News Summary

California’s housing market sees a sharp 8.4% drop in pending home sales year over year, the largest decline since October 2023. High housing costs, weather conditions, and severe wildfires are contributing to this downturn, while a surprising rise in mortgage-purchase applications indicates potential buyers are still interested. Experts offer mixed predictions for the market’s future, with potential increases in sales and home prices by 2025.

Pending Home Sales in California Take a Hit: What’s Going On?

As we settle into the new year, many in California are keeping a close eye on the housing market that seems to be ever-changing. Recent reports indicate that pending home sales have plummeted by 8.4% year over year for the four weeks ending January 12. This sharp decline marks the largest drop since October 2023, raising eyebrows among homeowners and potential buyers alike.

Why Are Sales Falling?

Several factors contribute to this significant dip in pending sales. First, the ongoing issue of high housing costs is making it hard for many prospective buyers to enter the market. As the median housing payment in the U.S. has reached its highest level in over two months at around $2,586 a month, buyers are feeling the strain on their budgets. The median sale price sits at about $379,609, which doesn’t make things any easier.

Adding to the woes are environmental factors that are influencing buyer behavior. The devastating wildfires across California not only affect property values but also discourage potential buyers from flocking to areas that are still recovering. In fact, in Los Angeles alone, pending sales fell by 4% year over year, accompanied by a 2.5% drop in new listings as residents grapple with the aftermath of these terrible fires.

Weather Woes and Buyer Decisions

Compounding these challenges is the severe winter weather that has swept through parts of the Northeast, Midwest, and South. Bitter cold and heavy snow are keeping homeowners from listing their properties and potential buyers from venturing out to visit available homes. Conditions are making it difficult for the market to rebound as more folks are forced to stay cozy at home rather than explore new housing options.

A Glimmer of Hope?

mortgage-purchase applications, which rose by 27% for the week ending January 10—the highest level seen in nearly a year. This uptick might suggest that some buyers are still out there, eager to find a deal. Furthermore, mortgage rates have been on a slight decline following a recent consumer price index report that hinted at softer core inflation, potentially paving the way for smoother market conditions.