Thursday, May 15, 2025
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Roseville

What is Slowing the California Housing Recovery?

The California housing market and our local market in the Sacramento area has slowed and is not reaching the earlier predictions of many real estate pundits. 

There appears to be three reasons why our housing market is not booming.  Distressed properties have declined significantly, although improving the job and credit market remains tight, and there are very few first-time buyers.

Although a good thing we have seen a dramatic drop in distressed property sales.  It was not that long ago when it seemed like every listing was a short sale or bank foreclosure.  Last year in July distressed properties made up almost 26 percent of sales.  This year they are down to 17 percent and declining.

Income and credit requirements have not kept pace with the rapid price gains over the past 18-months.  For prices to continue to move up we need to see incomes increase and/or the easing of credit terms.  We keep reading articles about credit getting easier but have yet to see any hard evidence.  The job market in California remains tight despite a brighter employment outlook.

Many first-time home buyers have fallen by the wayside as prices have increased and because of the lack of affordable inventory.  Although prices are not rising as fast this year, almost all metro areas are showing year-over-year price increases.  The current median price of a California home is just over $390,000. 

Until income growth catches up with affordability, the lack of first-time buyers and declining distressed property sales will most likely continue to slow the local and state housing market.



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