For the first time in California’s entire history, the median home price surpassed $600,000 in May 2018, according to data published by the California Association of Realtors. The $600,000 median home price for California was more than double the reported national median home price of $264,800.
According to the California Association of Realtors, the median home price of $600,800 that was reached in May 2018 was up 2.8% from April and 9.2% from the previous year in May 2017. Over 11 years ago in May 2007 when the state’s housing market last peaked, the previous all-time median price record was $594,530.
May 2018, or a few months into the summer months, may later prove to be the latest home selling peak months in California partly since the Federal Reserve continues their interest rate hike campaign, which is likely to reduce the number of qualified borrowers for these pricey homes. If so, there may be more sellers than buyers to work with in the near future. Declining Home Supply and Price Pressure
Over the past several years, there has been a rather large shortage of affordable properties available for purchase as well as a declining supply of new homes or condominium units being built. Partly due to the rapidly increasing costs and permit fee expenses for builders in the state, it’s quite challenging for real estate developers to deliver new housing units that are priced near the lower end of the price spectrum somewhere in the $200,000 to $400,000 price ranges.
Between the 2nd quarter of 2017 and the second quarter of 2018, the available supply of affordably priced residential units fell by 29% while the supply of homes for sale above $1 million increased by more than 18%. In spite of these high list prices, the median time that it took to sell a single-family home in California in May 2018 was just 15 days. Under the economic theory of the Laws of Supply and Demand, the prices for any goods or service will continue to rise for so long as the demand far exceeds the available supply.
California Home Prices in the 21st Century
Few places in the world have seen homes skyrocket in value from the start of the 21st century in 2000 to present day in 2018. The growth percentages in the 21st century are staggering when compared to the slower percentage increases seen in the 2nd half of the 20th century. Listed below are three of the most expensive counties in just Southern California alone to better comprehend how high that the median single-family home prices have risen:
In the incredibly expensive region of the Bay Area in Northern California, the median home price jumped 16.4% from May 2017 to May 2018 to hit $1,088,000. There were a whopping five counties (Marin, San Mateo, San Francisco, Santa Clara, and Alameda) in May 2018 that all had median home sales prices above $1 million dollars. The median home sales prices in these counties varied from a low of $1 million to a high of $1.62 million. In spite of the staggeringly high list prices, the typical home buyer in San Francisco County paid an average of 18% over and above the asking price. The average offering price paid per square foot in the San Francisco County region was more than $1,000 per square foot.
When comparing California’s median home price of $211,500 at the start of the 21st century in 2000 to today’s median prices that range from a statewide low median price of $600,000 to a high of over $1.6 million in San Francisco County, it is amazing how much higher the prices are for homes today statewide. At some point, these property values are more likely to stabilize or even fall as fewer borrowers may be able to qualify for these high home prices. Only time will tell which direction that home values will go in both California and the rest of the nation.