California Home Sales Drop 30 Percent as Housing Recession Bites

A sign is posted in front of new homes for sale at Hamilton Cottages in Novato, Calif., on Sept. 24, 2020. (Justin Sullivan/Getty Images)

Sales of homes in California were down more than 30 percent in September compared to a year prior, resuming a declining trend that began earlier this year amid soaring interest rates and inflation.

Owing to a rise in rates, last month’s median home price was $821,680, which was down 2.1 percent from August, but up 1.6 percent from September 2021, according to the California Association of Realtors (CAR).

Meanwhile, sales of existing, single-family detached homes in the state totaled 305,680 in September on a seasonally adjusted annualized rate, down 2.5 percent from August, when they totaled 313,540, and down 30.2 percent from September last year, when 438,190 homes were sold on an annualized basis.

Year-to-date statewide home sales were down 16.5 percent in September, according to the CAR, which collects information from more than 90 local realtor associations and multiple-listing services across the state.

Home sales in California have declined for 15 straight months on a yearly basis, according to the CAR, and the latest dip marks the second time in the last three months that sales dropped more than 30 percent from a year ago.

Elsewhere, it took roughly 22 days to sell a California single-family home in September, compared to 10 days a year prior.

Pointing to increasing inflation, higher interest rates, and economic uncertainty, CAR said that home sales are unlikely to see increased demand next year.

Bleak Outlook for 2023

“September’s sales and price declines reaffirm our forecast for next year,” said CAR Vice President and Chief Economist Jordan Levine. “High inflationary pressures will keep mortgage rates elevated, which will reduce homebuyers’ purchasing power and depress housing affordability in the upcoming year. With borrowing costs remaining high in the next 12 months, a pullback in sales and a downward adjustment in home prices are expected in 2023.”

The average mortgage rates on 30-year fixed loans have reached their highest level since April 2002, according to data from mortgage lender Freddie Mac, which pegs them at nearly 7 percent, while the average rate on a 15-year fixed mortgage is 6.09 percent.

Mortgage rates have been feeling the pressure as the Federal Reserve moves to curb red-hot inflation with a series of rate hikes. More hikes are widely expected in the coming months as the central bank attempts to meet its inflation rate goal of 2 percent.

Despite those hikes, inflation is still rife in the United States, and stood at 8.2 percent in September, missing out on market expectations of 8.1 percent.

Fears of a full-scale recession are increasingly mounting, with the International Monetary Fund (IMF), on Oct. 11, warning of a potential global recession next year.

“The worst is yet to come, and for many people, 2023 will feel like a recession,” said IMF Chief Economist Pierre-Olivier Gourinchas in the agency’s World Economic Outlook report.

Bryan Jung contributed to this report.