Home prices fall – then rise – amid ‘craziest market I’ve ever seen’ | News

Bakersfield’s home market may have gone into a frenzy.

The primary gauge of local home prices — the median of existing home sales, where half of the homes sold for more money and half went for less — was flat in December before falling 2.7 percent in January.

So what did it do in February? Jumped 5.3 percent to reach $379,000, which was 3.6 percent more than the median a year earlier.

The best description Gary Crabtree could come up with in his monthly market update was “instability.”

“As one longtime local broker put it, ‘This is the craziest market I’ve ever seen,'” Crabtree noted.

How crazy? Two homes that share the same floor plan in the same neighborhood recently sold within a month of each other. Crabtree said one sold for $380,000, the other for $450,000.

What’s more, last month’s jump came as the statewide median actually fell 2.1 percent to settle at $735,480, according to the California Association of Realtors.

Investor Frank St. Clair offered his own explanation Friday. Homes going into escrow under tough conditions in October, November and December closed out in January just as the market was picking up, he said. On paper, it could have made the market look weaker than it actually was – right before prices hit the gas.

“It was like night and day,” said St. Clair. In early January, he added, “A light switch turned on.”

Much of that likely had to do with mortgage rates rising in early May, chasing away buyers and leading to a glut of sellers, he said. That was before the rate on a 30-year fixed mortgage dropped more than half a point in early January.

The result has been strange, to say the least, said St. Clair: “It’s actually kind of fun.”

Looking at it from a supply and demand perspective, listings of existing homes rose 5.4 percent in February to 590, which was 108.5 percent more than a year earlier.

Home sales volume, meanwhile, rose 4.6 percent last month to 298, or about a third lower year-on-year.

New construction home sales in Bakersfield were a different story. As sales volume fell 7.8 percent, their February median price fell 2.9 percent to $475,900. That was 7.2 percent more than their median in February 2022.

Mortgage rates on a 30-year fixed loan were 285 basis points higher in February compared to a year earlier, and at 6.6 percent, they were 12 basis points higher than in January, Crabtree reported.

Overall, with February’s sharp change in the median of existing home prices, he theorized that home buyers were looking to jump in before conditions turn south.

“One reason may be that with interest rates relaxing and supply tightening,” he wrote, “buyers are capitalizing on the conditions and expecting interest rates to start rising again, shutting them out of a purchase in the near future.”

The government group, CAR, agreed buyers appear to be grabbing relatively favorable interest rates. Still, President Jennifer Branchini sees prices softening as lower-priced homes become more attractive.

“However,” she added in a press release, “with housing availability remaining extremely tight and housing supply conditions not expected to improve anytime soon, prices should bottom out later this year as interest rates stabilize.”

Or not. CAR followed Branchini’s prediction with some slightly less bullish, saying, “With home prices expected to remain soft through the remainder of 2023, the market will see larger price declines moving through the spring home buying season.”

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