29% fewer California homes sold. Is the Fed to blame?
29% fewer California homes sold. Is the Fed to blame?
California homebuying hasn’t been the same since the Federal Reserve’s war on inflation began three years ago.
That’s what my trusty spreadsheet found in the March homebuying report from Attom, which tracks the closed sales of existing residences and new construction, both houses and condos, dating to 2005.
The Fed’s efforts to cool an overheated economy with pricier financing began in March 2022. It totally iced home sales. For example, March 2025’s 26,454 sales were the third-smallest total for the month since 2005. It’s also 32% below the month’s 20-year average.
Or take a longer-term view of the collapse of homebuying. In the 36 months since the Fed started its cost-of-living focus, 27,703 California residences were sold in the average month vs. 39,049 in 2019-22.
We’re talking a 29% dive that’s also 25% slower than the 20-year average.
When the pandemic upended the business climate, the Fed came to the rescue with cheap money, and home prices surged.
Then numerous stimulus efforts and supply shortages boosted inflation to a four-decade high. The central bank ended its cheap money party, and yet home prices did not reverse.
Contemplate that California’s $743,250 median selling price in March was only 1% short of the record $750,000 set in May 2024.
Prices have risen 3.4% over 12 months, part of a 54% jump in the last six years.
The Fed’s move to raise interest rates helped to explode a house hunter’s costs.
In the three years of the central bank’s inflation battle, California home prices rose 6% as mortgage rates soared to 6.7% from 4.3% – creating a 40% boost to a buyer’s estimated house payments.
Contrast that to the three previous years when pandemic-spun rates gyrated from 4.3% to historically low 2.9% back to 4.3%. Home prices rose 45% with only a 44% payment jump.
Rising home prices aren’t a sign of market strength. They’re the reason why homebuying is frozen.
Over six years, a California buyer’s typical mortgage check is 101% bigger. In that same period, there was only a 29% increase in California wages.
So, what would it take to close the affordability gap? Try 36% price cuts, 2.8% mortgages, or 56% pay hikes. Or a mix of the trio.
Then eyeball the budget-busting fallout this way.
Only 17% of California households could qualify to buy in 2025’s first quarter, according to calculations from the California Association of Realtors.
Six years earlier, this affordability yardstick showed 32% could buy. And this qualification measure has averaged 31% since 2006.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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