August 2016 California Real Estate Market Update
The real estate market in California is HOT this summer….and Hot to touch for renters!
California’s typically busy real estate markets have been continuing to lead the trend, as seven of the top ten hottest markets as determined by an economist for the National Association of REALTORS.
Data indicates that nationally, July was one of the busiest months for real estate activity in a decade, driven by low mortgage interest rates and pent-up demand from low supply. Overall, home sales increased 10 percent in June over the previous month and 2.2 percent over June 2015 (National Association of REALTORS).
Home sales have been booming even as prices continue to climb, making it a perfect time for a homeowner to sell. Inventory of homes for sale ended 2015 at a 22-year low. (www.housingpredictor.com/2016)
Low inventory spurs stiff competition among home buyers. That means sellers can demand top-dollar for their properties. According to the California Association of Realtors, the median price of a single-family detached home in California rose to $519,440 in June, a 5.5 increase over June 2015’s median price of $492,320. The average price per square foot was $247, up from $237 in June 2015. That’s nearly double the national average of $249,800.
Note: San Luis Obispo's median sale price is $652,300. Search SLO Homes for sale HERE.
Low mortgage rates keep the seemingly astronomical price tags within the realm of affordability for many home buyers, however. The 30-year fixed-mortgage interest rate averaged 3.57 percent in June, compared with 3.60 percent in May and 3.98 percent in June 2015. In 2007, the average rate hovered around 6.7 percent. Rates are low enough that despite increasing home prices, typical mortgage payments are still lower for 2016 buyers than they were in 2007.
California’s housing stock has not kept pace with the state’s booming economy; another factor that may be driving real estate activity. California’s continued housing shortage, particularly in coastal areas, is a problem compounded by the startling lack of construction. According to one report from the nonpartisan organization Next10, only 21.5 new residential permits have been issued for every 100 new residents from 2005 to 2015, and only 59 percent of those permits were for single-family structures. (SetSchedule.com) Over the past three decades, California has added about half the number of units needed to keep housing costs in line with the rest of the U.S.
This has led to increased rental prices and more cases of room sharing. Median rents across the state have increased 24 percent since 2000, and at the same time, median renter household incomes have declined 7 percent. While homeowners spent about a quarter of their annual income on their housing mortgages, the highest of all states, renters in California spent on average 36 percent of their incomes on their housing, more than only two other states, up from an already high 28.1 percent in 2000 (la.curbed.com). Beacon found that, in 2014, California ranked a miserable 49th in home ownership rates among states, with less than 54 percent of homes occupied by their owner. The state also finished dead last in overall affordability.
*San Luis Obispo, one of the little known gems located between Los Angeles and San Francisco, has a median sale price of $652,300, without the hustle and bustle of the larger cities. The Pacific Ocean is only 11 miles west of the city making it an ideal location for beach lovers who don’t want to pay the inflated cost of being closer. The city houses the California Polytechnic State University, which brings with it the amenities of any major college campus – arts, transportation, and entertainment. And one of the main draws is the wide range of outdoor activities like hiking, kayaking, surfing, and sailing. (Housing Predictor)