Newsweek

California Housing Market Soars Back to Life

A "for sale" sign is posted in front of a home in Sacramento, California, on March 3, 2022. Rich Pedroncelli/AP<br />

The California housing market is showing signs of a dramatic rebound, recording its highest number of home sales in more than two years in February.

Average house prices have also risen in the state. The surge was fueled by declining mortgage rates at the start of the year and an uptick in available inventory, according to the California Association of Realtors (CAR).

Why It Matters

Although home sales have rebounded strongly, they have remained below the 300,000 mark since September 2022. With uncertainty still the theme for at least the first half of this year, housing sentiment could be negatively impacted and home sales could remain soft in the coming months.

What To Know

California’s housing market experienced a significant rebound in February, with existing, single-family home sales reaching 283,540 on a seasonally adjusted annualized basis. This marked an 11.6 percent increase from January and a 2.6 percent rise from February 2024—the highest sales level since October 2022, signaling renewed buyer activity after a sluggish start to the year.

But while statewide sales have surged, regional performance was mixed.

Two of California’s five major regions saw year-over-year sales growth, with the San Francisco Bay Area recording a 3.5 percent increase and the Central Coast rising by 1.6 percent. However, the Far North, Central Valley and Southern California regions recorded slight annual declines, with sales dipping between 3.0 percent and 4.9 percent.

At the county level, 23 of the 53 tracked by CAR posted annual sales gains. Calaveras County led with a 35.5 percent surge, while Tehama County experienced the steepest drop, falling 43.5 percent from the previous year.

Inventory has also grown, with 32 percent more homes for sale in Los Angeles County compared to February 2024, according to the Los Angeles Times. But homes took an average of 26 days to sell in February, compared to 22 days a year ago.

Meanwhile, average house prices have also risen in California. According to CAR, the statewide median home price now stands at $829,060, reflecting a 1.2 percent drop from January but a 2.8 percent year-over-year increase. Zillow puts the average California home value at $784,840, up 3.0 percent over the past year.

However, while California home prices have climbed for 20 consecutive months, February’s gain was the smallest since July 2023, indicating a potential cooling in price growth.

But despite sales and prices still being below historical averages, CAR economists see February’s sales rebound as a positive shift for California’s housing market. Chief Economist Jordan Levine said he expects stabilizing mortgage rates later this year, which could support further growth.

Meanwhile, CAR President Heather Ozur attributed the surge to lower borrowing costs and increased inventory, which made homeownership more accessible and helped ease some of the competitive pressures that have defined the market in recent years.

But while things may be looking up for homeowners, the same can’t be said for renters in Southern California, where the rental market is facing new pressures. January’s wildfires destroyed thousands of single-family homes, the Los Angeles Times reported, pushing many displaced residents into the rental market. Experts anticipate that rents will rise most sharply for larger units near burn areas, such as Pacific Palisades and Altadena, while smaller and more distant units may see less upward price pressure.

California’s cost of living is among the highest in the United States, driven significantly by elevated housing expenses. In 2017, the median home price in California was more than 2.5 times the national median, with coastal urban areas experiencing even higher prices.

What People Are Saying

CAR Senior Vice President and Chief Economist Jordan Levine: “Although sales are still below historical averages, this increase marks an encouraging shift in the market. Despite ongoing economic and policy uncertainties, mortgage rates are expected to stabilize later this year, supporting further growth.”

CAR President Heather Ozur: “California home sales rebounded strongly in February after a sluggish start to the year, supported by increased buyer activity and more available homes on the market. Lower borrowing costs made homeownership more accessible to buyers who were previously sidelined by affordability challenges, while the rise in available inventory will help ease some of the competitive pressures that have defined the market in recent years and set a positive tone for the market for the rest of the year.”