Is California’s housing market finally cooling off? Here’s the latest data on home sales and prices

Factors driving the trend include higher interest rates and prices increasingly out of reach for buyers, the report said.

“California’s housing market is moderating from the 12-year-high levels experienced in 2021, as higher mortgage interest rates and soaring home prices are starting to have an adverse impact on housing demand,” Jordan Levine, vice president and chief economist of the California Association of Realtors, said in the group’s April 2022 Sales and Price Report.

The realtors association found that the April statewide sales pace, measured by the number of homes sold, was down 1.9% from March and down 8.5% from last year — the biggest year-over-year decline in the last four months, the report said. Bay Area sales in April slowed even more than the state average, dropping 18.1% since one year ago, according to the report. Only the Central Coast saw a larger year-over-year decline, at 21.3%.

“With April pending home sales recording the worst drop in two years, the affordability challenges that buyers have been encountering are materializing in recent sales trends, and further declines in housing demand could continue in the second half of the year,” Levine added.

At the same time, however, the report found that prices are higher than ever, owing to mix of factors, including low housing inventory overall, inflation and an increasing share of high-end homes being sold on the market — a trend that is expected to continue in the coming months.

The realtors association found that California’s median home price in April broke March’s record, hitting $884,890 — 8.7% over last April. While that year-over-year increase was the smallest since June 2020, it still set a new peak price for the state.

The shifts in sales activity and pricing are subtle, reflecting a changing, but not crashing, housing market, realtors said.

“While many real estate pundits predict an imminent crash in the Bay Area real estate market, it appears they might be a bit premature in their dire forecasts,” Tim Yee, president of real estate firm RE/MAX Gold Bay Area, said in a report. But, he added, “rising interest rates, unchecked inflation and consumer confidence are all contributing to a leveling of the Bay Area markets, especially noticeable in the last two weeks of April and the first week of May.”

With inflation high and the stock market down, “the housing market is beginning to slow preliminary, but not universal reactions,” real estate firm Compass noted in its report, pointing to slowing sales activity as well as realtor accounts of less-crowded open houses and fewer offers on new listings.

But the firm added that, absent an economic disaster like the 2008 crash, cooling trends tend to be gradual — “more of a slow leak in an over-pressurized tire than a blowout at high-speed.”

“Even the hottest markets eventually cool. This does not necessarily imply a large ‘bubble and crash,’” the report said. “Over the past four decades, a cooling shift has typically meant a gradual decline in sales activity, then either a leveling off in appreciation or price declines of 5% to 10%.”

Compass also noted a slight “atypical” decline in the number of listings accepting offers and going into contract for the month of April after they had increased sharply every month since December 2021.

The local and state trends mirror nationwide housing market trends, according to the National Association of Realtors, which reported that sales activity was down year-over-year all over the country.

Though things may be slowing, the reports show that the market is still very competitive, and housing affordability issues are likely to persist throughout the state.

“As rates remain on the rise, the sense of urgency to buy is keeping the market highly competitive, especially since housing inventory continues to stay well below pre-pandemic levels,” California Realtors Association president and Bay Area real estate broker Otto Catrina noted in the group’s report.

“While we will likely see more listings come on to the market as we move further into the home-buying season, the housing shortage issue will likely persist throughout the rest of the year in major metropolitan areas, such as the Bay Area and the Southern California region,” Catrina added.