Sales activity in the housing market remained stagnant last month as mortgage rates continued to fluctuate and stayed elevated at the end of May. The supply side of the existing home market, however, continued to improve in May, as new active listings increased by double digits for the fifth consecutive month, according to a recent report from the California Association of Realtors (CAR).
Volatility in the past couple of months has also created renewed concerns for builders and pushed their confidence level down to the lowest level since late 2023, the report added. With that, construction activity dipped accordingly in the latest report.
But, the report pointed out, sellers are slowly adapting to the new normal and more homeowners are beginning to list their house on the market.
Inflation is also showing some evidence that it has resumed its declining trend, said the CAR report.
But as Forbes cautiously noted, “Year-over-year CPI inflation hit a 40-year high of 9.1% back in June 2022. After trending lower throughout the second half of 2022 and the first half of 2023, the Federal Reserve’s progress on inflation has slowed significantly in the past year. Without a clear downtrend in inflation, the Federal Open Market Committee, or FOMC, has said it is unwilling to cut interest rates from their historically high levels.”
The Fed could still cut rates later this year, said CAR, though at a more moderate pace. The moderation in rates, coupled with recent improvement in housing supply, said the report, which should lift the market sentiment up.
Active listings at the state level rose on a year-over year basis for the fourth straight month and the increase was the largest in 15 months. Newly listed for-sale properties also increased from a year ago for the fifth consecutive month by double digits as more homeowners put their house up on the market.
If interest rates decline in the short term, said the CAR report, “further improvement in housing supply could be observed in California before the end of the home buying season.”
The U.S. Census Bureau reported a seasonally adjusted annual rate of 1.28 million units of housing starts in May, a drop of 5.5% from April and a sharp decline of 19.3% from May 2023. Last month’s decline in construction activity was due primarily to a sizable decrease in new multifamily development, as multifamily starts fell 10.3% from the prior month and plummeted 51.7% from 12 months ago. Single-family starts also declined both on a month-over-month and on a year-over-year basis, said CAR, but at the more moderate paces of -5.2% and -1.7% respectively. The slight yearly adjustment, represented the first dip in single-family housing starts since June 2023.
Along with the mix of rate concerns and hopes, many homebuilders were put on pause as mortgage rates remained volatile in May, said CAR, while labor shortages and buildable lots continued to be issues for developers. According to the National Association of Home Builders/Wells Fargo Index, homebuilder confidence fell to the lowest level since December 2023.
In fact, the index noted, builders cutting home prices climbed from 25% in May to 29% in June. The use of sales incentives also went up to 61%, from 59% in the prior month, said the index, With shelter inflation remaining high and the Fed not likely to make its first rate cut until September, said the CRA report, builders adjusted their sales expectation downward with a four-point drop to 47 in the latest read, suggesting that fewer homebuilders view market conditions as favorable than not.
California home prices also climbed further in May, with the statewide median up 0.4% from April and recorded a strong year-over-year gain of 8.7% from the same month of last year, said CAR.
The median price of $908,040 recorded last month was a new high for the state, and the solid increase from last May was the eleventh straight month of annual price gain for California, the CAR report pointed out.
Stronger sales in higher-priced properties continued to contribute to median price growth, it said, with million-dollar home sales rising more rapidly than their more affordable counterparts in the state.
Post Views: 18
