California Real Estate Market Cooling

 While it's a shift of only 1-2 degrees, but the red-hot housing market is finally starting to cool.

Despite the median home price hitting yet another record high in May the year-to-year date statewide home sales dipped by 2.7% in May.  They had been rising steadily since February.  But, for the first time in 2021, the median number of days that a single-family home was on the market did not drip, but rather held steady at seven, the same number recorded in April.

John Graff, a Los a Angeles based broker and chief executive of Ashby & Graff said, "Buyers are getting fed up at this point with submitting as many as 8-12 offers and getting rejected."  "They're throwing up their hands at this point", said John.

The median price of a single family home in California hit $818,260 in May, an uptick of 1/2 % from the previous month.  It's an acceleration with a foot off the gas.  In April the median hit $814,000 up 7% crossing $800,000 for the first time in history.  Compare that to seven months ago at $700,000 and in May 2010 at $588,070.  Buyers are exhausted!

California Association of Brokers gave the median price increase on Ultra-luxury homes of +$1 million increasing 200% from May 2020.  

The most notable place of cooling was Los Angeles.  The talk of Bubble keeps popping up, but that is not the case when it is a simple slowing down in demand over excessive competition and over bidding to unrealistic numbers.

While the housing prices begin to slow their assent, the renters are facing eviction and those with back mortgage due are facing negotiations with servicing agents.  In Los Angeles County 7,677 were locked out of homes.  Eviction rates were higher in the inland empire and Los Angeles County.

Matching the eviction are the Mortgage Service companies bracing for a fallout as Covid Bailout ends.  An estimate 7.25 million borrowers have participated in forbearance programs.  This represents 14% of all home owners with mortgages.  At eXp Realty we are being trained and re-certified to handle REO properties.  That is Real Estate Owned by banks and financial institutions.  In the Sacramento area agents are already getting assignments of developer failed properties.  Locally I get Broker Price Opinions of investor private purchases off MLS.  The prices paid are really pushing the limit of what a home can sell for with improvement.  The over paying is quite significant.  Emails come into me regular with brokers and investors looking for listings not yet on the market.

To add to the issues of home values is the commercial market.  San Francisco office vacancy rate is at 20.1%.  San Francisco residential rental market is still down 20%.  It had a slight pop at the beginning of the year, but it failed to rally further.

According to Kelly Hwang of the SF Chronicle San Francisco's housing inventory went up in May 8.7% from April and 25.6% from this time last year.  

Bloomberg has stated that prospective home sellers who sat tight as the home prices climbed higher and faster are finally starting to cash out..  Bloomberg has stated their numbers show homes for sale climbed 6.7% in early June from the same period in May.  Listing rose in 54 out of 100 metropolitan areas.  Are seller's saying it's time to sell?

Redfin has noted that most of their sellers are retirees.  That makes sense especially when the potential of tax increases are on the horizon.  

WHAT OF THE FUTURE?

California real estate is and was a reflection of the Law of Supply and Demand.  As more people moved into California, demand for real estate increased.  With the increase in demand was the correspondent increase in price.  

The past year of so, the news media had numerous articles on the movement out of the State.  Corporations voted with their feet, as did the multi-billionaires who represented the corporations.   But when the evaluation of the populace is concerned the statistics DO NOT support the media claims.

"Researchers from a consortium of universities – including the Berkeley, UCLA, Cornell and Stanford – teamed up in the fall of 2020 to study California’s population. Their finding, released this week, determined there was “no evidence of an abnormal increase in residents planning to move out of the state”. Victoria Beklempis Yahoo News Friday, July 9, 2021"

Victoria's article HERE will give a detail of the actual movement.  It is more a re-distribution of the population; rather than, a movement out of the population.  

What it does mean is that those who are looking for affordability need only look in new areas or old areas that are in redevelopment.  

There is very little that other states can offer; other than, tax advantages. Our weather is exceptional and beaches and outdoors are within reach.  Our medical and educational facilities are exceptional.

So what are the first time home owners to do?  Look within your area and find locations that are affordable.  La Honda, the Skyline area, Half Moon  Bay are choices.  Then there is East Bay straight to the Nevada border.  My wife and I came back from a tour of Granite Bay.  It is ideal for young families.  Lower priced newer homes with great schools and shopping offering all the benefits our Safeway, Costco and Trader Joe's offers.  Kaiser is their in town and Sutter is nearby.  4430 Rolling Oaks Drive is a 4 BR, 3 Ba, 3197 SF home built in 1969 on .6 acres in town with a 3-car garage.  A 2-story Victorian styled home for $1,250,000.  For all those who can work from home and have a young family Granite Bay is a great choice.  I may add we saw no homeless, clean streets and friendly and open town's people.

Businesses such as Tesla and HP and Oracle can move; but the venture capital firms that created them as still here.  The money the creates investment opportunities will create business opportunities.  The business opportunities will create employment opportunities.

Who knows, the San Francisco exodus may just have a new migration as SF rebuilds and refurbishes itself.