California home prices break records again
CALIFORNIA – The Golden State housing market is still on an upward trajectory, quickly outpacing the prices of middle-class and low-income residents. In August, the median price of a single-family home again broke state records, hitting nearly $ 828,000, according to recent data.
The median price of a single-family home crossed the $ 800,000 threshold for the first time in April. Last August, the median climbed to $ 827,940, more than 17% up from last August, according to a new report from the California Association of Realtors.
Prices dropped momentarily in July, but hit their current high again.
“I was actually a little surprised that he passed the previous peak,” Wei said. “After dropping in July, it actually rebounded by just a few percentage points.”
Why is this happening?
A shortage of homes for sale in the Golden State, low-interest mortgage rates during the pandemic, and an increase in demand for the state’s highest earners earlier this year are what pushed the median price of homes. state homes above this threshold in the spring. But at the end of the summer, house prices were still going up, albeit at a much slower pace, Oscar Wei, chief economist at CAR, told Patch.
Home sales fell in the uncertain first months of the pandemic. But higher-income Californians whose jobs were unaffected by the coronavirus-related closures have started to navigate the market again in the second half of 2020.
Inflation, spurred by an economy hit by the pandemic, has also pushed up house prices, Wei said.
“You’ve probably noticed, not only in reports or in the media, but also while going to a restaurant or a gas station, that there has been a slight increase in prices,” Wei said.
Across the state and nationwide, soaring prices and commodity shortages have pushed up the cost of almost everything from restaurant meals to grocery shopping. And as building a new home becomes more expensive, the costs are passed on to buyers.
“The high inflation that we are seeing right now, in part will be temporary, in part is likely to continue,” Wei said. “Let’s face it, if you go to a restaurant and you see the menu prices go up, I don’t think six months down the road you’re going to see a change.”
The Federal Reserve met this week to discuss the possibility of raising interest rates on mortgages, credit cards and business loans.
“The Federal Reserve, they have to do something, probably next year or maybe even the end of the year,” Wei said. “For the Federal Reserve to keep inflation low, it must raise interest rates.”
Interest rate for 30-year fixed rate mortgages fell to an all-time high of 2.6% from 6.5% in 2006 and 2007, prompting many Californians to rush into the market, Wei said.
“Believe it or not, it’s still below 3%,” Wei said.
Low interest rates tend to drive changes in the housing market, according to Investopedia.
The pandemic may also have forced significant and perhaps permanent changes on the housing market, Wei said. With so many Californians working jobs in metro areas and still working from home, many are turning to more affordable parts of the state to buy a home.
“A lot of people probably don’t need to work five days a week in the office anymore… which allows people to have a little more flexibility,” Wei said.
For example, those jobs rooted in downtown Los Angeles, which now have the option of working from home full time or on a hybrid schedule, are looking to Riverside and San Bernadino counties to buy a home, where house prices are significantly lower, Wei mentioned.
“Some people believe … ‘I don’t have to drive on a weekly or daily basis anymore. [to the office] so I can actually get a property a bit further, ”he said.
Along with low interest rates and soaring prices, the state also faces another significant housing challenge: There simply isn’t enough housing on the market.
“With more flexibility, it’s actually a bit easier to buy a home,” Wei said. But the issue of supply will continue to be a problem in 2022. “
Governor Gavin Newsom recently signed a bill to end a strict single-family zoning requirement to address the housing shortage in the Golden State. Zoning laws have made it illegal to build anything other than a single-family home on one lot for more than 100 years, Vox reported.
“It will definitely help,” Wei said. “Relaxing zoning requirements … will certainly make it easier to add more housing … It will take time, however, and it will not happen overnight.”
The California Association of Realtors has over 200,000 members and is headquartered in Los Angeles. Read his full report here.
The Associated Press contributed to this report.