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A couple of reports released recently offer a promising outlook for the California housing market in the medium and long term. The anticipated increase in the statewide population in the coming years and a strong desire for many renters to buy in the near future are encouraging news that should help push housing demand to a higher level in the next few years. On the other hand, elevated interest rates in recent weeks and the lack of supply continue to present challenges for buyers in the near term, resulting in slow home sales activity so far in the spring / summer homebuying season. Home buyers have been gradually adjusting to the new normal though, despite being in an environment where rates stay higher for longer. Solid new home sales suggest that homebuyers still want to buy if they can find a way to get back into the market. With the improvement in housing supply conditions expected to continue throughout the summer and rates projected to moderate more consistently in the second half of the year, more buyers should reenter the market in the later part of the homebuying season.
California’s population grows in 2023 after three years of decline: California experienced positive population growth for the first time in four years in 2023. With foreign legal immigration continuing to bounce back from the pandemic era, and net domestic migration slowing down in 2023, the statewide population increased at an annual rate of 0.17% to 39.13 million last year. Across the state, 31 counties increased in population, with positive growth largely in the Bay Area, Central Valley, and the Inland Empire. Along with the increase in population, California also added more housing units in 2023. The statewide housing growth improved to 0.79% last year, as 115,933 units on net were built, including 22,802 accessory dwelling units. As the remote working trend continues to stabilize and net domestic migration recedes to the lowest levels of the 2010s, California population is expected to increase further at a slow pace in the near future.
Prospective homebuyers plan to buy but lack confidence to start the journey: Renters are unsure whether now is the right time to buy but many plan to buy in the next five years, according to the newest Bank of America Homebuyer Insights Report. With interest rates and home prices remaining elevated while the homebuying market continues to be highly competitive, 57% of the renters/prospective buyers who responded to the survey are unsure whether now is a good time to buy. Despite the high level of uncertainty, 81% of the prospective buyers consider renting as a temporary arrangement and 76% plan to buy a home within the next five years. Many of them, however, lack the confidence needed to navigate through the homebuying process. Half of them (51%), for example, are not confident in their understanding of homebuying grant programs, while 41% do not have a good understanding of how to finance or secure a mortgage. With lots of challenges and “noise” in the market, trusted advisors like REALTORS® are needed more than ever to guide consumers through their homebuying journey.
Mortgage rates rose this past week: The average rate on a 30-year mortgage moved back above 7% this week, a setback for home shoppers at a time when the U.S. housing market is already slowing under the strain of elevated home loan borrowing costs and rising prices. According to data from Freddie Mac, the average 30 year mortgage rate rose to 7.03% from 6.94% last week. A year ago, the rate averaged 6.79%.
If you have any questions or would like personalized advice regarding the current market conditions, please feel free to reach out. Your success in real estate is my top priority.
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