Interest Rate Reprieve Bolsters December Home Sales

Posted by Rick Griffin on Jan 24, 2023 10:39:30 AM

RISING INTEREST RATES DEPRESS HOME SALES, PRICES

A short respite in rising interest rates helped edge up California home sales in December 2022 to break a three-month sales decline. However, for the year as a whole, statewide home sales were down 23.1 percent from 2021.

According to the latest home sales and price report from the California Association of REALTORS® (C.A.R), closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 240,330 in December, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2022 if sales maintained the December pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The December 2022 statewide sales pace for existing, single-family homes was up 1.1 percent on a monthly basis from 237,740 in November 2022 and down 44.1 percent from a year ago in December 2021, when 429,860 homes were sold on an annualized basis.

December 2022 was the second straight month for home sales below the 250,000-unit level statewide.

Meanwhile, California’s median home price remained on a downward trend for the fourth straight month. It has been down on a monthly basis for the past six of seven months.

The December 2022 statewide median home price of $774,580 was down 0.4 percent from the $777,500 recorded in November 2022. The December 2022 price also was lower on a year-over-year basis for the second consecutive month, declining 2.8 percent from the $796,570 recorded last December 2021. 

For 2022 as a whole, California’s median home price increased 4.5 percent from 2021’s $786,750 figure but is expected to decline by 8.8 percent in 2023.

In San Diego, home sales increased month-over-month by 0.8 percent in December 2022, compared to November 2022. However, in a year-over-year comparison, between December 2022 and December 2021, home sales decreased by 43.2 percent from the same month a year ago.

December 2022 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

December 2022 County Sales and Price Activity

In San Diego, the median sales price for an existing, single-family detached home in San Diego County declined in December 2022 by 1.7 percent or $15,000 to $850,000, compared to $865,000 in November 2022. However, in a year-over-year comparison, between December 2022 and December 2021, the median home price increased by 1.6 percent from $836,700 from the same month a year ago.

“It’s encouraging to see an uptick in December’s home sales as buyers took advantage of a slightly more favorable lending environment that provided them with a window of opportunity to enter the California housing market,” said C.A.R. President Jennifer Branchini, a Bay Area REALTOR®. “As buyers and sellers gradually adapt to the new normal, we are seeing a shift toward a more balanced market. With both sides slowly adjusting their expectations, it’s hopeful that we’ll see sales ratcheting higher as market conditions improve further throughout 2023.”

“Home prices are holding up relatively well, despite rising interest rates and falling housing demand in recent months. Tight housing inventory was a primary factor preventing prices from free falling as new active listings continued to dip to reach the lowest level in at least the past five years,” said C.A.R. Vice President and Chief Economist Jordan Levine. “While depressed inventory will preclude major price declines beyond the 8.8 percent we forecast for this year, it will also slow sales growth and prevent the housing market from having a rapid recovery.”

Other key points from C.A.R.’s December 2022 resale housing report include:

 -- At the regional level, all major regions recorded year-over-year sales drops of more than 35 percent, with Southern California incurring the biggest decline of all regions for the third month in a row at minus 48.3 percent.

-- At the regional level, median home prices dropped from a year ago in all major regions, with the San Francisco Bay Area experiencing the biggest annual price decline at 9.6 percent. The median home price drop in the Southern California region for the month was 0.9 percent.

December 2022 County Unsold Inventory and Days on Market
(Regional and condo sales data not seasonally adjusted)

December 2022 County Unsold Inventory and Days on Market

-- Housing inventory in California continued to rise on a month-over-month comparison in 2022, compared to 2021, except as the year came to an end. The statewide unsold inventory index in December 2022 was 2.7 months, which was more than double the 1.2 months recorded in December 2021 but was down from the 3.3 months registered in November 2022.

-- In San Diego, the inventory of available homes for sale in December 2022 declined to 2.2 months, compared to 2.9 months in November 2022. A year ago, in December 2021, the figure was one month. Other inventory figures in San Diego in 2022 include 3.0 months in October, 2.7 months in September, 2.5 months in August, 3.1 months in July, 2.4 months in June, 1.9 months in May, 1.6 months in April and 1.4 months in March. Inventory levels indicate the number of months it would take for the available supply of homes on the market to sell-out given the current rate of sales.

-- Unsold inventory in all home price ranges on a statewide basis increased in December 2022, compared to December 2021, by 92 percent or more. For example, in the final month of the year, the unsold inventory in the $1 million and higher price range gained the most (154.5 percent), followed by the $750,000-$999,000 price range (145.5 percent), the $500,000-$749,000 (136.4 percent) and the sub-$500,000 segment (92.9 percent).

-- The median number of days it took to sell a California single-family home was 28 days in December 2022, 24 days in November 2022 and 12 days in December 2021. Other statewide inventory figures for 2022 include 23 days in October 2022, 22 days in September 2022 and 19 days in August 2022.

-- In San Diego, the median number of days it took to sell an existing, single-family home was 20 days in December 2022, compared to 18 days in both November 2022 and October 2022 and eight days in December 2021. Other San Diego days-on-market figures for 2022 include 19 days in September, 15 days in August, 10 days in July, eight days in June and seven days in May and April. The median represents a time when half the homes sell above it and half below it.

-- Once again, the statewide, sales-price-to-list-price ratio remained at below 100 percent in December 2022 at 96.2 percent. A year ago in December 2021, the ratio was 101.2 percent. Other 2022 statewide ratio figures include 96.7 in November, 97.3 percent in October, 97.7 percent in September and 98.4 percent in August. The sales-to-list-price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its last list price and is expressed as a percentage. A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.

-- The 30-year, fixed-mortgage interest rate averaged 6.36 percent in December, up from 3.10 percent in December 2021, according to Freddie Mac.

Topics: Brokers/Managers, Market Information