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California home prices, sales forecasted to spike amid lower interest rates

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Published  September 26, 2024 12:33pm PDT
Real Estate
KTVU FOX 2

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OAKLAND, Calif. - Call it a Catch-22 for prospective home buyers in California. Good news is that interest rates are finally coming down. But with lower rates, buyers are returning to the market, which is expected to heat up competition and drive up prices.

The California Association of Realtors (C.A.R) is projecting that the median home price in the state will spike 6.8% to $869,500 in 2024, and then surge 4.6% to $909,400 next year.

The real estate group forecasted that the average 30-year, fixed mortgage interest rate will slide from 6.6% in 2024 to 5.9% in 2025. 

Experts also said that while next year’s projected average for the 30-year will be higher than the levels prior to the pandemic, it’s expected to still be lower than the long-run average of almost 8% in the past 50 years.

In the Bay Area, where historically, home prices have been among the highest in the state, C.A.R. forecasted, "Prices will increase moderately by mid-single digits."

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The latest monthly figures from the real estate group showed the median price for an existing single-family home was $1.24 million in August, down 1.6% from a year ago. The statewide median was almost $889K.

San Mateo County had the highest median at $1.9 million, not only in the Bay Area, but statewide, according to C.A.R. figures. 

Santa Clara County followed closely behind at $1.85 million, and San Francisco’s median was $1.53 million.

Solano County had the lowest median in the Bay Area at $600K. 

C.A.R forecasted that in the next 18 months, as interest rates fall and homeowners and real estate investors who have been hesitant to sell in a slow market will put their properties up for sale.    

"Although inventory is expected to loosen as rates ease, demand will also increase with lower mortgage rates and limited housing supply, which will push home prices higher next year," C.A.R. Senior Vice President and Chief Economist Jordan Levine were quoted as saying in a release issued by the real estate group.

C.A.R. projected active listings could be up 10% in the Bay Area next year.

Figures show that home sales fell more than 8% in August from the previous month. But the year-to-year change was actually in positive territory, with a 4.8% increase. 

Sonoma County saw the greatest year-to-year jump in sales with an increase of more than 15%, and Napa County had the biggest drop, falling 12 percent from the year before.