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What you need to know about the real estate market this June
The strong U.S. economy is causing significant bond market volatility, affecting 30-year mortgage rates and California’s housing market. Following a robust jobs report last week, 10-year Treasury rates surged, pushing daily mortgage rates above 7%. Despite the positive jobs report, the services sector, experiencing high demand, struggles with worker shortages, elevating wage growth and inflation. Fortunately, more listings are entering the market, aiding a rebound in home sales from 2023, and sales are expected to rise further this year.
Key Market Insights:
1. Job growth scares bond traders, but does not reflect full picture:
The U.S. added 272,000 jobs last month, surpassing expectations and causing market anxiety over potential Federal Reserve rate cuts. However, while the employer survey shows strong growth, the household survey—focused on small businesses—reveals ongoing job losses, suggesting the labor market may not be as robust as it appears.
2. Rates hold steady amid economic resilience: Strong job reports have pushed 30-year mortgage rates around 7% as bond demand drops and prices fall. This robust economic data delays Federal Reserve rate cuts; a rate cut in 2024 is possible, but any decline in mortgage rates will likely be modest due to long-term Fed projections.*
*If you’ve been waiting for rates to drop, it’s time to rethink this approach. Due to rising home values, waiting, even with a lower interest rate, will cost you.
Home sales continue to rise despite the rates
3. Home sales continue to rise despite rates: Sales continue to increase across California with home prices also increasing for the 10th month in a row throughout the state. Though 2021 highs in sales volume are still far off, the steady rates of appreciation show that California real estate is a strong investment. For example, in South Santa Barbara County, the year-to-date median home price for single-family homes is up 8.6% over 2023 and up 15.7% over 2021.
4. Inventory grows, yet it remains a seller’s market: Although many California homeowners secured rates below 4% during the pandemic, inventory has been increasing throughout 2024. Various life events, such as births, deaths, and moving out of state, are prompting homeowners to move despite higher rates. This trend is expected to drive higher sales this year, but inventory levels remain tight; the Santa Barbara County supply is around three months, indicating a seller’s market.
5. Service sector rebounds, consumer spending persists: In May, the service sector saw a sharp rebound with increases in business activity, marking the largest gain in nearly 18 months. Prices for services continued to rise, a key concern for the Fed due to lagging inflation in goods. Despite this growth, service sector hiring remained negative, aligning with the labor market weakness indicated by the household survey. This suggests consumers are still spending, but underlying labor issues persist.
Resources: CAR Market Minute Report, SBAOR MLS data, CAR Financing the Dream of Homeownership Webinar
South Santa Barbara County Market Highlights:
- Sales activity: Year-to-date (YTD) sales for single-family homes and Planned Unit Developments (PUDs) have reached 338, up from 296 at this time last year.
- Median sale price: The median sale price YTD for single-family homes and PUDs is now $2,252,000, up from $2,100,000 year-over-year.
- Active listings: Active listings have increased to 550, compared to 440 in May 2023.
As always, I’m here to help you navigate this evolving market. Whether you’re buying, selling, or simply seeking advice, feel free to reach out!