How much will California home sellers cut their prices as competition grows?
My trusty spreadsheet analyzed Realtor.com statistics on the number of existing houses and condos on the market and their asking prices. The average results for the three months ending in May were compared with two years earlier – a time when the pandemic homebuying frenzy was cooling – and with 2019, just before coronavirus upended the real estate scene.
The top line is that California list prices are down 1% this spring compared with two years ago following a 50% increase in active listings from 2023.
We know that affordability challenges have deterred numerous house hunters, as prices and mortgage rates remain stubbornly high. But at least as summer starts in 2025, the folks who dare shop for housing have far more options.
And pricing habits of California homeowners suggest that new inventory is being noticed.
Cost pressures
Is the uptick in homes for sale some dramatic exit strategy by owners?
Historically speaking, California’s supply of residences for sale has yet to surpass 2019 levels. California listings remain 13% below what’s seen as “normal” times of six years ago.
And nationally, California’s two-year inventory jump ranked only No. 30 among the states. Florida’s 125% increase was No. 1.
California bargains still seem impossible to find. California’s $764,000 listing price for the three months ending in May was the third-highest asking price in the nation, behind Massachusetts at $805,900 and Hawaii at $776,700.
Still, the 1% dip in asking price since the spring of 2023 is a sharp contrast to the previous four years.
California’s was one of 21 states with price cuts during the past two years. Hawaii’s 9% drop was the largest, followed by Iowa, down 8%, and Florida, down 7%.
Let’s not forget the pandemic era’s demand for larger living spaces, plus historically cheap mortgages fueled by the Federal Reserve.
The result was a 33% surge in California asking prices between 2019 and 2023. The only good news is that 39 states had bigger increases.
Bad mix
Elevated prices have persisted despite the Fed’s reversal from low-rate policies – a move aimed at cooling an overheated economy with the worst inflation in four decades.
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Housing affordability plummeted. Consider one estimate of a California buyer’s house payments, which shows that the monthly financial burden has tripled in 10 years.
No matter the math, it’s too much for California house hunters.
California homebuying in the past year ran 27% slower than its 20-year average pace dating to 2005, according to data from Attom. Nationally, sales are 11% below normal.
So the grand question: Will California home sellers in mid-2025 have to significantly lower prices further if they want to cinch a deal?
Or will potential drops in mortgage rates – not guaranteed despite pressure on the Fed to cut the rates they control – get house hunters in a buying mood?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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