The aggregate statistics point to an overall market that continues to do well. Mortgage applications have been growing for almost a year consecutively, rates remain below 3%, and the pandemic is subsiding and allowing a more robust economic recovery to begin to take root. However, even as the broader picture continues to improve, many factors also show that a rising tide is only lifting some boats in our industry. Many REALTORS® are optimistic, but far fewer are experiencing a boost in their own business from robust macro conditions and homebuyers are growing increasingly pessimistic about housing as supply and affordability deteriorate in today’s hot market.

California Housing Market Accelerates Last Week: Based upon daily transaction volume recorded on the MLSs last week, home sales in California accelerated from their 2020 pace with a 67.6% increase over cumulative sales to the same point in May 2020. Sales increased in every region of the state last week with the exception of the Central Coast, which saw a modest decline from the week before. Overall, home sales are only slightly below their levels in late 2020, when statewide totals were near 15-year highs. 

Public Health Numbers Remain Encouraging: California saw its raw volume of new coronavirus cases dip to just 1,349 on May 4th. That is the smallest number of new cases since May 11, 2020. The 7-day average for new cases has now been below 2,000 for the past 16 days consecutively and the state has been averaging less than 100 deaths per day for the past 25 days in a row. California also continues to make good progress on vaccine distribution with nearly 32 million first doses given out equating to just over 49% of the population. 

Rising Tide Only Lifting Some Boats: REALTOR® optimism remains high in our weekly survey of members with roughly half of all agents still expecting more sales and listings in the coming week and nearly 70% of respondents betting on higher prices. However, drilling down into the individual experience of these same respondents shows that far fewer are enjoying the gains—less than one-third of agents surveyed listed a property, entered escrow, or closed a transaction last week. In other words, REALTORS® remain optimistic about the broader market conditions, even if that hasn’t led to a corresponding boost to their own business.

Mortgage Applications Continue to Slow: Although last week was the 50th consecutive increase in new mortgage applications for home purchases on a year-to-year basis (+24%), the pace of growth dipped for the second week in a row. On a weekly basis, the purchase index has been down in 5 out of the past 6 weeks and is now roughly on par with where it was during the same period in 2019. Part of the accelerated growth in the annual comparison is since applications were still falling by roughly 20% at this point in 2020, suggesting that the peak of home sales is likely close or already behind us after adjusting for seasonal patterns.

Rates Hold Steady Just Under 3%: Although technically a decline, the typical rate for a 30-year fixed-rate mortgage was essentially flat at 2.96%—a modest change from 2.98% the previous week. Fortunately, 10-year Treasury rates held steady at 1.61% last week, but we should still expect mortgage rates to rise in coming weeks due to both normalizing inflation and mortgage rate spreads that are compressed relative to historical norms.

Home Purchase Sentiment Suffers From Low Supply and Rising Prices: The percentage of consumers who said it was a good time to buy in C.A.R.’s Monthly Consumer Poll was flat in April at just 25%. Meanwhile, the percentage of Californians who said it was a good time to sell rose to 66%—an all-time high since survey began in 2018. In addition, the gap between buyer and sellers was also at an all-time high of 41% last month. This tracks with recently released data from Fannie Mae’s Home Purchase Sentiment Index, which showed a similar national downtrend in purchase sentiment.