It’s been almost a dozen years since California housing has been in “buyer’s market” conditions.

Industry folklore infers that buyers are in control of the market when house hunters can pick from listing inventory that equals six months or more of sales. If supply is three months or less, the homebuying logic says it’s a “seller’s market.” In between, a so-called “balanced” market is in play.

So to hunt for buyer’s markets, my trusty spreadsheet applied those curious definitions to California Association of Realtors stats tracking sales of single-family homes plus some related economic data going back to 1990.

Let’s start by noting that California’s supply of homes for sale was 2.8 months in September. That’s a seller’s market, according to real estate mythology.

You have to go back to February 2012, when supply was 7.5 months, to find the last time California buyers were in control of the market, by this definition.

Over these past dozen years, California housing has been a seller’s market 38% of the time and “balanced” 62%. In that same period, the Realtors’ median selling price for existing single-family homes rose at a swift 8% annual pace.

Clearly, as California house hunters know, buyers were not driving the market.

Lots of options

So what does history tell us about typical California buyer’s markets compared with supposedly seller-friendly times?

Homes for sale are plentiful. Supply averaged 10.2 months in buyer’s market periods stretching back 34 years vs. 2.4 months when sellers are in control.

And there’s no need to rush. Since 1990, listed houses sat for an average 63 days in a buyer’s market vs. 23 for sellers.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

Meanwhile, prices go down. Buyer’s markets average 3.7% depreciation in the previous 12 months vs. 15%-a-year appreciation in seller’s market.

Mortgage rates also dipped when buyers control the market. Since 1990, the 30-year fixed loan rate was down 0.3 percentage points in the previous year for buyers vs. a 0.1 point gain when sellers are in control.

Buyer beware

Those seemingly enticing buyer’s market conditions, however, fail to get house hunters into a buying mood.

California averaged a 26% lower sales rate in buyer’s markets vs. seller’s markets. Even builders pull back, filing 27% fewer permits to construct single-family homes in buyer’s markets.

• RENT TRENDS: What’s available – and what are landlords charging? CLICK HERE!

So why does real estate chill in buyer’s market conditions? Well, that “time to buy” period typically parallels weaker economies that can spook house hunters and owners alike.

California’s unemployment rate averaged 7.7% in a buyer’s market vs. 6.4% when sellers were in control. Job creation statewide shrinks by 62% in buyer’s markets.

Also, ponder this national yardstick of house-hunter interest from the Conference Board: 3% of consumers polled had homebuying plans during California buyer’s markets vs. 5% in seller’s markets.

Bottom line

The spreadsheet says California has been in buyer’s market status one-third of the time since 1990. But it’s a dying breed of house-hunting conditions, when you look at the math by each decades …

1990s: 79% of the decade was a buyer’s market during a decade marked by a painfully slow rebound from a housing crash off late 1980s highs.

• SOCAL JOBS NEWS: What industries are hiring? Who’s cutting back? CLICK HERE!

2000s: 27% buyer’s market with a huge homebuying surge became a bubble that burst into the Great Financial Crisis as the decade ended.

2010s: 3% buyer’s market as housing rebounded from the Great Recession’s carnage.

2020s: No buyer’s markets through September 2023 amid all the pandemic gyrations, including a period of historically low mortgage rates.

History shows a “buyer’s market” designation is a spurious label for what are largely bad times for California pocketbooks.

So maybe buyer’s markets should come with warning labels as a financial calamity may be required to create another one for California house hunters.

Buyers, be careful what you wish for.

One suggestion

House-hunting’s long-running transformation includes people moving less often, consumers accessing detailed market info, near-instant cash buyers and tighter lending standards.

Maybe the buyer/seller-market math should morph, too.

From 1990 through 2006, just before the bubble burst, California was a “buyer’s market” in 49% of all months and a “seller’s market” 17% of the time – using the traditional 6-month/3-month template and Realtor data.

Looking at the past 12 post-crash years – assuming you’d want to match that pattern – a buyer’s market would be 3.25 months-plus of supply and a seller’s market would be 2.25 months or less.

If nothing else, this evolving gap in homebuying supply is another measurement of today’s steep house-hunting challenges.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

How ridiculously unaffordable is Southern California housing?

Just think about the ubiquity of million-dollar listings across the region. My trusty spreadsheet found that 46% of all single-family houses for sale in September were priced at $1 million or more, according to statistics from the California Association of Realtors.

That’s 5,588 of September’s 12,074 listings seeking seven figures. And 24% of the region’s inventory is asking $2 million-plus. And 16% were listed at $3 million or more.

Want something in six figures? Just 6,486 to choose from.

Daunting details

Look at this huge ownership hurdle, by county. The closer to the coast, the more million-dollar houses you’ll find. That helps to explain a population exodus inland – or out of state.

But asking seven figures isn’t just concentrated in ocean-proximate locales in 2023 …

Orange County: 1,328 million-plus listings or 84% of inventory. And 44% of those houses for sale run $2 million-plus while 29% ask $3 million or more.

Los Angeles County: 3,288 seven-figure listings – 66% – with 38% at $2 million-plus and 26% at $3 million or more.

Riverside County: 675 seven-figure listings – 23% – with 8% at $2 million-plus and 4% at $3 million or more.

San Bernardino County: 297 seven-figure listings – 11% – with 3% at $2 million-plus, and 2% at $3 million or more.

It’s a statewide issue, too, with 2,427 seven-figure listings across California. That’s 39% of all listings with 19% of what’s on the market priced at $2 million-plus, and 12% at $3 million or more.

Pocketbook pain

California houses are selling at a 241,000-a-year pace – 41% below an average dating to 1990.

Why? Peek at estimated house payments that seven-figure houses generate, assuming the current 7.8% rate on a 30-year mortgage with a 20% downpayment and payments equalling one-third of income.

$1 million houses: $5,800 a month – and that’s if you have $200,000 for the downpayment – requiring a $209,000 household income to qualify.

$2 million: $11,500 a month with $400,000 down, requiring $414,000 income to qualify.

$3 million: $17,300 a month with $600,000 down, requiring $623,000 income to qualify.

And the share of families earning $200,000 or more in 2022? In Orange County, it’s 23%. LA, 15%. Riverside, 12%. San Bernardino, 10%.

Locally speaking

Seven-figure houses are broadly common across Southern California, according to pricing within 128 communities tracked by the Realtors. Let’s look at these numbers …

69: Communities with a seven-figure median listing price – that’s 54%.

114: Communities with at least one seven-figure listing – or 89%.

85: Communities with houses for sale between $2 million at $2.99 million – or 66%.

73: Communities with houses asking $3 million or more – or 57%.

Location. Location. Location.

And $1 million is a relative bargain in some cities. Southern California had 28 communities with median asking prices exceeding $2 million in September …

Beverly Hills: $9.5 million with 165 7-figure listings – 88% at $3 million or more.

Malibu: $8 million with 164 7-figure listings – 87% at $3 million or more.

Laguna Beach: $6.3 million with 112 7-figure listings – 87% at $3 million or more.

Newport Beach: $5.9 million with 180 7-figure listings – 85% at $3 million or more.

La Canada Flintridge: $5 million with 21 7-figure listings – 67% at $3 million or more.

Santa Monica: $4.9 million with 64 7-figure listings – 80% at $3 million or more.

Calabasas: $4.5 million with 42 7-figure listings – 60% at $3 million or more.

Dana Point: $4.1 million with 64 7-figure listings – 59% at $3 million or more.

Manhattan Beach: $4 million with 58 7-figure listings – 78% at $3 million or more.

Hermosa Beach: $3.8 million with 21 7-figure listings – 52% at $3 million or more.

Palos Verdes Estates: $3.7 million with 41 7-figure listings – 63% at $3 million or more.

Villa Park: $3.2 million with 7 7-figure listings – 57% at $3 million or more.

Westlake Village: $3 million with 36 7-figure listings – 47% at $3 million or more.

Agoura Hills: $3 million with 18 7-figure listings – 44% at $3 million or more.

San Juan Capistrano: $2.7 million with 32 7-figure listings – 41% at $3 million or more.

Arcadia: $2.7 million with 71 7-figure listings – 44% at $3 million or more.

Coto De Caza: $2.6 million with 26 7-figure listings – 42% at $3 million or more.

Rolling Hills Estates: $2.6 million with 6 7-figure listings – 50% at $3 million or more.

Seal Beach: $2.6 million with 19 7-figure listings – 32% at $3 million or more.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

West Hollywood: $2.6 million with 18 7-figure listings – 28% at $3 million or more.

Ladera Ranch: $2.5 million with 13 7-figure listings – 46% at $3 million or more.

Topanga: $2.5 million with 23 7-figure listings – 30% at $3 million or more.

Irvine: $2.3 million with 109 7-figure listings – 33% at $3 million or more.

Laguna Niguel: $2.3 million with 46 7-figure listings – 30% at $3 million or more.

North Tustin: $2.3 million with 20 7-figure listings – 15% at $3 million or more.

San Clemente: $2.2 million with 92 7-figure listings – 33% at $3 million or more.

Rancho Palos Verdes: $2.1 million with 43 7-figure listings – 19% at $3 million or more.

Indian Wells: $2.1 million with 31 7-figure listings – 29% at $3 million or more.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

The number: Southern California is home to 33 of the nation’s priciest ZIP codes for residential real estate.

The source: My trusty spreadsheet looked at RealtyHop’s annual ranking of the 100 most-expensive neighborhoods in the nation based on median selling prices.

Quick analysis: In case you need another reminder of the exorbitant cost of Southern California housing, one-third of the nation’s most expensive ZIPs for housing reside near the California coast between Santa Barbara and the Mexican border.

Six of them are in one Southern California city – Newport Beach.

This year’s count is higher than the 30 in 2022 but on par with 33 in 2021. The Class of 2023 had a median selling price of $2.5 million, down 5% in a year – attention, “bargain” hunters – after a 15% gain in the previous 12 months.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

Statewide, 61 ZIPs are in the Top 100 vs. 59 in 2022 and 63 in 2021. These California neighborhoods had a median selling price of $2.7 million, up 1% in a year after a 13% gain in the previous 12 months.

Location. Location. Location

Here are the Southern California members of the Top 100 ZIPs in 2023, with their US rankings for the past three years …

No. 2: Beverly Hills 90210 with a $6.29 million median price; it ranked 3rd in 2022 and 4th in ‘21.

No. 6: Montecito 93108: $4.8 million, No. 7 in ‘22, No. 6 in ‘21.

No. 9: Newport Beach 92661: $4.35 million, No. 14 in ‘22, No. 17 in ‘21.

No. 10: Rancho Santa Fe 92067: $4.25 million, No. 18 in ‘22, No. 24 in ‘21.

No. 13: Newport Beach 92662: $3.98 million, No. 9 in ‘22, No. 9 in ‘21.

No. 14: Newport Beach 92657: $3.95 million, No. 23 in ‘22, No. 15 in ‘21.

• RENT TRENDS: What’s available – and what are landlords charging? CLICK HERE!

No. 18: Santa Monica 90402: $3.7 million, No. 17 in ‘22, No. 20 in ‘21.

No. 21: Los Angeles 90077: $3.5 million, No. 25 in ‘22, No. 7 in ‘21.

No. 22: Newport Beach 92625: $3.49 million, No. 24 in ‘22, No. 26 in ‘21.

No. 23: Los Angeles 90272: $3.4 million, No. 20 in ‘22, No. 12 in ‘21.

No. 34: Rancho Santa Fe 92091: $2.99 million, No. 27 in ‘22, No. 36 in ‘21.

No. 36: Manhattan Beach 90266: $2.95 million, No. 44 in ‘22, No. 37 in ‘21.

No. 42: San Diego 92014: $2.83 million, No. 75 in ‘22, No. 70 in ‘21.

No. 43: Newport Beach 92660: $2.8 million, No. 37 in ‘22, No. 65 in ‘21.

No. 45: Newport Beach 92663: $2.75 million, No. 71 in ‘22, No. 55 in ‘21.

No. 49: San Marino 91108: $2.73 million, No. 54 in ‘22, No. 44 in ‘21.

No. 52: Rancho Palos Verdes 90274: $2.5 million, No. 62 in ‘22, No. 59 in ‘21.

No. 55: Los Angeles 90049: $2.5 million, No. 77 in ‘22, No. 72 in ‘21.

No. 59: San Diego 92118: $2.47 million, No. 53 in ‘22, No. 69 in ‘21.

No. 61: Beverly Hills 90212: $2.45 million, No. 94 in ‘22, No. 64 in ‘21.

No. 67: Summerland 93067: $2.37 million, unranked in ‘22, No. 61 in ‘21.

No. 68: Villa Park 92861: $2.35 million, No. 73 in ‘22, unranked in ‘21.

No. 69: Santa Barbara 93109: $2.3 million, No. 64 in ‘22, No. 76 in ‘21.

No. 70: Los Angeles 91436: $2.3 million, No. 59 in ‘22, No. 74 in ‘21.

• AFFORDABILITY: Who can afford to live here? What’s being done? CLICK HERE!

No. 71: Huntington Beach 90742: $2.3 million, No. 68 in ‘22, No. 87 in ‘21.

No. 72: Los Angeles 90291: $2.3 million, No. 66 in ‘22, No. 58 in ‘21.

No. 75: La Cañada Flintridge 91011: $2.28 million, No. 83 in ‘22, unranked in ‘21.

No. 84: Hermosa Beach 90254: $2.15 million, No. 85 in ‘22, No. 77 in ‘21.

No. 86: Beverly Hills 90211: $2.15 million, No. 74 in ‘22, No. 80 in ‘21.

No. 92: Irvine 92603: $2.1 million, unranked previous 2 years.

No. 98: Encinitas 92007: $2 million, unranked in ‘22, No. 92 in ‘21.

No. 99: Los Angeles 90048: $2 million, No. 87 in ‘22, No. 79 in ‘21.

No. 100: Los Angeles 90027: $2 million, unranked previous 2 years.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Southern California house hunters have half the for-sale options than in pre-pandemic times.

When my trusty spreadsheet looked at the number of residences listed for sale in the six-county region as counted by Realtor.com and compiled by the St. Louis Fed, it found an average of 21,163 listings in July through September. That’s off 32% from the same period in 2021 and down 52% vs. 2016-19.

Limited choices are one reason the median selling price has surged 58% in the past seven years, according to CoreLogic data.

Here’s a look at the supply drop by county and median price change over seven years:

Orange: 2,369 this year, off 39% vs. 2021 and down 65% vs. 2016-19. The median price is up 67%.

San Diego: 2,521 this year, off 43% vs. 2021 and down 62% vs. 2016-19. Median up 69%.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

Ventura: 679 this year, off 39% vs. 2021 and down 62% vs. 2016-19. Median up 53%.

Riverside: 3,948 this year, off 30% vs. 2021 and down 53% vs. 2016-19. Median up 65%.

San Bernardino: 3,639 this year, off 29% vs. 2021 and down 46% vs. 2016-19. Median up 77%.

Los Angeles: 8,006 this year, off 26% vs. 2021 and down 42% vs. 2016-19. Median up 57%.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Let me introduce to you a noteworthy slice of California’s job market – the dissatisfied worker.

It’s this good-sized group of unhappy Californians that helps explain consumer jitters, despite a largely healthy economy. You’ll find them, statistically speaking, in a gap between two job-market benchmarks.

Here’s the math: California’s official unemployment rate averaged 4.2% in the 12 months ended in June. In the same period, a very broad measure of statewide joblessness was 8.7%.

Remember, joblessness is measured by the US Bureau of Labor Statistics, which polls workers. The key difference between these two workplace yardsticks is two groups: “discouraged” workers – the people who are not in the official workforce but who would work if offered a job – and the “underemployed” workers – those folks with part-time gigs who want full-time work.

• CALIFORNIA JOBS: More firings, fewer hirings and quits. READ HERE!

My trusty spreadsheet found California’s 4.5-percentage point gap between these two rates to be the largest among the states.

Next in the dissatisfaction rankings comes Alaska with a 4.3-point gap, then New York at 4.2, New Jersey at 4.1 and Connecticut at 3.9. The smallest spread was found in Vermont and North Dakota, both at 1.6. California’s big rivals Texas and Florida had 3.3-point gaps.

High worker dissatisfaction is nothing new to California.

This gap has averaged 6.3 points over 20 years – again, the largest among the states – ahead of Oregon at 6.2, Nevada at 5.9, Washington at 5.8 and Michigan at 5.7. The lows were found in Vermont and North Dakota at 1.6. Texas was 4.5, Florida had 5.6.

Improved, nonetheless

The good news is that dissatisfaction is down statewide and across most of the nation, by this measurement.

California’s gap shrank by 0.3 points in the past year, one of 33 states with drops. The biggest dip was in Hawaii, off 1.5 points, then Pennsylvania and Mississippi, off 1.3. The largest increase was in New Jersey, up 0.9, then Maine, up 0.8. Texas was off 0.1 points, Florida was up 0.1.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

Looking longer-term – comparing June to 20-year averages – California dissatisfaction was down 1.8 points, the No. 25 decline among the states. Dissatisfaction in all states is running below historical norms.

Michigan had the biggest drop, down 3.2 points from its average. Next were Mississippi, Washington, and Oregon at 2.9. The smallest improvement was the District of Columbia and New Jersey, off 0.5 points. Texas improved by 1.2 points, Florida, 2.3.

Bottom line

Despite all the talk about worker shortages and employees’ willingness to quit due to plentiful job opportunities, a significant slice of the workforce remains dissatisfied.

This numerical chasm helps explain the queasy financial feelings that don’t align with other business numbers suggesting a robust economy.

Yes, there’s high inflation, domestic political tensions and two wars overseas. A wobbly job market doesn’t help.

• MORTGAGE NEWS: What’s up with rates? Who’s lending? CLICK HERE!

For example, look at the anxieties found in consumer confidence as measured by the Conference Board.

California shoppers’ optimism fell 4% during the year ended in October. It was flat nationwide. Texans were 1% more confident while Floridian optimism fell 3%.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

My trusty spreadsheet reviewed supply stats on single-family homes for sale in September from the California Association of Realtors. The group tracked 128 neighborhoods in Los Angeles, Orange, Riverside and San Bernardino counties.

Ponder the breadth of this region’s housing, where median listing prices run from $394,450 all the way up to $9.5 million. Assuming a 7.8% mortgage rate and 20% down, buyers at those prices would have monthly payments ranging from $2,840 to $68,400. Yes, that’s sixty-eight thou.

But let’s focus on the 25 lowest-priced neighborhoods where medians run up to $594,900. At that price, a buyer gets a $3,950 house payment.

These spots of relative affordability are inland communities – many in the desert or the mountains. They’re primarily far from the big coastal jobs hubs. So unless a house hunter can work from home, or doesn’t mind a long commute, finding homebuying-level wages nearby could be a challenge.

House hunters will find just 1,843 total listings in those communities – a supply that’s off 33% in a year. Elsewhere in Southern California, there were 10,231 residences for sale – an inventory down 28% in a year.

• WHAT EXODUS? California has 4th ‘stickiest’ population in US, says Dallas Fed

Note that shrinking inventory is an issue across the entire state at all price points: 32,116 houses for sale – off 24% in a year.

Locally speaking

Green Valley Lake had the cheapest listings in September, by this math.

The community in the San Bernardino Mountains – roughly halfway between Lake Arrowhead and Big Bear Lake – had a $394,450 median asking price for the 32 residences listed for sale. Supply is up 220% in a year.

The other 24 …

Adelanto: $399,999 ask with 47 for sale – off 15% in a year.

Helendale: $417,500 ask with 62 for sale – off 23% in a year.

Running Springs: $434,500 ask with 60 for sale – up 40% in a year.

Banning: $435,000 ask with 41 for sale – off 61% in a year.

• MORTGAGE NEWS: What’s up with rates? Who’s lending? CLICK HERE!

Apple Valley: $442,000 ask with 155 for sale – off 44% in a year.

Yucca Valley: $449,900 ask with 115 for sale – off 14% in a year.

Victorville: $450,000 ask with 195 for sale – off 42% in a year.

Hemet: $450,000 ask with 197 for sale – off 9% in a year.

Twin Peaks: $477,000 ask with 11 for sale – up 38% in a year.

San Jacinto: $484,990 ask with 51 for sale – off 47% in a year.

Pinon Hills: $484,999 ask with 16 for sale – off 39% in a year.

Hesperia: $489,999 ask with 119 for sale – off 44% in a year.

Wrightwood: $492,450 ask with 24 for sale – off 29% in a year.

Desert Hot Springs: $495,000 ask with 111 for sale – off 21% in a year.

San Bernardino: $510,000 ask with 135 for sale – off 42% in a year.

Colton: $525,000 ask with 23 for sale – off 45% in a year.

Phelan: $527,450 ask with 34 for sale – off 42% in a year.

Joshua Tree: $530,000 ask with 83 for sale – off 20% in a year.

Beaumont: $548,365 ask with 115 for sale – off 23% in a year.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

Coachella: $549,490 ask with 23 for sale – off 30% in a year.

Highland: $570,000 ask with 42 for sale – off 47% in a year.

Perris: $587,126 ask with 55 for sale – off 17% in a year.

Rialto: $593,522 ask with 36 for sale – off 43% in a year.

Lake Elsinore: $594,900 ask with 61 for sale – off 56% in a year.

Bigger picture

Ponder this measure of affordability at the county level – the share of houses for sale seeking less than $500,0000 in September …

San Bernardino: 1,218 listings or 47% of all inventory.

Riverside: 590 listings, or 20%.

Los Angeles: 281 listings, or 6%.

Orange: 5 listings. Yes, five. Or 0.3%.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

The number: Here’s a spooky hit to your wallet: The buying power of American wages has been cut by a candy bar in two years.

The source: My trusty spreadsheet looked at some Halloween-themed research from S&P Global Market Intelligence comparing candy costs and wages.

Quick analysis: The pay of an average US worker bought 15.2 candy bars an hour in 2023 – that’s a 4% drop from 15.9 bars in 2022 and off 7% from 16.3 in 2021.

The problem isn’t pay raises. Instead, it’s candy inflation, which is running 7.2% this year – and that’s an improvement over 14.2% a year ago. By the way, candy prices have risen at a  2.9% annual pace over the past 20 years.

Or look at the inflation hit another way with a sweet twist.

Americans will spend a record $30 billion on candy – 2% growth for the year and up 34% vs. 2015-19. But when adjusted for inflation, sales are down 4% from a year ago and up just 1% vs. 2015-19.

Sound bite: “After nearly a decade of red-hot sales, candy appears to have hit a sour patch,” says Michael Zdinak, the group’s economics director. “There’s no sugarcoating the fact that wages haven’t kept up with the jaw-breaking rise in candy prices, work in 2023 earns the average person a whole candy bar less per hour than it did in 2021.”

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

”Survey says” looks at various rankings and scorecards judging geographic locations while noting these grades are best seen as a mix of artful interpretation and data.

Buzz: California consumers are getting less for their money this year as inflation trims already cooling shopping habits.

Source: My trusty spreadsheet sought to quantify how the rising cost of living eroded buying power and cash register activity. So state-by-state retail sales were matched against the inflation rate from the Consumer Price Index. Then we looked at how 2023’s first half spending compared with recent history.

Topline

California retail sales in the first half of the year grew 0.9% vs. 2022’s first six months. Meanwhile, inflation averaged 4.9% in this period.

So shopping, adjusted for the bite of a significant cost of living hike, suffered a 4% one-year drop.

• MORTGAGE NEWS: What’s up with rates? Who’s lending? CLICK HERE!

That was a middle-of-the-road result. California ranked 25th in this buying-power benchmark among the states. And it was almost the same as a 4.1% median decline nationwide.

Every state had after-inflation sales drops, with Idaho the largest at 8.7%. Then came Wyoming at 8.4% and West Virginia at 7.2%.

The smallest dips were found in Iowa at 0.7%, then Washington, D.C. at 0.9% and Massachusetts at 1.1%.

Details

The pandemic era’s early spending spree could not be sustained long-term – especially in particular Western and Southern states that were economic wunderkinds during the pandemic era.

Ponder the huge sales gains, even after inflation, in the two years ended June 2022.

California shopping grew at an 11.9%-a-year pace while the cost of living inflated 4.7%. The eye-popping 7.2% after-inflation growth ranked No. 25 among the states. And it was a smidge faster than 7.1% gains nationwide.

• RENT TRENDS: What’s available – and what are landlords charging? CLICK HERE!

Every state advanced. The biggest jump of 2020-22 was in Idaho at 10.7% a year. Then came Tennessee at 10.5%, and Montana at 10.4%.

Smallest increases were seen in Rhode Island at 4.3%, West Virginia at 4.6%, and Maine and North Dakota at 4.8%.

Bottom line

You can’t blame a loss of buying power for all of this year’s shopping sluggishness.

For starters, the consumer spending gains coming out of 2020’s pandemic lockdowns could never be replicated.

Various stimulus efforts ended and there was no longer a need to stock up for work or schooling at home.

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

And don’t forget, the Federal Reserve’s been trying to chill inflation with its economy-choking high interest rates.

So, it’s little surprise shopping looks icy. Just look at 2023 vs. the previous two years.

California’s after-inflation shopping was 11.2 percentage points weaker – this year’s 4% drop vs. 7.2%-a-year growth in 2020-22.

Again, it’s a fairly typical result, ranking 24th among the states and practically the same as the nation’s shopping slump.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

A witches’ brew of economic forces is stirring unnerving thoughts about what’s next for California’s homebuying market.

One particularly ghoulish factor in these spooky times is that most Californians can’t afford to buy a home in the state – whether they are a first-time house hunter or an owner looking for a new place.

That’s largely due to a scary reversal of mortgage rates, which have risen to 23-year highs, less than three years since we saw record lows.

Yes, prices have not cracked and remain near record highs.

Still, these gut-twisting gyrations walloped the pace of statewide home sales, which are eerily slow and run 35% below average this year.

Forecasting California’s homebuying future requires a peek into a spine-chilling concoction of market forces that may not mix well.

Remember, housing’s history is filled with painful memories of the Great Recession and the very gloomy days of the early 1990s.

But any California outlook means pondering a potentially haunted house with a dozen real estate characters lurking.

No. 1 Central bankers: The scariest thing about the Federal Reserve has been its resolve to fight the worst bout of inflation in 40 years. Driving up interest rates – notably home loans – “higher for longer” to cool the overheated economy has iced homebuying. Spooky stat: A borrower’s buying power has shrunk by 45% from its peak when mortgage rates fell to 2.65% in January 2021.

No. 2 Lenders: It’s frightening to see the pullback in mortgage-making. Loans counts have tumbled as layoffs multiplied. Meanwhile, lenders seem fearful. So borrowers face increased qualification standards. Spooky stat: The Mortgage Bankers Association’s Credit Availability Index this summer hit an 11-year low.

No. 3 Bond traders: This normally anxious flock seems extra antsy. To protect their mortgage investments from inflation’s ravages, they’ve demanded premium rates to keep funds flowing to homebuying. Spooky stat: Thanks to rising rates, mortgages as an investment have lost 8% of their value this year – and 20% over three years.

No. 4 Investors: It’s spine-tingling to think how dark homebuying might be without this often-derided slice of the market. But how long can deep-pocketed investors keep buying amid market turmoil? Spooky stat: 34% of California home purchases in the second quarter were made by investors – the highest share in the nation, according to CoreLogic.

No. 5 Owners: The move-up market is a ghost. This group is petrified of selling because they likely can’t afford to buy another home – an inability to move which cuts demand and supply. Spooky stat: California listings have run below 2022’s slim pickings for five consecutive months, says California Association of Realtors.

No. 6 House hunters: Jittery first-time homebuyers are staring down an unsettling clash of lofty prices and low affordability. Plus, there’s worry high rates could stick around and limit future refinancing savings. Spooky stat: Only 32% of Californians could qualify to buy in the second quarter – the lowest level in 17 years, a Realtor starter-home index shows.

No. 7 Builders: The ghastly cold market for resale homes created opportunities for sellers of new construction. But developers have run into various shortages – materials, labor and land to build. Spooky stat: How short are builder supplies of property lots? San Diego (71% below normal), Los Angeles-Orange County (66%), San Francisco (48%), and the Inland Empire (46%).

• REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!

No. 8 Landlords: Soaring rents pitchforked folks into ownership two years ago. But 2023’s fears of empty rentals nudged apartment owners to chill their pricing – motivation for tenants to stay put. Spooky stat: California rents were rising at a 16% annual rate as recently as April 2022. In August 2023, they were falling at a 2% yearly rate.

No. 9 Employers: Jobs drive homebuying. And a strong hiring pace has helped keep the California housing market stable. But bosses now seem skittish and slowed staffing growth. Spooky stat: California hiring is off 10% this year.

No. 10 Consumers: Shoppers’ overall psyche is the bedrock for homebuying. And that foundation seems a tad creeky of late amid a host of economic and political tensions. Spooky stat: California’s future looks 15% gloomier over the past year, according to the Conference Board’s consumer confidence index.

No. 11 City planners: California’s horrifying inability to build enough housing seems like a never-ending nightmare. Getting residential projects through local approval mazes remains daunting. Spooky stat: California is home to 11 of 25 US metropolitan areas with the largest housing shortages.

No. 12 Movers: The hair-raising cost of California living is pushing residents out and scaring off potential relocations to the state. Perhaps that exodus lessens congestion and helps a housing shortage short term. It could strangle the state economy long term, too. Spooky stat: In 2021-22, California lost 1.65 million residents to other states but only 900,000 people moved here.

Postscript

Want to see just how “spooked” you are by these dozen housing worries?

Take our online “Spooky Housing” quiz at bit.ly/spookyhousing to gauge your real estate anxieties.

By the way, my score was 50% – so let’s just say I’m half-spooked!

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

How slow is it? Consider that in the 12 months ended in August, 28,810 San Bernardino County residences sold, according to CoreLogic. That’s 34% below the homebuying pace of two years earlier.

This drop can be linked to drastically falling affordability in the pandemic era.

August’s median price of $495,000 – the fourth-highest ever – is up 41% since February 2020. Meanwhile, mortgage rates went from 3.5% to 7.1%. A typical San Bernardino buyer saw house payments surge 112% to $2,661 monthly, assuming a 20% downpayment.

My trusty spreadsheet reviewed how homebuying moved with big rate swings dating back to 1988. This 416-month span was sliced into thirds – ranking the results by one-year moves in the average 30-year fixed mortgage rate from Freddie Mac.

We contrasted the periods when rates surged the fasted vs. times when mortgages tumbled the most. Both groupings averaged 1 percentage-point moves over 35 years.

The swings

Ponder how San Bernardino homebuying gyrates during these rate-swing extremes since 1988.

Start with pricing. When mortgages were in their steepest jumps, home values in San Bernardino averaged 9% one-year gains.

Yet when mortgages were in their steepest drops, median home prices in San Bernardino had 1.5% gains.

By the way, the local median price has appreciated 4.6% since 1988. So cheaper financing for house hunters could mean softer pricing, too.

And falling rates modestly boost the San Bernardino sales pace, historically speaking.

The largest rate drops came with 6.9% one-year gains in the number of closed transactions.

When rates increased rapidly, however, the sales pace fell – averaging 4.1% one-year losses.

The secret sauce

There’s a catch to lower rates – housing’s three magic words: “Jobs, jobs, jobs.”

Rates are usually rising when the overall economy is strong – even too strong – and hiring is plentiful. Remember, you need a solid paycheck to be a successful house hunter.

Yet rates tend to dip when the economy is sour, and that’s not a great backdrop for a major purchase such as a home. So, let’s peek at California’s job market since 1988.

When rates surged over the past 35 years, California employment grew at a 2.7%-a-year pace. But jobs shrank at a 0.7% annual pace when rates tumbled.

Bottom line

This isn’t just some local housing quirk. Falling rates come with pricing weakness in many places.

Across the six-county Southern California region, the sharpest rate jumps were in step with 8% average one-year price gains. The largest rate drops came with 2% average price gains.

And nationally, soaring rates meant an average 7.5% one-year gain in the Case-Shiller US index vs. 2% appreciation when rates were cascading.

History is not a forecast. And maybe it’ll be different this time. But 35 years is a good guide to what’s possible.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com