![]() As the Fed nears the end of its tightening cycle, there should be less upward pressure on rates, meaning that the bulk of the adjustment to this new environment is probably behind us." "This has crimped purchasing power and had a negative impact on homebuyer demand in the state. "Since they began raising rates, longer term Treasury rates, and thus, mortgage rates, have climbed significantly with rates near 7 percent for 30-year mortgages," he said. The Fed pausing its tightening cycle is going to be helpful for the state's aspiring homebuyers, Levine told Newsweek. That means that even with lower demand, California still has "more homebuyers than homes to put them in," Levine said, "which is why there is still upward pressure on home prices and why homes have begun to sell quickly again, with roughly half of all transactions closing above list price once again." ![]() "There are currently fewer homes available for sale than there were during the lockdown of April and May 2020." "When you look at the near-term expectations, prices are expected to continue to rise on a month-to-month basis for the next few months because inventory remains extremely tight in California," he explained. What's driving this comeback? A lack of inventory-which is not great news for aspiring homebuyers hoping for affordable prices. But prices have recently bounced back in the state, reaching above $800,000 "for two months in a row since last year," Levine said. In San Jose during the same period, they dropped by 9.46 percent, and in Sacramento by 6.85 percent.Īverage home prices in California peaked at over $900,000 last year, but had dropped by 18 percent from their peak by February of this year. In San Francisco, home prices plunged by 9.92 percent year-on-year in April, according to Zillow. But in big metros where homes were significantly overpriced, many of which are in California, prices dropped by over 5 percent in recent months. Mario Tama/Getty ImagesĪcross the country, the home price decline was modest. But as mortgages became more expensive following the Fed's interest rate hikes, home buying became unaffordable for many, demand started dropping-and so did home prices.Īn American flag flies above the construction site of a multifamily housing development on Jin Los Angeles, California. Last year, home prices reached skyrocketing heights across the country due to a combination of lack of inventory, bidding wars between homebuyers, and low mortgage rates. The move, said Jordan Levine, senior vice president and chief economist for the California Association of Realtors, could help release pressure on the California housing market, which has suffered some of the deepest home price plunges since the start of the housing market correction that began last summer. The Federal Reserve's recent decision to pause its aggressive rate-hiking program could offer a lifeline to the struggling California housing market, an expert told Newsweek.Īfter raising interest rates 10 consecutive times since March 2022, the Fed announced last week that it would leave its key rate unchanged, as it waits to assess the full impact of its policies on the U.S.
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