Current home sales
In September 2024, 21,822 escrows closed in California for new and resale home transactions. September home sales volume was down 12% from the prior month, not a surprise due to the annual sales cycle. Significantly, September 2024 sales volume was unchanged from the same month a year earlier.
Further, year-to-date (YTD) sales volume for September 2024 did not change from a year ago. However, compared to 2019 — the last normal year before the economic tsunami of the 2020 pandemic — sales volume YTD is 27% lower. A real estate recession by most standards.
Recent home sales trends
Annual home sales in 2023 experienced a 22% decrease from 2022. More critically, sales volume in 2023 was 30% below 2019 — the last past year in a typical sales cycle.
The Homebuyers available for 2023 were cannibalized by the preceding pandemic-driven buying spree. Further, today’s buyers know their math for income-to-mortgage leveraging. Also, they are less inclined to buy until sellers adjust prices downward to reflect their reduced borrowing capacity brought on by high mortgage rates which have been rising over the past decade.
Wages of buyers have only kept pace with recent inflation, nearly fully offsetting pandemic induced inflation. However, the “taxation by increased interest rates” has eliminated pay increase advantages for homebuyers needing mortgage funds.
Today’s sales volume strikes at pricing
Watch for home sales volume to further tail off in 2025 before and after what will be a lackluster annual spring increase is sales numbers. Without the support of a steady rush of homebuyers, home prices do begin to decline.
When home prices decline across all pricing tiers, recently mortgaged homebuyers with little downpayment will see the equity in their home slide underwater. This pricing event did not occur in 2024 and is not likely to begin until H2 of 2025. However, the very low rate of mortgage foreclosures is trending steadily upward which will eventually force some owners to sell.
Expect a return of real estate speculators by 2027 producing a “dead cat” bounce in both sales volume and pricing.
Within 12 months following the speculator driven market bounce, home prices historically bottom. It is then that a sustainable sales volume and pricing recovery will take over with the return of end user homebuyers, likely around 2027-2028.
Updated November 2024.
Chart 1
Chart update 11/22/24
Sep 2024 | Sep 2023 | YoY change | |
| California home sales volume | 21,822 | 21,756 | 0% |
Home sales fluctuate from month-to-month for a variety of reasons. The most significant reason is the volatility of homebuyer demand. Several factors constantly move California’s homebuying market, including:
- seasonal motivational differences, an annual cycle [see Chart 2];
- job market fluctuation;
- mortgage interest rate movement;
- home pricing sought by sellers;
- Investor and speculator opportunity perceptions;
- negative equity property financials;
- turnover rates for tenants and owners; and
- homebuyer saving rates.
Seasonal differences in annual sales volume
It’s normal for home sales volume to rise in the first half of the year and fall after peaking around June.
Chart 2
Chart 2 shows average home sales volume experienced from 2011-2018, a recovery period. As depicted, the most homes sold monthly during a year close escrow in June. Another upturn takes place in December, as homebuyers seek to wrap up their financial activities before the end of the year.
Real estate professionals need not fuss when they hear of falling sales volume in the latter half of the year. It is a normal seasonal progression taking place. What to watch for is year-over sales, to compare one month this year, or other period such as year-to-date, with the same month or period last year.
The recurring recovery for home sales volume
Annual real estate sales numbers since the Great Recession of 2008 were characterized as a bumpy plateau in home sales volume. This period ended in 2020 with the Covid pandemic.
As a rule, current market activity, whether up or down, is reflected first in sales volume, followed in nine to 12 months by price adjustments. Both sales volume and prices fluctuate from month to month. However, they trend in opposing directions like a seesaw.
Chart 3
Chart update 09/19/24
| 2024 | 2023 | Annual change | |
| Annual home sales volume | 267,865 | 260,064 | +3% |
To set the stage for a forward look, a review of sales volume in the recent past is helpful:
- Mid-2005 saw sales volume peak for all types of real estate in California, with nearly 754,000 homes sold that year;
- sales bottomed in 2008 and were artificially inflated in 2009 due to subsidy-induced purchases and speculators prematurely jumping on that momentum, but remained 40% below 2005;
- 2011 increased slightly in sales volume while decreasing in sales prices, a normal price adjustment condition;
- 2013 home sales volume stagnated while home prices increased rapidly some 30+%, not a good set of signs for the immediate future; and
- 2018 saw sales volume decrease rapidly in the fourth quarter, ending the year 4% below 2017;
- 2019 home sales volume decreased slightly from the prior year; and
- 2022 home sales volume peaked early in March and lost all ground gained in the pandemic year of 2021, ending the year 24% below 2021, but only 12% below 2019, the last “normal” year for home sales before the pandemic upended market dynamics.
- 2023 home sales lost a further 22% over the prior year, further wiping out the ground gained in 2021.
- 2024 home sales have stabilized from the prior year, with a slight downward trend. This will likely remain the norm until mid-2025.
Chart 4
Chart update 09/19/24
| Sep 2024 | Sep 2023 | Sep 2022 | |
| Home sales volume year-to-date | 205,696 | 201,041 | 245,265 |
Year-to-date (YTD) home sales volume in 2024 rose slightly compared to a year prior. As of September 2024, YTD home sales volume is 2% above a year earlier. Compared to 2019 (the last “normal” year for housing before the Pandemic Economy took over), home sales volume YTD is 27% lower in 2024 as of September.
Home sales volume remains steady rising slightly in 2024, due to:
- high mortgage rates lowering homeowner turnover;
- a greater percentage of all-cash buyers undeterred by interest rates;
- home inventory across the state increasing slowly; and
- the 2024 shadow recession, yet to be declared, but well underway throughout our housing markets.
Home prices steadily increased in the first two quarters of 2024 and will soon fall, dragged down by significant cuts to buyer purchasing power.
Home sales in the coming years
The forward trend in California home sales is mixed for both buyers and sellers. Homebuyer income is growing but only keeping up with inflation, more so than any time during the decade before the pandemic. The increased borrowing capacity brought on by lower mortgage rates ended in 2013, but those historic lows were matched by many buyers and homeowners in 2020 through early 2022.
first tuesday forecasts annual home sales volume will remain the same as 2023 in the 2024-2025 periods, the result of new construction and lowering drift in FRM rates.
Relocating Baby Boomers going into retirement in the coming years will be the primary propelling force by both selling homes and buying replacements. Their Generation Y (Gen Y) age group will add to the sales volume when they find jobs at better pay levels permitting them to borrow and become first-time homebuyers.
Trends to be concerned about
Many long-term market conditions restrain the rise of home sales volume:
- the weakest homebuyer demographics in decades;
- failed savings for a down payment as high rents squeeze potential first-time homebuyers from saving, even though personal income since 2016 has risen at a pace slightly above the rate of consumer inflation during the period;
- buyer borrowing power no longer enlarging the funds they can borrow as interest rates have trended higher since 2013, the pandemic period an exception, reducing funding for purchase-assist financing and dampening property prices;
- the public’s increasingly anti-business and pessimistic attitude about American economics, wealth inequality and national politics no matter election outcomes; and
- tightened mortgage standards as lenders are forced to apply forgotten fundamentals of sound mortgage lending practices (20% down payment on non-FHA/private mortgage insured loans, lower income ratios, risk-free credit scores and full documentation of income, funds and collateral value).
The competitive broker
What’s a broker to do until home sales volume takes off?
SFR brokers and agents might consider adding SFR-related services to supplement their income. Those who do add related services will restructure their practice as “all-service brokers.” Transaction-related services will be integrated into their office operations to maintain solvency and growth.
Related article:
https://journal.firsttuesday.us/how-to-survive-the-next-recession/68413/
These services include:
- escrowing their in-house transactions under the broker’s license;
- entering into or expanding property management services;
- negotiating equity purchases for investors from underwater owners on the chance of a short sale discount or who have a positive equity;
- specializing in sales and leasing of a particular type of commercial property, other branch office locations and alternative marketing approaches (aside from social media);
- providing mortgage loan broker services for business-investor loans made by private lenders and secured by the borrower’s residence (no mortgage loan origination (MLO) endorsement required);
- arranging carryback financing and the takeover/assumption of existing mortgages, and buying and selling those carryback trust deed notes;
- negotiating options to buy, or lease with option to buy when inventories expand as the shadow inventory of speculators returns to be sold;
- exchanging properties with equity to help owners relocate their wealth held in real estate tax free; or
- using barter credits in lieu of greenbacks, etc.
Buyers brokers are mandated to commit to exclusive representations with buyer-clients for all types of property.
Buyers, on entering into an exclusive right-to-buy Buyer-Broker Representation Agreement, commit to employ a broker and their agent. This representation is the obverse side of the same employment sellers commit to when employing a broker and their agent.
The representation agreement clarifies the broker is assured time spent with a buyer produces a closing and a fee when the property is available in the market.
thanks
The wisest policy for growth has been shot down over and over. The idea is logical: require higher density building around transportation hubs. Incentivize more people to use public transport. Reduce wasteful commuting and expansion of the highway system. Blaming low inventory on regulations is a shallow, threadbare shibboleth. Developers want tax breaks, freedom to cut corners, and the right to ignore environmental impacts. They are not victims. Californians who move to Texas will not put up with the Medieval regime of the extreme right, the destruction of marsh lands, and the flooding that results when concrete covers every available space. They will not put up with the backward assault on women’s rights. California is still the nation’s innovation hub. California is moving forward, and rumors of its demise are just plain wrong.
There’s always speaks and valleys in housing and consumer cycles. sometimes people make more income and other times they don’t,some of it does have to do with wealthier people overpaying for homes on the coast.
I had some horrible experiences with Real Estate agents in the past, therefore would never sign an exclusive right to buy with an agent. So, if an agent insist I do that, I would just carry on to the next agent and first agent would lose a potential sale with me.
Treat me right, and I will treat you right.
Too many hungry agents out there for me to need you.
I learned the hard way.
That’s really how other Virginia Ganskie agents exploit us just to sell. but someone recommended my agent and he was also an advisor and I witnessed how sincere he was. not only so that he can sell but he also wants to satisfy his client and be happy.
Please update the article, it has stale information.
so im thinking to hold onto my fathers house til 2024? looks like market is spiraling slowly to me and if i sold now id take a loss…
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….
You really have to wonder with all the aggressive lending 5-percent down up to $2.5 million, second mortgages making a come back at higher loan to values, and no tax returns loans down to 500 credit scores that when sales volume decreases it’s an ominous sign.
January 2008 was not in the midst of a great recession. The recession didn’t start until fall of 2009.
Everything is very open with a very clear
clarification of the issues. It was definitely
informative. Your site is extremely helpful. Thank you for sharing!
Great Article, it is great to know what the statistical data says but statistics are interpreted in multiple ways. Owning a home is an individual choice in response to individual circumstances and needs so sales continue regardless of what the market is doing. If people were willing to once pay rates upwards of 10% to own a home, they’ll continue to do so, especially now with rates still under the highest average rate of 6.19% according to another “statistic”, rents continue to rise, most new construction are apartments and live/work developments where everyone it’s crowded living, people want their own piece of America. Many people are also taking advantage of higher loan limits in high cost areas $679,650 and Down Payment Assistance Programs that cover the down payment and closing costs up to that amount, without having to be a first time buyer!!
Is there a difference between Northern and Southern California markets concerning vulnerability? I have been under the impression that if the economy dips, SoCal prices drop sooner and faster than NorCal prices because there is more supply down there. Isn’t that what happened in the early 90s? And is the desert more vulnerable than the rest of SoCal?
I ask because we are hoping that our home in the Sacramento-Tahoe region will hold its value and that the desert prices will drop first so we can retire to Palm Springs with an advantage. We would like this to happen in about 5-8 years from now.
This next crash is coming much sooner than 5-8 years…
When the Governor, himself, plans to ration water to 50 gallons a day per person, can you really expect people to pay premium prices to live in such a state? A man made drought dries up home sales and the California economy
There was a decline, starting in 2008, along the I-5 corridor of the Central Valley, as environmental issues effected home sales. The shut down of the Harvey O. Banks Pumping Plant, which delivered water for 400 miles of homes and farmland created housing market chaos as over 50 towns lost water for showers and toilets, businesses, hospitals, schools and prisons. Unemployment increased to 40%. (Search online , Dead Harvest, Devin Nunes for details) Valley Farm prices and land values predictably dropped, as water prices increased to $2000 per acre foot.
Dust bowl conditions and migration out of the valley continued as the Federal government, faced with litigation, turned the problem over to the State. Major cities found lower cost housing prices rising due to an influx of displaced agricultural workers and industries. As the state’s tax base eroded, necessary college tuition increases created more interest in low cost rental properties in campus cities.
Shortages of low cost rental property and homes, including trailer parks developed as an influx of new immigrants pushed moderate cost homes to continue raising in value in the major cities. Wild fires, made possible by laws controlling the clearing of underbrush, effected populations along the mountain ranges and in the northern portions of the state.
Displaced home owners were greeted with a housing shortage and increased prices. Drug cartels attempting to control marijuana farms also contributed to the fire danger. The northern portions of the state, were affected by mandated water control issues, while, at the same time, dams and reservoirs were removed to limit hydroelectric production and promote the state’s goal of windmills and solar panels sales. The mandated requirement for homes to buy into solar panels prior to resales, pushed prices up.
Laws requiring state wide rationing of drinking water in less than 2 years will have a predictable impact. The newly mandated water divisions, recently mapped by Sacramento, with ability to add unlimited taxes on properties, within these divisions, should impact home sales between L.A. and San Francisco along the coastal valley and Salinas River. The scheduled removal of the Diablo Power Plant which serves much of California is predicted to have a heavy impact especially in SLO County.
It’s crazy how much home values differ from east coast to west. We are on the Atlantic side of the US and have the same issues but our home prices are much less. Funny to see everyone has problems
Great resource. Thank you.
Statistics can be interpreted in many ways but it’s important to at least start with hard data and not just opinion.
Just another bubble, worse than the others – and I’ve witnessed quite a few.
When THIS one goes, it will be ugly.
~ Occams
Based on what? The real estate market is much stronger and more stable compared to 2006-2007.
Based on what you just said. I’m sure you asked and said the same thing back in 2006-2007, that you think the real estate market was much stronger and more stable compared to the previous recession.
The real estate market will be surprised when rates rise causing a drop in prices. Rates can’t stay this low forever. Even with a recession due t Biden’s more regulatory policies will bring back a Jimmy Carte economy.