California homebuying: Collapse? Crumble? Or crash?

A 21-month streak of statewide sales pace below 300,000 a year is the longest dip in stats dating to 1990.

You pick the description for the dramatic drop in California home sales.

Did sales collapse? Crumble? Cave in? Crack? Or … crash?

At 2024’s mid-point, my trusty spreadsheet peered into the California Association of Realtors’ statewide homebuying database to see the stunning depth of the current homebuying slump.

California single-family homes were sold at a 270,200 annual rate in June. Semantics aside, how slow is that?

While it’s just off 3% in a year, it’s down 32% compared with the quaint, pre-pandemic days of 2018-19.

Next, when looking all the way back to 1990, June sales were 33% below average. And only 6% of all those months had fewer sales over those 34 years.

Also, consider that the last time California’s buying pace exceeded the 300,000-a-year speed it was September 2022, not too long after the Federal Reserve began raising rates to cool an overheated economy, in turn producing painful inflation.

This 21-month streak below 300,000 is the longest dip in homebuying data stretching back to 1990. The previous record was 10 months that ended in March 2008, a time when housing’s bubble burst, collapsing the world’s financial markets into the Great Recession.

Since 2008, California’s population grew by 6% and its jobs grew by 16%. So this current sales pace looks even weaker on any per capita kind of measurement.

Price points

Yes, buyers statewide paid a median $900,720 in June, the third-highest price on record following all-time highs set in April and May.

The price benchmark is up 7.5% in a year. That’s generous appreciation compared with historic gains that averaged 5.4% annually. And June’s median price was 55% above what was paid in 2018-19.

Of course, house hunters aren’t cheering these high prices. As mortgage rates nearly tripled in three years from below 3% to above 7% – with prices roughly staying firm – affordability all but disappeared. Sadly, housing has become a rich person’s game.

Rising prices and rates mean a house hunter’s theoretical mortgage payment rose 10% in a year – and is up a ridiculous 108% compared with the 2018-19 span.

Realtor stats show us that only 17% of Californians could afford to buy the median-priced home in 2024’s first quarter. That’s down from 20% a year earlier, and the 29% average in 2018-19.

More options

We were told last year that prices remained high because house hunter’s options were dramatically limited.

But there are significantly more houses on the market in 2024. Realtor stats showed a three-month supply at the current sales pace in June, up 36% in a year.

But more listings with fewer sales is a very worrisome trend.

To be fair, the inventory is not plentiful. June’s supply was 13% below 2018-19 and 47% below the 34-year average.

Yet even the feverish rush to buy – a trend that’s supporting those high prices – has cooled a bit this year.

California homes stayed on the market 18 days in June, Realtor stats show. That’s three days longer in a year.

Still, the selling speed looks swift historically: June’s pace was two days quicker than 2018-19 and 23 days quicker than the 34-year norm.

Bottom line

California’s housing market needs cheaper prices if homebuying is to regain its health.

Consider this current 21-month sales “whatever” by looking at all 21-month periods going back 34 years.

Since September 2022, California’s sales pace is down 37% while the median price rose 10%.

Next, think about the Great Recession and its worst 21 months for sales, ending July 2008. California sales fell 38% combined with a 36% decline in prices. You can blame the end of easy money lending.

And don’t forget the ugliness of the early 1990s. California sales fell by 5% while prices were down 5%. Blame the demise of a lending force: the savings and loan industry.

Now, economic cycles are rarely the same. But when demand is weak, markets are vulnerable. So, let’s watch how California prices fare in the next 21 months after these two lethargic periods.

In the early 1990s, there was an additional 7% price dip as mortgage rates rose 1 percentage point to 8.5%.

However, in the Great Recession era, California prices fell another 14% despite rates dropping by 1.3 percentage points to 5.1%.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com