California’s housing market has just experienced a significant milestone, with the number of active listings hitting its highest level in five years. As of September 2024, 61,000 homes were up for sale, a number not seen since 2019. This sudden surge in supply is being hailed as a potential turning point for homebuyers who have long been frustrated by skyrocketing prices and limited inventory. However, while this boost in housing stock may be cause for cautious optimism, it also hints at the possibility of downward pressure on prices, which could reshape the state’s real estate landscape in the months ahead.
According to data from Realtor.com, California’s housing inventory grew by an impressive 41% year-over-year in September 2024. This surge is particularly pronounced in several metro areas, with San Diego, Stockton, Modesto, and Oxnard leading the way in terms of supply growth. For potential buyers in these regions, the influx of new listings could represent a long-awaited opportunity to find a home without having to engage in the kind of frantic bidding wars that have characterised the market in recent years.
Yet, despite this increase in available properties, many homebuyers in California remain disheartened. While supply has improved, housing prices continue to hover at high levels, making the dream of homeownership feel elusive for a large segment of the population. It’s a complex situation—more homes are available, but for many, they are still out of financial reach.
The rapid rise in inventory is a development that has been building over the past several months, and experts are now closely watching to see how it will affect the broader market in late 2024 and into 2025. The typical economic principle of supply and demand suggests that when more homes are available, prices should begin to fall as competition among buyers decreases. But the reality in California’s housing market may not be so straightforward.
Historically, California’s real estate market has been one of the most competitive and expensive in the country. Over the past decade, a combination of factors—ranging from a strong job market in tech hubs to a chronic shortage of housing—has driven up prices to dizzying heights, particularly in urban centres like Los Angeles, San Francisco, and San Diego. Even with a record number of homes now on the market, prices have not yet seen a meaningful decline.
There are several reasons for this. First, many homeowners who might consider selling are reluctant to do so in the current economic climate. With mortgage rates still elevated compared to the ultra-low rates seen in previous years, some homeowners fear they won’t be able to secure a favourable loan if they sell and buy again. This reluctance to move could help to keep prices buoyant, even as more homes come onto the market.
Additionally, although inventory has risen sharply, sales activity has remained sluggish. The California Association of Realtors (CAR) recently reported that home sales in August 2024 were among the lowest for any August on record. This slowdown in transactions suggests that even with more homes available, there are fewer buyers able or willing to make a purchase. The affordability crisis, fuelled by both high home prices and the increased cost of borrowing, has created a situation where more supply doesn’t necessarily equate to more sales.
While some homebuyers may be hoping that this inventory surge will lead to a significant drop in prices, the reality could be more nuanced. A key question for the market is whether this uptick in supply will lead to a sustained correction in home values, or whether it will be a temporary blip.
One factor that could influence the direction of prices is the health of the broader economy. With rising interest rates, inflation concerns, and the possibility of an economic slowdown, potential buyers may be more cautious about making large financial commitments, even with more homes to choose from. On the other hand, if interest rates begin to decline or stabilise, it could spur more buying activity, pushing prices back up despite the increased inventory.
In the short term, the rise in housing supply is undoubtedly a welcome development for buyers who have been priced out of the market. However, it may take several more months of inventory growth and softer sales before any meaningful price reductions occur. For now, California remains a state where high demand, high prices, and limited affordability continue to shape the housing landscape.
Looking ahead to late 2024 and into 2025, the biggest question on many people’s minds is whether this trend will continue. Will the surge in inventory eventually translate into a more balanced market where prices cool off, or will the underlying pressures that have kept prices elevated persist? For buyers, sellers, and industry observers alike, the coming months will be critical in determining the future direction of California’s real estate market.
In particular, cities like San Diego, Stockton, Modesto, and Oxnard—where the inventory spike has been most pronounced—will be ones to watch closely. If these regions begin to see price adjustments in response to the growing supply, it could signal a broader shift across the state. Alternatively, if prices remain stubbornly high despite the increase in listings, it may indicate that deeper structural issues, such as land use restrictions and regulatory hurdles, continue to constrain the market’s ability to respond to changing conditions.
For now, potential buyers should keep a close eye on the market as it evolves. While the influx of homes onto the market is undoubtedly a positive sign, the affordability crisis is far from over. For many, the dream of owning a home in California remains just that—a dream. Whether this new supply will help to bring that dream within reach is a question that will only be answered with time. As the state’s housing market moves towards the end of 2024 and into 2025, all eyes will be on the interplay between supply, demand, and affordability in what remains one of the most dynamic real estate markets in the world.
