Home prices in California continued to rise and reached a new peak collectively in the latest market report from the California Association of REALTORS® (C.A.R).
The statewide median price of existing single-family homes increased at an annual rate of 9.2 percent, the fastest pace in four years, and reached a new record high of $600,860. The median price in California, in fact, has been growing at or over 8.6 percent on a year-over-year basis for the past four months and averaged a 7.9 percent growth rate in the last twelve months.
The robust price gain in California is also reflected by the upward trend in the price-per-square foot measured at the state level. The median for the measure increased 6.7 percent from $268 in May 2017 to $286 in May 2018, reaching the highest level since November 2007. With the annual growth rate of the price-per-square foot consistently staying above 6 percent since July 2016, the gain in the statewide median price is believed to reflect “real” growth in the value of homes, rather than a shift in the market towards bigger houses. The strong price growth is attributed primarily to the imbalance between supply and demand.
With the economy expected to grow nearly 3 percent in 2018, the number of new household formations in California is projected to increase at the fastest pace since 2008. On top of that, many buyers rushed into the market to take advantage of low interest rates in the first quarter of 2018, as they anticipated further increases in mortgage rates in the second half of the year. The supply in housing, meanwhile, remained tight as fewer for-sale properties were added to the market and there were not enough new constructions. As a result, prices remained elevated and continued to experience solid growth in recent months.
While the statewide median price will likely continue to establish new record highs before the summer ends, the strong growth trend in prices may have already peaked. Inventory started showing signs of improvement in April and May, and the appreciation in home prices should decelerate now that we are in the second half of the year, especially since further rate increases are expected to hamper homebuyers’ affordability and put a cap on how much they are willing to pay for their new home.
About Jaleesa Peluso, Laguna Beach Realtor & Certified International Property Specialist
Jaleesa and her team specialize in representing local as well as foreign buyers and sellers of Orange County real estate. Are you considering leasing, buying or selling your Orange County home? Call us now at (949)395-0960!