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TheWeekly™

Here's your roundup of recent major news affecting California real estate, housing, and mortgages.

California's Housing Market Faced a Decline in November 

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California's housing market faced a decline in November due to high borrowing costs and a slowing economy. The California Association of Realtors reported a 2.2% drop in single-family home prices compared to October, with sales slipping by 7.4%. C.A.R. President Melanie Barker attributed the decline to elevated mortgage interest rates and a persistent shortage of homes for sale.

Realtor sentiment in December reflected concerns about fewer properties entering the sales pipeline, anticipating a drop in sales and a rise in prices. Despite the challenges, economists are optimistic about 2024, expecting a 22.9% increase in existing single-family home sales and a 6.2% rise in median home prices. However, current sales activities showed a decrease in all major regions in November, with the Central Valley experiencing the most significant drop (-14.4% year over year).

The roller coaster ride in home prices continued, with some counties experiencing significant drops, such as Napa (-19.7%) and San Mateo (-14%). Mortgage rates were declining from 2023 highs, but home prices continued to rise. Rental prices saw a decrease, with Zillow reporting a $45 per month drop in December 2023.

Looking ahead, the forecast for 2024 includes expectations of rising interest rates and inflation, potentially impacting homebuyers' purchasing power. The California housing market may see a pullback in sales and a downward adjustment in home prices. However, rental property investors using advanced property management software could experience better profitability.

Despite uncertainties, the California housing market remains competitive, with many factors influencing its dynamics, such as the timing of Federal Reserve rate drops, inflation trends, and the continuing exodus of residents and businesses to lower-tax states.

C.A.R.'s 2024 California Housing Market Forecast predicts a 22.9% increase in existing single-family home sales and a 6.2% rise in median home prices. The forecast emphasizes the persistent housing shortage and competitive market contributing to upward pressure on home prices.

In conclusion, while challenges persist in the California housing market, including rising interest rates and inflation, the overall outlook remains cautiously optimistic for 2024. The potential for a wave of homes entering the market when mortgage rates fall further could impact both homeowners and landlords, presenting opportunities and challenges in the evolving landscape.

Real Estate - The median U.S. housing payment has significantly dropped by almost $400 since its peak in October, sparking renewed interest from previously sidelined buyers and leading to a resurgence in early-stage demand for homes. Redfin's Demand Index, measuring early-stage demand, has shown a notable 10% increase in the past month.

Over the four weeks ending December 31, the median U.S. mortgage payment reached $2,361, reflecting a substantial $372 (-14%) reduction from the record-high levels in October, hitting the lowest point in nearly a year. The average weekly mortgage rate also saw a decrease to 6.61% by the end of December, down from the 23-year high of 7.79% recorded in late October.

The combination of lower mortgage rates and an increase in the inventory of homes (with new listings up by 10% year over year) is revitalizing early-stage homebuying demand. Redfin's Homebuyer Demand Index, an adjusted measure of requests for tours and other homebuying services, surged by 10% in the past month, reaching its highest level since August. Despite an annual decline in pending sales of only 3%, this marks the smallest drop in two years.

Real estate experts note a positive shift in buyer sentiment. These trends indicate that the recent decrease in housing payments is fostering a more active and optimistic real estate market. Leading indicators suggest the potential for a rebound in the housing sector as buyers eagerly return to the market.

Mortgage - US mortgage rates continued their downward trend this week, bringing some relief to home buyers in the face of the challenging housing market, the least affordable since the 1980s.

In the week ending December 28, the 30-year fixed-rate mortgage rate averaged 6.61%, down from the previous week's 6.67%. This marks the ninth consecutive week of declines, driven by expectations of Federal Reserve rate cuts in the upcoming year. A year ago, the average 30-year fixed-rate was 6.42%.

Freddie Mac's data, based on mortgage applications from a wide range of lenders, focuses on borrowers with a 20% down payment and excellent credit. It's important to note that individual buyer rates may vary.

Looking ahead to 2024, economists anticipate further declines in mortgage rates. Federal Reserve officials project three rate cuts next year, which could exert downward pressure on mortgage rates. While the central bank doesn't directly set mortgage interest rates, its actions influence them. Mortgage rates closely follow the yield on 10-year US Treasuries, which fluctuates based on expectations about the Fed's actions and market reactions.

Despite the drop in mortgage rates, a significant sales recovery hasn't materialized yet. Limited housing inventory continues to support home prices. Nonetheless, real estate professionals predicts a potential rebound in the housing market in the coming year if inflation continues to decelerate.