November 25, 2024 – California housing market bounced back in October and had the fastest year-over-year growth pace in sales in 40 months. Last month’s statewide median price also increased from a year ago and recorded the largest gain in the past three months. The supply condition improved as well with new active listings exceeding the year-ago level for the 10^th consecutive month. On the newly construction home front, builder confidence reached a 7-month high, and developers believed that the latest election outcome will provide regulatory relief for the industry in the coming years. The optimism will likely result in more housing units being built, which is encouraging news for the market.

Home prices in California record fastest growth pace in three months: California median price rose again in October as it increased from both the previous month and the same month of last year. The year-over-year gain last month was the fastest growth pace recorded in the past three months, and the 5.8% jump marked the sixteenth consecutive month of annual price increase for the Golden State. On a month-to-month basis, the median price increased 2.4% – the largest September-to-October increase in at least the last 45 years. It was also larger than the long-run average of 1.5% decline between those months. Home prices could soften in coming months as the market enters the traditional off-season but should continue to register year-over-year growth for the rest of the year.

Housing supply continues to increase in October: New active listings at the state level improved from a year ago for the tenth consecutive month in October. The pace of new listings was not only the highest since July of this year, but it was the ninth time in the last ten months that new for-sale properties increased by double digits. Consistent growth is a promising sign for the supply side, as 42 of the 52 counties tracked by C.A.R. increased in new active listings from October 2023. Sutter increased the most on a year-over-year basis with a jump of 57.8%, followed closely by Yuba (57.6%) and Calaveras (54.2%). Two counties were unchanged, and eight counties declined in new active listings from the same month of last year in October. Trinity (-28.6%) had the biggest drop, followed by Plumas (-21.4%) and Lassen (-13.0%).

Single-family rent growth remains positive but begins to fizzle: U.S. single-family home rent prices went up 2.0% year- over-year in September, the lowest rate since late 2023 and was below the pre-pandemic average of 3.5% recorded in the decade prior to COVID. According to the latest CoreLogic Single-Family Rent Index, rent growth for detached units increased 2.3% year-over-year, while attached properties went up more modestly by 1.5%. Rent growth on high-end units (2.6%) continued to outpace their low-end counterparts (2.5%) but decelerated slightly from 2.9% recorded in August. Of the metropolitan areas surveyed by CoreLogic, two of them recorded an increase of 5% or more, with Detroit (5.2%) posted the highest year-over-year increase, followed by Seattle (5%). Los Angeles (1.9%) continued to register a mild gain in rent prices in September, but San Diego (-0.7%) was one of the four metro areas that recorded a negative growth from last year. With many multifamily rental properties flooding the market in the past 12 months, single-family rent growth is expected to moderate further in the short term.

Housing starts fall sharply as hurricanes and rates weigh on construction: The U.S. Census Bureau reported a seasonally adjusted annual rate of 1.31 million units of housing starts in October, a drop of 3.1% from September and a fall of 4.0% from October 2023. Last month’s decline in construction activity was due primarily to the adverse impacts of hurricanes Helene and Milton, but the recent spike in mortgage rates might have played a minor role as well. The weather-related pullback was evidenced by a sharp decline in the South region where total starts dropped 8.8%, while housing starts in the Midwest and the West rose solidly. Single-family starts had a monthly decline for the first time in three months, with a drop of 6.9% from September. In the West region, however, single-family units continued to rise modestly at 4.6% but dipped 9.1% from the same month last year. Multifamily starts at the national level jumped 9.6% from September but continued to downshift from last year with a -12.6% growth rate.

Builder confidence improves to 7-month high: With the election uncertainty lifted and Republicans winning control of the White House and Congress, builder sentiment improved for the third consecutive month as they expect market conditions will continue to improve. The NAHB Housing Market Index, a measure that reflects builder confidence, increased three points to 46, the highest level since April 2024. While labor shortages and buildable lots will continue to be issues for developers, builders are feeling more confident as they believe regulatory relief for the industry will be forthcoming in the years to come. The latest survey also revealed that the share of builders cutting home prices dipped slightly from 32% in October to 31% in November. The usage of sales incentives also went down to 60% in the latest report from 62% in the prior month. 

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