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Home sales in California have dipped below pre-pandemic levels as the effects of rising interest rates begin to show. Existing single-family home sales totaled 377,790 in May on a seasonally adjusted annualized rate, down 9.8 percent from April and down 15.2 percent from May 2021. Year-to-date statewide home sales were down 8.9 percent in May. California's housing market started showing signs of a market shift in May, as the monthly average 30-year fixed rate mortgage surpassed 5 percent for the first time since April 2010 which lead to the lowest sales level since June 2020 and the largest year-over-year decline in 5 months. While public health concerns and market uncertainty were the triggering factors that resulted in the sales decline 2 years ago, tight supply and the higher cost of borrowing were responsible for the large decline this time around. "We're beginning to see signs of a more balanced housing market with fewer homes selling above list price and homes remaining on the market a little longer than in previous months," said C.A.R. President Otto Catrina, a Bay Area real estate broker and REALTOR. "What this tells us is that there is slightly more supply, fewer and less- intense bidding wars, and those who've experienced 'buyers' fatigue' may now have a window of opportunity. " Pending home sales declined 30.6 percent in May – the biggest drop since the first month of the pandemic. This is likely due to eroding affordability, rising mortgage rates and home prices, and the increased risk of a recession. The combined effect of these factors resulted in a record increase in the average monthly mortgage payment to a typical home by more than 40 percent in May. With the Fed expected to raise rates further in the second half of the year, the 30-year fixed rate mortgage could surge past 6 percent by year's end and lead to more affordability challenges. The overall supply condition in California improved in May, partly due to a pullback in demand. With both closed sales and pending sales slowing by double-digits, total active listings experienced a gain of 46.7 percent in May, the largest year-over-year growth in at least the last 89 months! Active listings in May also climbed to the highest level since July 2020 and had a month-to-month increase of 26.4 percent from April. Source: www.car.org By Glenn and Nona Bradd, Realtors and Residents California May Sales & Price Report 12 | LIFE IN SOLERA | AUGUST 2022 |

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