After several months of stagnation, the total volume of real estate sales in January reached the highest level in six months, providing a glimmer of hope for the market. Particularly noteworthy was the first month-over-month increase in existing single-family home sales statewide in 31 months, injecting confidence into the entire market. At the same time, the inventory of homes for sale and pending sales in the state saw a year-over-year increase for the first time since May 2021, suggesting that the market may further warm up in the future.
It's worth noting that while the median price of existing single-family homes in California dipped below the $800,000 benchmark for the first time in January, it still experienced annual growth. Except for a few remote areas, the median home prices in all major regions showed an increase compared to the same period last year, demonstrating the overall resilience and warming trend of the market. Despite a slight increase in interest rates in recent weeks, housing prices are expected to continue rising moderately over the next few months due to ongoing housing supply shortages.
The year-over-year decline in active listings statewide continued, but the magnitude of the decline in January was the smallest in ten months. Meanwhile, new active listings saw a year-over-year increase for the first time in 19 months, with the annual growth rate reaching its highest level since May 2022, injecting new vitality into the market.
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However, the latest inflation data exceeded expectations, leading to interest rates rising to their highest level in two months last weekend, which may prompt more home sellers to pause listings in the coming weeks. Overall, it is expected that the rate reduction will be delayed until the end of the year, and the inventory situation in 2024 may gradually improve.
On the other hand, the seasonally adjusted annual rate of housing starts in California in January 2024 was 1.33 million units, down 14.8% from December last year and 0.7% from January 2023. This marks the largest monthly decline since April 2020, with housing starts dropping to the lowest level in five months. Weather factors and higher interest rates may have contributed to the sharp drop in construction activity in January.
Single-family housing starts declined by 4.7% month-over-month but increased by 22% from the same period last year. Meanwhile, the builder confidence index rose for the third consecutive month, indicating a positive attitude in the construction industry. With builder confidence levels continuing to rise, housing construction activity may accelerate again in the short term.
Additionally, in January 2024, consumer prices rose by 3.1% year-over-year, down from 3.4% in December last year but still higher than economists' forecast of 2.9%. The core CPI also exceeded economists' forecast of 3.7%.
Housing costs remained high, with its index increasing by 6.0% year-over-year, accounting for two-thirds of the monthly growth in all items. Given the persistent inflation, the likelihood of a rate cut after the March FOMC meeting is very low. In conclusion, based on the above data, the California real estate market showed signs of recovery in January 2024, and it may continue to develop in a positive direction in the future.
