Statewide home sales ease as mortgage interest rates rise

The California Association of Realtors reports statewide home sales moderated in February as interest rates rose. On a year-over-year basis, robust demand and a shortage of homes for sale continued to push up home prices. Realtor officials speculate how the rise in interest rates could affect the market.

Closed escrow sales of single-family detached homes in California totaled 462,720 in February, a decrease of 4.5 percent from 484,760 in January. Home sales were up 9.7 percent from a year ago, when 421,670 homes were sold.

Meanwhile the statewide median home price dipped to $699,000 in February, down 0.1 percent from $699,920 in January. February’s median price was up 20.6 percent from $579,770 recorded last year.

“While higher rates may slow growth in home sales temporarily, the major roadblock in the long run is a shortage of homes for sale,” said C.A.R. President Dave Walsh. “With inventory dropping more than a half from a year ago, the market will soften in the second half of 2021 if we don’t see enough homes come on the market to meet demand.”

According to C.A.R. Vice President and Chief Economist Jordan Levine, “The upward movement in rates has called into question whether the market will sustain its momentum going into the spring homebuying season.”

All major regions, except for the Central Valley, experienced a surge in sales from a year ago. All major regions also recorded double-digit increases in the median price increased from last year, with the San Francisco

Bay Area growing strongest at 26.5 percent. The Bay Area posted a double-digit year-overyear increases in sales from a year ago.

In Silicon Valley, prices remained strong as demand for homes has not receded, said Joanne Fraser, president of the Silicon Valley Association of Realtors. “We are seeing significant increases in what buyers are willing to pay. The sale to list price ratio is over 100 percent across the valley. Multiple offers are driving prices upward to an all point high, which is a tremendous value for sellers. We saw a rise in new listings in February, but not enough to keep up with demand.”

Sales in Santa Clara County were down 2 percent from January and were 23.5 percent higher than in February 2020 before the pandemic hit the area. The February median price jumped 8 percent to $1,486,250 from $1,375,000 in January and was 10 percent higher than the February 2020 median of $1,350,000. The median days on market was at eight, down from nine days in January.

The 30-year, fixedmortgage interest rate averaged 2.81 percent in February compared to 2.74 percent in January. “Some buyers may hesitate to buy due to higher interest rates, but by historical standards interest rates are still relatively low. Their move upward could motivate buyers to act quickly before rates increase further,” said Fraser. “Also, the spring weather, more people getting vaccinated and getting out of a Covid lockdown could also be motivating factors that may add momentum to the market.”