Signs of a Housing Market Bubble? California Housing Market Update

As of today, the housing market remains far from normal, with inventories falling by more than 33% over the past year. The current supply of homes on the market still remains historically low.

Record-low mortgage rates and shortage of inventory are keeping the US housing market strong as far as demand is considered. Home prices have been surging month-over-month breaking new records. While affordability issues worsen, low mortgage rates, growing savings, and a strengthening job market combine to keep homeownership within reach for many potential buyers. But will the housing market eventually crash? Let’s look at the most recent trends and housing market predictions for 2021 and 2022.

A strengthening economy and millennials nearing their peak homebuying years are fueling a residential housing boom. Due to millennial homeownership and other reasons such as growing construction costs and real-estate investors scooping up starter houses, housing supply is presently at its lowest level since the 1970s. Low mortgage rates, combined with an increase in work-from-home opportunities as a result of the pandemic, have also fueled a surge in housing demand, particularly in lower-density suburbs.

Forbearance Update

The White House recently announced additional measures to help struggling homeowners avoid foreclosure as they exit forbearance, including loan modifications and payment reductions. Borrowers with federally backed mortgages can lock in lower interest rates and extend the length of their mortgages. For borrowers who can’t resume their monthly mortgage, HUD will offer lenders the ability to provide all eligible borrowers with a 25% principal and interest reduction.

San Diego Housing Statistics

Closed Sales decreased 10.4 percent for Detached homes and 6.0 percent for Attached homes. Pending Sales decreased 22.4 percent for Detached homes and 12.3 percent for Attached homes. The Median Sales Price was up 28.3 percent to $975,293 for Detached homes and 13.5 percent to $582,000 for Attached homes.

Days on Market decreased 54.8 percent for Detached homes and 65.5 percent for Attached homes. Supply decreased 54.2 percent for Detached homes and 47.1 percent for Attached homes. The National Association of REALTORS® reported inventory of homes for sale nationwide rose slightly in June as more sellers list their homes, hoping to take advantage of record-high sales prices across the country.

Even with renewed home seller interest, inventory overall remains 18.8% lower than a year ago, according to NAR.

According to Contract signings declined again in July, with a 1.8% monthly slide, as rising delta variant COVID cases cast a looming shadow over business activity and re-openings. The monthly decline was driven by drops in all regions, except the West. Pending home sales were 8.5% below year-ago levels. After a year of boxed-in activity, many Americans embraced the summer sunshine and decided to take a much-needed vacation, putting real estate decisions on the backburner.

Homeowners responded to market trends and started listing homes in larger numbers.’s weekly data has seen more new listings in 19 of the last 22 weeks, compared with the same period in 2020. Prices are reflecting the influx of supply, growing at a tamer 8.6% year-over-year rate, compared with the double-digit gains of this past year. With mortgage rates still under 3.0%, first-time buyers can look forward to a fall season with more affordable house options.

Homes are not selling quite as fast and we are still seeing homes price reduce more often than I have in the last year. This indicates that sellers MUST price their home correctly and in my experience, pricing your home slightly under market value can drive up the price through bidding wars.  This continues to be great news for home buyers as we move into the fall.  

The annual price growth rate has slowed for the third month in a row. The annual median home price growth rate in June was 12.7 percent, down from 15.2 percent in May. In comparison to previous year, large metros witnessed an average price increase of 3.9 percent. Price rise in the country’s major metros is slowing somewhat quicker than in the rest of the country.

While median listing price growth is slowing, this does not represent a housing market crash, but rather a shift in the mix of inventory offered for sale this month versus last year. Total houses for sale on the market in July were 606,086, which is still 305,000 fewer homes actively for sale on a typical day in July compared to the previous year. In July, newly listed homes grew by 6.5% on a year-over-year basis, and remained stable on a month-over-month basis.

Should you Sell or Wait?

If you’re trying to decide whether or not to sell your house, this is the time to think seriously about making a move. Fannie Mae’s recent Home Purchase Sentiment Index (HPSI) reveals the number of respondents who say it’s a good time to sell is higher now than it was over the past few summers (see graph below). Today, the majority of consumers, 75 percent, say it’s a good time to sell a house.

The scales are tipped in a seller’s favor today. But while housing supply is undeniably low, the right side of the graph shows how the inventory situation is improving little by little each month as more sellers list their homes for sale.

As a seller, that means each month, buyers have more options to pick from. By extension, that means your house may get less buyer attention with time. Danielle Hale, Chief Economist for, explains it like this:

More homeowners continue to list homes for sale compared to a year ago… Notably, while new listings continue to lag behind a more ‘normal’ 2019 pace, the gap is shrinking. Even though homes continue to sell quickly thanks to high demand and limited supply, new listings are subtly shifting the balance of market conditions in favor of buyers.” 

A few significant mortgage rates inched upward today. The average interest rates for both 15-year fixed and 30-year fixed mortgages increased. We also saw an increase in the average rate of 5/1 adjustable-rate mortgages. Although mortgage rates fluctuate, they are quite low right now. Because of this, right now is an excellent time for prospective homebuyers to lock in a fixed rate. But as always, make sure to first think about your personal goals and circumstances before purchasing a home, and compare offers to find a lender who can best meet your needs.  I’ll put a link to today’s mortgage rates in the description below.  

The 30-year fixed-rate mortgage average is 3.08%, which is an increase of 7 basis points from one week ago- experts agree that we will see increasing mortgage rates over the next year. 

VA mortgage loan rates today are at 2.5% so still very low

What does this all mean? This is the second month I’ve seen prices start to slip in the housing market and trend towards a more stable market.  Home buyers have more choices than they have since the pandemic began.  We will still have to see what the delta variant does to the housing market, but since San Diego still has a housing shortage, home prices will hold steady.  Do you have a question?  CONTACT ME anytime for information on the housing market and real estate in San Diego