California Home Prices Down 18% From 2022 Peak

Home prices in California have fallen 18% since they peaked in May, when the median price of a home in the Golden State topped $900,000, a record high.

The median home price in California dropped to about $735K in February, a 2.1% dip from the previous month and the lowest level in two years, when the median price in February 2021 was $699K, according to the latest report from the California Association of Realtors.

In a glimmer of hope, CAR reported that home sales in California surged for the third consecutive month in February, when 284K homes were sold, a gain of nearly 18% over January’s total.

However, year-to-date statewide homes sales in February were down nearly 40% in a YOY comparison with February 2022, CAR said.

California’s median home price retreated for the sixth straight month in February, CAR said, declining 2.1% from January’s $751,330 to $735,480. February’s price also was lower on a year-over-year basis for the fourth consecutive month, declining 4.8% from the revised $772,180 recorded last February.

“Despite the third straight monthly improvement, sales of existing single-family homes in California remained below the 300,000-unit pace for the fifth consecutive month,” the realtors association report said.

“A brief interest rate reprieve and softer home prices during January created a window of opportunity for homebuyers to dip their toes into the home-buying waters, which helped boost home sales to the highest level in five months,” said CAR President Jennifer Branchini, in a statement.

“A shift toward more home sales in the lower-price segments is expected to continue to further soften home prices. However, with the availability of homes remaining extremely tight and housing supply conditions not expected to improve any time soon, prices should find bottom later this year as interest rates stabilize,” she said.

Of course, if inflation persists and the Fed aims for six percent—causing the mortgage rate to surge again—then all bets may be off regarding the floor for home prices in California.

According to a report in the Orange County Register, the 18% drop in home prices in the 10 months since their record peak falls between the worse home price slumps of the past 32 years.

In 1991, prices fell 6% in 10 months, a slump that continued for almost six years, bottoming out at a 20% loss. In 2007, as the housing bubble began to collapse—the prelude to the global financial crisis—prices fell 30% over 10 months, eventually dropping by 60% at the beginning of the Great Recession.