Is affordability improving in the California real estate market?
Affordability is a hot topic in today’s real estate market. For Californians, the issue is even more pressing, as prices continue to climb in most of the state’s larger metros. Despite growing concern over California real estate getting too high, recent reports may show that affordability may actually be improving in The Golden State.
More homes are selling below asking price.
According to data from the November 2016 REALTOR® Market Pulse Survey from the California Association of REALTORS® (CAR), the share of California homes selling below asking price increased from 40% in November 2015 to 44% in November 2016. Additionally, the share of homes selling above asking price fell to 25% in November 2016 from 27% in November 2015. The remaining 31% of homes sold at asking price, down from 33% in November 2015.
Premium paid over asking price is dropping.
Even though the report found that a quarter of all California home purchases were above asking price, the premium buyers are paying above asking price is getting smaller. In other words, the homes that are selling for more than the asking price aren’t selling for as much more as they used to.
According to the report, for California homes that sold above asking price, the premium paid over asking price decreased to 8.4% in November 2016, down from 9.1% in October 2016 and down from 8.9% in November 2015.
More homes had listing price reductions.
According to the report, about a third (31%) of California properties had listing price reductions in November 2016. This was unchanged from October 2016, but up slightly from 30% in November 2015.
Why the change?
California REALTORS® responding to the CAR November Market Pulse Survey reported a decline in floor calls, listing appointments and open house traffic, indicating a slowdown. While this could be tied to the start of the winter season typically being the slowest for real estate markets nationwide, there may also be some reluctance to buy amid the talk of rising interest rates. In fact, three times the number of REALTORS® reported a concern with rising rates when compared to October 2016.
Why the rate changes shouldn’t scare you.
By now, we know that mortgage rates have inched up slightly since the end of last year. However, with rates remaining near historic lows and the market experiencing less aggressive demand, now could be the perfect time to buy. Less competition from other borrowers is a trademark advantage to buying in the off season; however with spring only about a month away, California buyers who want to get the best deal may do well to move quickly.
Don’t let the thought of a slightly higher mortgage rate scare you away from owning your own home. Nearly every real estate expert and economist that has commented on the subject has said the value in owning a home is still substantial enough to warrant the potential (and most likely minuscule) rate increase. CNN Money published a great article on the subject, explaining that, on average, U.S. homeowners will pay $21 more per month due to the projected rate increase. When you compare the financial cost of owning a home against the benefits (both short and long term, financial and emotional), even with a slight rate increase, the benefits typically outweigh the costs.
Ready to learn about finding a mortgage for your California home purchase? Call (707) 522-1887 to connect with one of our mortgage experts and request a free rate quote.