Is 2024 Your Year To Buy a Home in California?

Is 2024 your year to buy a home in california?

If you haven’t owned a home before, the timing can feel precarious. You can’t snap your fingers and become a real estate agent, so how do you know if 2024 is right?

Should you buy a home in California?  

“Many buyers try to time the market, but studies have shown that no matter when you jump into real estate you always come out ahead in the long run. The best time is always as soon as you can.” - Sandy Jamison

2024 could be the year you buy property, but California home prices won’t be the sole decider. That’s more of a starting point. You need to look at many factors beyond the walls of your future home, far from the streets of the neighborhood.

California homes in the afternoon heat

A few homes basking during California’s summer - via Jirka Matousek

What Kind of Market Do Homebuyers Look For?

Over different years and seasons, the California real estate market changes, meaning it’s not always the ideal time to become a homeowner.

Home buyers have a harder time when:

  • Cost of living rises: In California, living expenses sometimes outpace inflation.  
  • There is economic uncertainty: Nobody wants to move into areas with a bleak economic outlook. Detroit is a textbook example of this. Unemployment shot above 16% 
  • Supply is low: This can be an advantage, but buyers like options too.
  • Interest rates are up: Demand reduces, but so does the cost of owning one.

Home buyers prefer a market with:

  • Reasonable costs of living: Less monthly expenses mean more budget for a better home and a higher-quality lifestyle to match it.
  • Strong economic outlook: Naturally, buyers usually look for prosperous or up-and-coming neighborhoods.  
  • Higher earning potential: The tech sector has seen layoffs in recent years, with tens of thousands coming from companies like Google, Meta, and Amazon.
  • A range of options: In California, the best season to buy is summer, but this means competition is higher too.
  • Lower interest rates: Demand rises, but buyers can afford homes more easily.

Is California Affordable in 2024?

Without affordability, buying homes becomes more difficult for anyone below a certain level of income. Unfortunately, California was the 3rd-most expensive state to live in, according to Forbes Advisor Analysis. 

Their data, updated Jan 17, 2024, ranked the states yearly expenses for housing, healthcare, taxes, food, and transportation:

  • 1st was Hawaii with a $55,491 annual cost of living.
  • 2nd was Massachusetts with a $53,860 annual cost of living.
  • 3rd was California with a $53,171 annual cost of living.
  • 4th was New York with a $49,623 annual cost of living.
  • 5th was New Jersey with a $49,511 annual cost of living.

Iconic Painted Ladies home in California

An iconic row of “Painted Ladies” in California - via Dennis Jarvis

Will California Become More Affordable in 2024-2025?

In August, 2023, KTLA News remarked that California was at a 16-year low for housing affordability. This is a trend which doesn’t correct itself easily, 

Still, housing affordability can be managed more easily than the cost of living can. You can decide which home and California neighborhood you live in, but you can’t always shop around for electricity, groceries, and other necessities.

By choosing somewhere up-and-coming, less developed, or overlooked, affordability will present itself to you. 

If one area doesn’t meet your budget, you’ll still have an endless supply of Bay Area neighborhoods to pick from.

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2024 Homebuyers in California Need to Watch These Things

Start by looking at these five factors that homebuyers will be affected by in California.

If you need clarity about something, we’re a short message or call away.

Interest and Mortgage Rates

Investors are looking to the Fed in 2024, hoping that the trend of rate hikes becomes a slow reversal. 

Current interest rates (5.25% to 5.50%), which hit a 22-year high, could be the peak. Plenty of analysts believe cuts are on the way, but confidence seems shaky. 

On the 17th January, 2024, CME Group estimated that it was almost 50/50 the rate would be maintained or reduced to 5.00%-5.25%. But a month later, the odds were 90% in favor of rates staying the same.

Important Question: 

How do these interest rates affect buying a home in California? 

Answer: 

Your purchasing power is reduced as rates rise. 

Acting like a massive bank, the Fed sets a fund rate that affects how much it costs lenders to offer you a mortgage. 

If the Fed sets higher interest rates, monthly mortgage payments increase, which gives a first-time homebuyer a smaller budget to work with. Even a portion of a percent drop equates to hundreds of dollars for some homeowners. 

Important Question:

If rates are high, what can homebuyers do to make buying a home in California less expensive?

Answer: 

With rates up, mortgages cost more, taking some wiggle room from a homebuyer’s budget. All is not lost though, as you might be able to create more room in other places. 

You could select neighborhoods without inflated real estate price tags. Plenty of Bay Area communities offer first-time homebuyers lower median prices, with the same amenities as high-priced nearby cities.

For example, here are some of the cheapest places to live in the Bay Area:

  • Vallejo - median list price of around $500,000
  • Concord - median list price of around $670,000
  • San Pablo - median list price of around $600,000
  • Oakland - median list price of around $690,000
  • Modesto - median list price of around $500,000  

Housing Inventory

Inventory usually comes from two main sources: existing homes and newly-built properties.

Existing homes make up most of the market, but they’ve got to be unoccupied first. With some homeowners locked into more attractive interest rates on their mortgages, they might be reluctant to move - even though they’d probably prefer to. You can start to see just how important interest rates are from this. It’s not only a factor for buyers moving into new homes, but existing homeowners too.

Newly-built properties also fuel ‌California real estate inventory, to a lesser extent. Labor supply is one factor that seemed to limit multi-family construction during 2023. Several state initiatives are pushing construction along, aiming to bring low and mid-tier stock to the market.

Recently, areas like Sacramento, Riverside and San Diego saw the largest increases in residential construction.

  • Single-family residential construction starts were down 10% in 2023 in California. 2023 saw 56,700 starts, while 2022 saw 62,900 starts.
  • Multi-family construction was down 4% in 2023, with 53,000 units started. The previous year, there were 55,200 starts in total..  

One real estate report expects 2026 and 2027 to be some of the most active upcoming years for construction starts. 

Home Renovation

A home undergoes some construction - via Brock Builders

Purchase Timing

We’ve got an entire guide on which seasons are best for buying homes, but here’s a summary.

Selection is best in the summer, though that doesn’t always mean that prices are too. The downside to all of that selection is that sellers know they’ve got more eyes on their listings. Prices may be slightly inflated, with savvy sellers knowing the buyer pool is larger, increasing their odds of collecting their asking price.

Winter is the best time to shop for low California home prices. You’ll compete with fewer buyers, leaving sellers more motivated to make you sign on the dotted line. There’s one drawback, which is the supply. 

Over different years and seasons, the California real estate market changes, meaning it’s not always the ideal time to become a homeowner.

Don’t expect as many options during the winter season. January and its neighboring months are typically peak lows in terms of supply. That being said, you’ll have the advantage of working with more committed home sellers, eager to close the deal with you. You can use this powerful tool during negotiations

Median House Prices

Median house prices are one of the easiest metrics for first-time homebuyers to understand.

So, what’s happening in 2024 with the median house prices? 

Comparing January 2024 to January 2023, median prices are up over 6.5%, plus around 8% more homes sold. 

One of the driving factors for higher median prices in 2023 was a supply that didn’t mean real estate demand. The buyers who weren’t able to find homes, or couldn’t afford to, will likely be on the market once conditions improve. When supply reaches more acceptable levels, the market could be ultra-competitive and quickly snap up extra inventory. 

“Home prices keep marching higher,  National Association of Realtors Chief Economist Lawrence Yun said to USA Today. Only a dramatic rise in supply will dampen price appreciation.”

One thing to remember about median California home prices:

Looking at ‌median prices alone is like trying to guess the flavor of a dish before tasting it. 

Using ‌median prices can give a vague sense of affordability (or unaffordability), but look beyond the numbers. If the median prices seem high, you’ll get a general perspective, but gems may still be in the listings. 

Inflation Rates

In January 2024, California’s inflation rate was at 3.1%. Higher inflation devalues our incomes and limits what we can purchase, especially when it comes to homes. Inflation also devalues wage growth, tending to impact leisure and hospitality roles less than others.

2% inflation (CPI) is the rough number that the Fed aims to reach, but the US hasn’t been there for quite some time (since ~Jan, 2021). 

Inflation reached 40-year highs in 2022, but thankfully seems to have trended lower over the past two years, this may allow the Federal Reserve to pause rate hikes.

One inflation tracker noted that Inflation has decreased since mid-2022 peak, but core inflation still well above pre-pandemic average”

San Francisco City Hall

San Francisco City Hall, California  via Dennis Jarvis

2024 Could Be Your Year

2024 hopes to be a soft recovery of the housing market in many categories. Interest rates, supply, and inflation will all be pulling the market’s strings, as will the job sector. 

If you seek affordability, The Jamison Team can point out where it is. We’ve been finding value in California and even guaranteeing homebuyer happiness since 2008. 

We’ll be happy to take your call at our San Jose offices, where we’ve already helped countless clients and earned our awards

More Questions? Follow-up With Us!

If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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