Central Valley counties won’t solve the housing shortage anytime soon but buyers should see lower prices, better inventory and leveling interest rates
TULARE COUNTY – The statewide shortage of homes won’t improve anytime soon but the price of existing homes should be coming down as interest rates level off and buyers see less competition.
The number of new home building permits issued in the Central Valley for the first two months of 2023 numbered 534 through March 5 compared to 911 this time a year ago. It is not just the residential market that is sagging by more than 40% this year. The value of all commercial permits is down by a similar level valued at $114 million so far in 2023 in Madera, Fresno, Kings and Tulare Counties. That is way down from $231 million in the first two months of 2022, according to Construction Monitor, a trade website which tracks construction permits nationwide.
High mortgage rates and reduced demand is having an effect on both sales and price of existing homes in Visalia, according to Tulare County Association of Realtors’ February figures. In Visalia, sold listings are down 40% so far this year and the average sales price has dropped 11%. The average sales price in Visalia was $355,000 as of February 2023 compared to $398,000 a year earlier.
“With home prices expected to remain soft and the mix of sales continuing to shift toward less expensive housing units throughout the rest of 2023, the market will see more downward price adjustments in the next few months,” C.A.R. Vice President and Chief Economist Jordan Levine said.
The average sales price of an existing home has made it hard for a California family to own a home across the state. The California Association of Realtors says 17% of California households could afford to purchase the $790,020 median-priced home in the fourth quarter of 2022, down from 18% in third-quarter 2022 and down 25% from fourth-quarter 2021. The report said affordability in Kings County was better at 35%.
Fewer sellers, fewer buyers
In Visalia there are about half as many active listings on the market year over year in the Multiple Listing Service (MLS), a database built on surveys of more than 90 associations of realtors in the state. Sellers are pulling back along with buyers which has increased the inventory of available homes for sale. The cooling market helped housing inventory in California reach its highest level in almost three years in January. The statewide unsold inventory index (UII) was double the level of 1.8 months recorded in the same month of last year, surging to 3.6 months in January 2023, a level last seen in May 2020, when the state underwent a pandemic lockdown. Unsold inventory increased from a year ago by 88% or more in all price ranges, with the $500,000-$749,000 price range gaining the most (112.5%), followed by the $1 million-and-up price tier (105.0%), the $750,000-$999,000 (100.0%) and the sub-$500,000 (88.9%).
In Tulare County, unsold inventory rose from 2.6 months in December to 3.8 months in January, double the 1.9 months in January 2022. Houses for sale are also staying on the market three times longer than a year ago, increasing from 11 weeks to 34 weeks.
Using figures from Construction Monitor, Kings County’s new home permits are at a similar pace to last year at this time while the value of commercial projects is just $3 million so far this year compared to $10 million at this time last year.
California Association of Realtors’ January 2023 resale housing report revealed significant year-over-year declines in both home sales and median prices throughout major regions of California. All major regions experienced year-over-year sales drops of over one-third, with the Central Valley and Southern California experiencing the steepest declines at -43.3% and -41.1%, respectively.
The Federal Reserve policy of higher interest rates to fight inflation has propelled mortgage rates into the low 7’s this week. The 30-year, fixed-mortgage interest rate averaged 6.27% in January, up from 3.45% in January 2022, according to Freddie Mac.
“Thanks to slightly waning interest rates and tempering home prices, California’s housing market kicked off the new year with another step up and continued to improve in January as buyers gained more confidence in purchasing a home and the affordability outlook improving slightly,” said C.A.R. President and Bay Area realtor Jennifer Branchini. “While the monthly sales gains have been nominal over the past two months, the market is moving in the right direction, and more gradual improvements could be coming in the months ahead as the market moves into the spring homebuying season in a few weeks.”
