The paths of Bakersfield’s new versus existing home markets diverged sharply last month as interest rates continued to climb, according to a new report that illustrates the impact of local homeowners feeling “locked in” by the relative bargain of their current mortgage loans.
Appraiser Gary Crabtree reported this week in his July market summary that the volume of sales for existing homes dropped more than 14% in July, while that of newly built homes jumped 36%. He added that the market share of new homes hit a 16-year peak last month.
He attributed the situation to homeowners being wary of selling homes they purchased at interest rates that were low in comparison with July’s 6.84% rate on a 30-year fixed mortgage. Such loans have since risen to reach 7.23%.
“It appears that the existing home seller is reluctant (to) place their homes on the market for fear of not being able to (afford) replacement housing, leaving the new construction market to take up the demand for housing with a 24% market share, the highest since 2007,” Crabtree wrote.
He noted that up to 10% of July’s sales data might not have been captured because of a cyber attack that shut down Bakersfield’s multiple listing service.
By the end of last month, the median price of an existing home sold in July rose 2.6% from June to reach $399,000, which Crabtree noted matched the peak of the housing bubble in June 2005. Meanwhile, the median for a home of new construction last month increased 0.1% to hit $433,500.
Crabtree pointed out that July’s median for existing homes was 8.4% greater than a year before, which he wrote “reflects a normal increase in prime market season conditions.”
The new-versus-existing sales volume trend has come at a time of overall declining local demand — probably unsurprising amid elevated interest rates — and stable supply.
Supply as measured by 489 current listings was basically unchanged from June’s 490, though new listings declined almost 29% to settle at 209 in July.
Demand as measured by volume of sales, new and existing, was off 6% from June’s total at 500.
As he has in recent months, Crabtree noted that local affordability continues to decline for entry-level buyers, driven in part by a shortage of homes for sale.
Statewide, the California Association of Realtors reported home prices “continued to stabilize” as July’s sale price median eked out a year-over-year gain for the first time since October, ending July at $832,340.
Demand remained down, however, as sales volume declined 3% from June and closed last month 9% below July 2022’s level.
CAR President Jennifer Branchini said in a news release California’s home markets continue to be competitive despite hard times for buyers.
“Many in the market aspire to become homeowners and are actively looking to buy, but the shortage of homes for sale and elevated mortgage rates remain challenging headwinds for them,” she wrote.
The association explained the relatively strong home prices as a result of a resilient economy with strong job growth combined with a shortage of homes for sale. It warned of an annual slowdown coming at the end of summer.
“As the housing market transitions into the off-peak home-buying season in the coming months,” CAR’s release stated, “the statewide median price will likely soften as market competition cools. Home prices, nevertheless, should continue to improve from last year as tight housing supply conditions persist.”
