California Real Estate: Median Home Prices Hold Steady

Buyers’ fatigue may have helped stabilize sales figures in May, but brokers expect a renewed frenzy in coming months.

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It’s a shift of only one or two degrees, but the red-hot housing market in California is finally starting to cool.

Despite the median home price hitting yet another record high in May, year-to-date statewide home sales dipped in the state by 2.7 percent in May. They had been rising steadily since February. And for the first time in 2021, the median number of days that a single-family home was on the market did not drop, but rather held steady at seven, the same number recorded in April.

“Buyers are getting fed up at this point with submitting as many as eight to 12 offers and getting rejected,” said John Graff, a Los Angeles-based broker and the chief executive of Ashby & Graff Real Estate. “They’re throwing up their hands at this point.”

The median price for a single-family home in California hit $818,260 in May, an uptick of half a percentage point from last month. It’s an acceleration with a foot off the gas: In April, when the median price hit $814,010, prices had jumped 7 percent from the previous month to cross the $800,000 threshold for the first time in history.

Only seven months prior, the median price crossed $700,000 for the first time, and one year ago, in May 2020, the median price for a single-family home in California was $588,070.

“My clients are exhausted. They would still love to buy a house but they’re not interested in the bidding wars,” said Kelli Miller, a broker in San Diego. “I’m still seeing multiple offers, but it’s not the frenzy that it was before.”

Ms. Miller said the downgrade was more noticeable among homes priced below $1 million, noting that it was those homes that would have received a dozen offers or more just a few months ago. They are now receiving “only” five or six offers. Much of that has to do with inflated asking prices, which have been propelled upward by a trifecta of record-low supply, increased demand and rock-bottom mortgage rates.

“Most families just are not interested in paying such a marked-up premium,” she said.

A May 2021 report from the California Association of Realtors noted that the sales of ultraluxury properties played a significant role in May’s record-breaking median home price, referring to “robust demand of higher-priced properties” and adding that the market share of $1 million home sales in California has increased more than 200 percent from May 2020.

“More million dollar properties were sold in the past couple of months than homes priced below $500,000,” the report’s authors added.

California, which remains mired in an affordable housing crisis, saw its population decline last year for the first time in more than a century. And the demographics of its cities and suburbs remain in flux as many residents, particularly young families with children, leave its urban centers for more affordable homes in further-flung spots.

The cooling was more apparent in the Los Angeles Metro area, where the median home price — $725,000 — remained unchanged from last month; along the Central Coast, where the median sales price dipped 2.8 percent in May, and in California’s far north, where the median sales price slipped from $367,250 to $365,000. One area that doesn’t appear to be slowing, however, is the condo and townhouse market, which in May recorded an increase in median sales price of 3.9 percent, up to $592,000.

Jonathan Miller, of the appraisal firm Miller Samuel, compiles the monthly Elliman Report, an in-depth look at sales activity in several key U.S. markets, including California. While he agrees that the frenzy in California is starting to slow, he is quick to dismiss doomsday scenarios of an impending burst bubble.

“The lack of inventory is pervasive, and we’re seeing buyer fatigue. The market is still quite intense but not at the same level it was earlier in the year,” Mr. Miller said. “This doesn’t mean that the next step is a downward trend; it only suggests that the incline won’t be as steep as it was.”

Mr. Graff, the broker in Los Angeles, agrees.

“There’s been talk in some corners of a bubble and I want to emphasize that’s not true. It just comes down to supply and demand,” he said.

He dismisses another idea, as well: that the dip recorded in May will last through the summer.

“The market is still very hot,” he said. “This might be a slight cooling as buyers and sellers all take a collective pause to breathe, but there’s no sign of this abating any time soon.”

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