April 25, 2022
California Median Price Sets a New Record: The statewide median home price surpassed $800k for the first time in six months and recorded a new high of $849,080 in March. California existing single-family home sales increased in their median price by 11.9% from a year ago and began to accelerate again as the market prepared to enter the home-buying season. The month-to-month percent change in median price also soared to the highest level since March 2013 and the 10.1% increase was the first time in nine years that the growth rate reached a double-digit pace. March’s month-to-month increase was also more than twice the long run average of 4.5% recorded between a February and a March in the last 44 years. With the market competitiveness likely to remain heated, the statewide median price could increase further in the next few months during the traditional home buying season.
Rents Continue to Surge: Along with home prices, cost of renting also jumped rapidly at the national level with single-family rent prices up 13.1% year-over-year in February. U.S. rent prices extended its 11th straight month of record-level gains and reached another new high as another double-digit increase was recorded. Supply shortage in available rentals has contributed to the prolonged run-up in price growth, while robust home price increases most likely have played a role in the high rent growth as well. San Diego-Carlsbad had one of the highest year-over-year increase in California at 17.1%, while Los Angeles-Long Beach-Glendale also experienced double-digit growth.
Fewer Buyers Searching for a Home: While sales remained solid in the latest sales and price report, there are signs that imply a market slowdown could be forth coming in the second half of 2022. A quarterly report released by National Association of Home Builders suggests that fewer buyers were trying to find a home to buy in the first quarter of this year. The share of prospective buyers who were actively searching declined to 46% in Q122, back to pre-pandemic levels after reaching a recent peak of 61% in Q221. For those who had not been successful in finding a home, the share who plan to give up their home search until next year or later rose for the third straight quarter to 25% in Q122, after bottoming out at 20% in Q221. Higher mortgage rates and double-digit growth in home prices are slowing down the housing demand momentum and the effect may become evident in a couple of months.
Mortgage Applications Dip as Rates Climb Further: With interest rates remaining on the rise, mortgage applications continued to decline since they started slowing in early February. The Market Composite Index, a measure of mortgage loan application volume, dropped 5% on a week-over-week basis (seasonally adjusted). The decrease was attributed primarily to the fall in refinancing activities, with the corresponding index down 8% from the prior week and was 68% lower than the same week a year ago. Purchase applications also weakened but at a more moderate pace of -3% week-to-week and -14% year-over-year.
Homebuilding Momentum Continues: Building activities was the pleasant surprise this week, as overall housing starts increased 0.3% from the prior month, while building permits also rose solidly on a month-to-month basis. Much of the upward adjustment came from multifamily units, however, as single-family starts actually declined 1.7% in March and permits fell 4.8%. Despite the pullback, single-family construction remained exceptionally strong year-over-year, with starts totaled 1.2 million units this year compared to 1.13 million units in 2021. The strong start in home building in Q122 reflects some easing in supply constraints, as builders may have found workarounds while construction employment continues to improve.
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