Big drops in inventory thwart California buyers
California homebuyers are experiencing the worst situation in the country when it comes to new home listings.
- Several Southern California cities have seen new listings drop significantly year over year.
- The situation makes an already tough buying environment even more difficult.
- However, home sale prices have slipped just as drastically in some California markets, particularly Oakland and San Francisco.
Conventional wisdom suggests that good things come to those who wait, but the virtue of patience hasn't paid off for California homebuyers who have sat on the sidelines in hopes that the housing market would eventually offer good news.
Though hot — perhaps even bubbly — California markets have seen prices soften in the last year, inventory remains stubbornly tight in several of the state's biggest metro areas. According to Redfin's latest housing market update, new listings have dropped in all metropolitan areas the company tracks, but the situation is most dire in California.
New listings fell the most in Riverside, which witnessed a decline of 48.7% year-over-year, followed by Anaheim (-48.6%), Los Angeles (-40.6%) and San Diego (-39%). Las Vegas, down 38.6%, was the only city outside of California in the top five.
Nationally, new listings for sale dropped by 19% year-over-year for the four-week period ending May 7, meaning that the inventory situation in top California cities is considerably worse than in the typical city elsewhere in the U.S.
The inventory shortage is nothing new, particularly as homeowners who financed at record low rates in 2021 remain hesitant to list their homes for sale and lose out on a mortgage rate that is less than half of today's borrowing rates. But the situation in California remains tenuous as interest rates remain high and home prices continue to fluctuate dramatically.
According to the same Redfin report, home sale prices have dropped the most in hot pandemic markets, which includes many California metros. Of all cities analyzed, Austin has seen the biggest drop year over year, with home sale prices falling 17.7%. Oakland and San Francisco weren't close behind. Sale prices in the two metros have dropped 15.7% and 11.9% respectively. Las Vegas has seen home prices fall 10.7% since this same period last year, while San Jose has experienced a decline of 9.7%.
"A lot of potential home sales are locked up until mortgage rates come down to a level for which current owners would be willing to trade in their 3% rate," Redfin's Deputy Chief Economist Taylor Marr said in the report. "The problem is that's unlikely to happen anytime soon, as although inflation is steadily coming down from last year's record-high levels, it's still above target."