January 20, 2025 – California ended the year with a positive note with home sales reaching the highest level in five months. As projected, both sales activity and the statewide median price were up modestly for the year as a whole as California wrapped up 2024 with a double-digit gain in sales. With mortgage rates remaining at their highest level since early July and devastating wildfires taking a toll on the L.A. region’s housing market, California will likely have a slow start this year, but demand should pick up once we enter the spring homebuying season. The market is expected to improve in 2025, but stickier-than-expected inflation, the ongoing insurance crisis, and policy changes under the new White House administration are challenges that could put a drag on the market. 

California home sales close the year strong: California ended the year with the largest yearly increase in existing home sales since June 2021, but its housing market remained a work-in-progress in December. Despite a double-digit growth rate from their year-ago level, sales of existing single-family homes remained well below the pre-Covid norm of 400k units. The strong year-over-year gain observed last month was largely due to low-base effects once again, as home sales in December 2023 dropped to their lowest level since late 2007. Nonetheless, the increases from the prior year and the prior month were encouraging and lifted sales of the entire year modestly above 2023’s level. Total sales of existing single-family homes in 2024 improved by 4.3% from the year prior and marked the first gain in three years.

Median price bounces back in California in 2024: The statewide median price in December continued to climb on a year-over-year basis for the 18^th consecutive month, and the gain recorded last month was on par with the 6-month moving average observed between June 2024 and November 2024. On a month-to-month basis, the December median price had a slightly stronger November-to-December increase than the historical long-run average growth between the two months. For the year as a whole, the 2024 annual median price was up 6.3% from the prior year, a solid bounce back from the dip of 0.6% in 2023. While prices are expected to moderate further in the next couple of months as they follow their seasonal trend, a low single-digit year-over-year growth should continue to be observed in Q12025 before the homebuying season kicks off.

Core CPI dips for the first time in five months: U.S. consumer prices registered the largest increase in nine months, but the core inflation annual rate decelerated for the first time since July. The latest headline Consumer Price Index (CPI) went up 0.4% from the prior month and was up 2.9% from the same month of last year. Most of the monthly gain in the overall price growth in December was due to higher fuel costs, as gasoline surged 4.4% from November. Excluding food and energy, the core CPI rose 0.2% month-over-month and came in at 3.2% year-over-year. The core annual inflation reading had been stuck at 3.3% in the past four months, and December was the first time since July that the year-over-year price growth decelerated. Shelter costs, which accounted for about one-third of the total increase in CPI in December, rose 0.3% month-over-month and increased 4.6% year-over-year. The annual increase was the smallest growth rate recorded since January 2022 and the slowdown in housing inflation was a contributing factor for the dip in core inflation in the latest month. The market reacted positively to the news, with mortgage rates dipping more than 15 basis points since the release of the inflation report.

Retail sales up but come in lower than expected: U.S. retail sales ended 2024 with a solid clip in December, with consumers spending slightly less than expected at the end of the year. While the overall retail sales increase of 0.4% from the prior month was just shy of the 0.5% gain projected by economists, November retail sales were revised upward to 0.8% from the initial estimate of 0.7%. On a year-over-month basis, consumers spent 3.9% more than they did in December 2023. Growth was observed across the board, with miscellaneous store retailers (+4.3%), sporting goods/hobby/musical instrument/bookstores (+2.6%), and furniture (+2.3%) gaining the most in December. Building materials & garden stores (-2%) remained weak at the end of last year, but restaurant sales (-0.3%) also pulled back for the first time in nine months, which was a surprise. With gift purchases remaining solid, the drop in restaurant sales could just be a pause at the year-end as consumers decided to use the money to fund their holiday shopping instead. As the job market continued to be strong late last year, the outlook of retail sales remains positive for the first quarter of 2025. 

U.S. foreclosure activity dips for the first time since 2021: Foreclosure filings on U.S. properties decreased to 322,103 in 2024, a drop of 10% from 2023, a dip of 1% from 2022, and a plunge of 35% from 2019, according to ATTOM. Foreclosure activity last year remained well below the Great Recession’s level, with filings in 2024 down 89% from the peak of 2.9 million in 2010. The 322k plus properties with foreclosure filings represented 0.23% of all U.S. housing units, a dip from both 0.25% in 2023 and 0.36% in 2019. The share was also a significant drop from the peak of 2.23% in 2010. For the month of December, 28,632 properties in the U.S. started the foreclosure process, a 3% decline from the prior month, and a drop of 6% from the same month in 2023. Nationwide, one in every 4,922 properties had a foreclosure filing in the last month of the year. At the state level, California had 29,529 foreclosure starts in 2024, an increase of 1.2% from 29,180 reported in 2023. With home prices expected to rise again in 2025 and the economy projected to grow modestly this year, foreclosure activity will likely continue to stabilize in the next 12 months.

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