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
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.