"Housing" is now a buzzword in California.
Whether talking about impossibly high rent in the Bay Area, the Sacramento region's rent growth, millennial home buying trends or affordable housing-- the topic is frequently discussed. For real estate analysts, the Golden State brings fascinating numbers and movement. But for many California residents, housing can be a headache due to the expensive cost of living in the West Coast power state.
However, the chaotic real estate market may be slowing down soon in some regions, according to a recent report by the California Association of Realtors (CAR).
The study found, California pending home sales dropped in October to the lowest level in six months. Pending sales dropped 2.6 percent across the state with some regions, such as the Bay Area, experiencing decreases of 10.5 percent. Interestingly, the drop in pending home sale prices only affected San Mateo, Santa Clara and Monterey Counties but San Francisco County saw an anomaly compared to the rest of the region with pending sales rising 15.1 percent from a year ago, according to the report.
Southern California also saw an overall dip in pending home sales. On the contrary, the Central Valley experienced a spike in pending sales from the previous year except in Sacramento County, pending sales fell 6.6 percent.
The report indicates the issue with a dip in pending home sales seems to relate to low housing inventory. As homes sell, there are not enough new listings to replenish the inventory. Homeowners who may want to sell their home for a new house see little promise of moving upwards, and could instead find themselves moving sideways into another similar house.
Sacramento has notoriously struggled with adding enough housing units to meet the high demand the city has seen over the past few years, resulting in sky high rent and an increase in home sale prices.
The CAR report found that nearly 70 percent of properties sold in October received multiple offers, signaling a competitive market, mostly with lower and mid-priced homes.
A change is predicted to come in 2018, which could cause a shift in the market trend. A Realtor.com study is forecasting supply will finally catch up with demand in the second half of 2018, relieving buyers from higher prices and giving potential new homeowners more inventory to choose from. Relief is expected to start in the upper tiers and make it way to the lower tiers.
The Realtor.com study also predicts more millennials will be able to purchase homes next year as the generation grows older and their salaries increase. The largest generation in the U.S. is reaching the point where many are in their late 20s and 30s. Millennials may be able to take on bigger mortgages than they could have handled in the past.
The report predicts the Stockton/Lodi market will be number four in the top 10 housing markets-- based on largest sales and price gains-- the only region to make the list in California.
While Sacramento isn't building houses quickly enough to meet the fast-paced demand, the city is still attempting to make an effort by adding a potential 5,000 apartment units for rent over the next few years. The city of Roseville, where many millennials choose to buy homes, is also adding affordable housing units to rent to combat the current shortage.