California Real Estate Shifts: A Breakdown on 2018 Data

California real estate markets are always interesting to watch, because the state is so diverse. From small farm homes in the Central Valley to ultra-expensive homes in the Bay Area and Los Angeles, few other states have the range of prices and potential buyers found in California.

The California Association of Realtors (CAR) recently broke down all of California’s housing data from the third quarter of 2018, and while there are variations from zip code to zip code, some big overall shifts are evident. These shifts have been brewing for months, and the data now suggests that rather than a blip, we are looking at a continuing trend.

Important Figures from California’s 2018 Q3 Housing Data

• In September, the California housing market saw its largest year-over-year home sale decline since March 2014. Sales of existing single-family homes dropped below the 400,000 mark for the second month in a row.
• The median home price in California also fell in September to $578,850. That marks a 2.9% decrease from August when the median price was $596,410. However, the median price is still up 4.2% from one year ago when the median was $555,400.
• The biggest sales declines were found in Southern California, led by Los Angeles County with a 22% drop from September 2017. Orange County saw a 21.8% drop, and sales in the more modestly priced Inland Empire were down 10.8%.
• While sales in the Central Valley are down on the whole by 15.1% from September 2017, Glenn and King Counties saw sale increases of 9.1% and 11.1% respectively.
• Across the state, active listings increased for the sixth straight month after a 33-month period of decline.

What This Means

What does all of this mean for California house flipping? The expert consensus seems to be that people who could be buying homes right now are sidelining themselves, meaning that they are waiting to buy out of fear that prices may soon drop. There is an overwhelming sense that home prices are peaking, and buyers are wise enough to understand that it doesn’t make sense to buy high.

At the same time, the pressure on the housing inventory is finally starting to decrease, as evidenced by the increase in active listings. And finally, mortgage rates are continuing to rise, which makes buying a house even more expensive.

These factors combine to put a great deal of pressure on house flippers in California. Ideal rehab properties haven’t exactly been plentiful for a while now, but the share of properties that are still in a price range that will get buyers excited rather than scaring them off is only going down.

Flippers who will do best in this market are those who can hedge their bets with multiple investments at a time in a variety of markets. The increasing use of house flipping loans throughout the flipping industry should allow more experienced flippers who study trends and are willing to look outside their comfort zones to continue to find success, even in this tightening winter market.