According to the National Association of Realtors®, the Pending Home Sales Index (PHSI) fell by 7.7% to 72.3% in April. Compared to the same period last year, pending transactions dropped by 7.4%. An index of 100 is equivalent to the contract activity level of 2001. "The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market," said NAR Chief Economist Lawrence Yun. "But the Federal Reserve's anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply." Yun added, "Home prices are hitting record highs, but the pace of gains should decelerate with more supply. However, the prospect of measurable home price declines appears minimal.”
According to April data, the number of existing home sales in California rose by 10% compared to the previous month and saw a 12.6% year-over-year increase. The number of homes listed for sale also saw a significant increase. In Northern California, homes for sale in the East Bay Area increased by 37% in April, reaching the highest level in four years. Inventory in the South Bay Area also increased by nearly 34% compared to the previous month but was down 1.4% compared to April 2023.
However, the increased inventory did not affect the home sale prices in The Bay Area. The median home price in the East Bay Area exceeded $1.26 million in April, up more than $90,000 compared to last year. The median home price in The South Bay Area continued to rise, increasing by $300,000 since the beginning of the year, solidly sitting at the $2 million mark, with a year-over-year increase of more than 14% compared to April 2023.
The increased inventory also stimulated an increase in sold volume. The East Bay Area saw nearly 300 more transactions in April than the previous month, with an increase of over 200 transactions year-over-year. The South Bay Area also performed well, with 143 more sold properties than the last month and an increase of 225 transactions compared to 2023.
Currently, the average days-on-market in The East Bay Area is 12 days, while it is 9 days in The South Bay Area. April data shows a significant increase in housing inventory, but it has not caused a decline in home prices. The continuous rise in prices suggests that The Bay Area market has not yet cooled.
Although the Consumer Price Index (CPI) in April was slightly better than in March, at 3.4%, it makes it harder to predict when the Federal Reserve will start lowering loan rates. Consumers have yet to see the expected rate cuts, causing Fannie Mae's Home Purchase Sentiment Index (HPSI) to drop 2.5 points to 69.4 in May. This reflects consumers' frustration and with the overall lack of purchasing affordability. On the other hand, homeowners’ perception of home-selling conditions declined only slightly and remains largely positive after a steady increase over the last few months. We predict that some homeowners may increasingly want or need to sell their homes for non-financial reasons, which may lead to an increase in the near term. Further improving housing inventory will lead to slightly increased sales activity through the end of the year. Currently, the Bay Area's market is mostly dominated by first-time homebuyers. If you plan to buy a home or have any questions about specific markets, feel free to contact us.
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