The tide is shifting in favor of buyers across much of California.
As home sales volume continues to slow and prices cool across the state, some California housing markets have become solid buyers’ markets. In these areas, buyers have the advantage over sellers, as inventory is climbing and homes are sitting for longer.
In fact, of the ten fastest-cooling markets in the U.S., six of them are located in California, according to Zillow. The metrics Zillow uses to determine whether an area is a buyers’ or sellers’ market are the number of average days on market, the share of listings receiving a price cut and the average price-to-list ratio.
These new buyers’ markets include, in order of the steepness of their recent swing in favor of buyers:
- San Jose;
- San Diego;
- San Francisco;
- Los Angeles;
- Sacramento; and
- Riverside.
However, while these markets have all made swift reversals in housing trends over the past year, areas like San Jose, San Francisco and Los Angeles are still moving quickly compared to other parts of the state and country. For example, San Jose is the most quickly cooling market in the U.S., with 11.1% of homes receiving a price cut in February 2019, up from 3.7% a year earlier. And yet, homes here still regularly sell rapidly and above list price.
Thus, while today’s homebuyers are sensing factors are turning in their favor, when compared to the rest of the U.S., California homebuyers are still facing major obstacles. The major obstacle continues to be insufficient homes for sale to meet pent-up homebuyer demand.
The good news is homebuying factors are expected to continue to improve in the coming months, as:
- mortgage interest rates remain low heading into the next recession, anticipated to arrive in 2020;
- inventory continues to climb from the recent lows experienced at the beginning of 2018; and
- home prices are trending down in response to 2018’s declining sales volume.
Expect homebuyers to take full advantage of these increasingly favorable market conditions once home prices hit their bottom following the coming recession.
Related article:
California’s for sale inventory: a symptom of homebuyer demand
How can you say, “Thus, while today’s homebuyers are sensing factors are turning in their favor, when compared to the rest of the U.S., California homebuyers are still facing major obstacles. The major obstacle continues to be insufficient homes for sale to meet pent-up homebuyer demand.” and in the following 2 paragraphs say, “inventory continues to climb from the recent lows experienced at the beginning of 2018;”
The major obstacle is insufficient homes for sale, yet inventory is climbing. Hmmmm. Which is it in reality?
Inventory is climbing, but very slowly because California makes it SO hard and SO expensive. The permit fees, the school fees and their processes are not reasonable. They make it so hard for contractors to turn a profit because they want it all. It’s very discouraging and demoralizing to many small and mid-sized residential builders. In some cases they want nearly twice the value of a given lot, just in permit fees. So a guy might look at a lot, and think… okay, that lot is probably worth $150k, building costs, escrow/title, etc…, and they might think they can turn a reasonable profit for their time and risk. But wait… then the government comes in and tells them they want upwards of $60,000 or more…. there goes all of the builder’s profit and there goes another house that CA needs. Instead of worrying about rent control, I cannot understand why CA doesn’t just make it easier and more affordable… they already get so much in property taxes. Why do they have to take so much from each house BEFORE it even gets built. Very exasperating….