriors, and dated bathroom designs may hinder buyers' purchasing decisions.