Let me make one prediction about California’s housing market in 2024.

The number of purchases will increase.

Could sales go any lower after crashing into history’s basement this year?

My trusty spreadsheet reviewed various homebuying metrics that the California Association of Realtors has published dating to 1990. We tossed in some broader economic yardsticks kept by various government agencies, too.

This look at the annual average swings during those 33 years – including the 12 months that ended in November 2023 – shows California homebuying has never been slower.

The 259,100 pace of existing single-family home sales in 2023 broke the previous bottom of 290,500 in 2007 as that bubble burst into the Great Recession.

Consider that 2023’s homebuying crash was the result of a 42%, two-year drop in sales. The main culprit was the Federal Reserve, which rapidly boosted mortgage rates from historic lows to battle pesky inflation.

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In housing’s previous debacle, the end of easy-money lending was primarily to blame. California homebuying shrank by 49% in 2005-07 to fall below the previous bottom – 298,000 sales in 1991 when a broad economic malaise led to a slow half-decade for homebuying.

Yes, California home prices in 2023 didn’t follow the purchasing pace’s tumble into the abyss. You can thank few sellers and a half-decent job market for that pricing stability.

Still, the end of cheap money chilled appreciation. California’s $811,500 median selling price for the 12 months ending in November was a 1% drop off the 2022’s record high. And that price pinnacle was set with a mere 4% one-year gain in 2022.

Those aren’t price crashes, but they’re below the 5.2% average appreciation rate since 1990.

And dare I mention that amid the homebuying’s steep descent of 2005-07, California prices also rose 5%? That bubble-bursting era’s price implosion of 50% came in 2008-09.

Now that we’ve noted crash history, let’s think about homebuying’s challenges for 2024 through the lens of 33 years of housing’s ups and downs.

Today’s stubbornly high prices and historically average mortgage rates make buying a home a financial improbability for most Californians. Plus, the broader economic backdrop, an often under-appreciated factor in the housing market’s health, seems a bit wobbly.

So let’s eyeball 2023’s economic gyrations, their place in housing’s history and how they may factor in homebuying’s future.

How much a month?

The affordability crisis in California housing is the root of the current homebuying crash. Few renters – or owners – can make a purchase pencil.

Mortgages: In two years, the 30-year loan rate has gone from under 3% to nearly 8% and back to under 7%. A longer-term view shows for all of 2023, rates averaged 6.8% – up from 5.3% the year before and a 6% average since 1990. What’s next? In the 10 years since 1990 when rates fell by a half-percentage-point or more, sales averaged 5% gains and prices rose 3%.

House payments: Will the mix of high rates and prices continue to handcuff house hunters’ budgets? The typical 2023 buyer paid a record-high $4,237 monthly, assuming a 20% downpayment. That was up 16% in a year following a 39% surge the year before. Those kinds of payment leaps define the lack of affordability.

Making the payment: Not many paychecks fit these buying budgets. According to a Realtor index, only 17% of Californians theoretically qualified to buy the median-price home in the year ended in September. California housing has never been a bargain, but we’re at the fourth-lowest affordability in 33 years – roughly half of a 32% average since 1990.

• INFLATION TRENDS: What’s up? What’s cheaper? What’s next? CLICK HERE!

Rents: Relatively speaking, being a tenant doesn’t seem so bad today. Still, landlords upped California rents by 5.3% in 2023, using Consumer Price Index calculations for Los Angeles-Orange County and San Francisco. That jump followed a 4% increase in 2022. Historically, these rents have risen 3.6% a year.

What’s for sale?

One major reason prices remain high is that there’s no rush to sell. So house hunters have limited options. Don’t expect that to change much in 2024.

Inventories: Few owners can afford to move, so the move-up market – a key provider of listings – is dead. That’s a key reason homes for sale averaged a 2.7 months supply in 2023, the estimated time to sell all listings at current purchasing speed. Even 2023’s 9% increase left house hunters picking through the sixth-lowest supply since 1990 and less inventory than the historic 5.7-month average.

Selling speed: The rare Californian with the finances and nerve to house shop has to act quickly. Homes sat unsold for only 22 days in 2023. That’s the sixth-lowest level on record and roughly half the average of 42 days on the market for California listings since 1990. I wonder if quick selling will become the norm thanks to all the powerful electronic house-hunting tools.

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New construction: If you can’t find an old home, what about a new one? California’s builders provided some help, with 59,000 permits to build single-family residences in 2023. That’s the seventh-consecutive year above 58,000 after builders averaged 33,000 the previous eight years. However, 2023 was 19% below the 33-year historic pace.

Funky fundamentals

Healthy homebuying conditions require overall financial stability, yet 2023’s economy raised more than a few questions for potential house hunters.

Job creation: More workers means more potential buyers – yet hiring has cooled. California had 0.4% more residents saying they’re employed in 2023. But that’s the 10th-smallest increase since 1990. Plus, it’s down from 2022’s 5% increase and the 0.8% yearly average since 1990.

Joblessness: Layoff news can chill the economic psyche, and 2023’s headlines may have been worse than the numbers. Joblessness ran 4.5% this year, the fourth-lowest since 1990. But the rate was up 0.3 percentage points in a year. Still, unemployment is far below its 7.1% average since 1990.

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Paychecks: The pandemic’s labor shortages fueled hefty raises. That could be over, which is bad news for housing. Statewide income per capita grew only 0.1% in 2022, the latest data are available. That was the second-smallest increase since 1990 and a huge drop from a 10% leap in 2021. The average income jump since 1990 has been 4.1%.

Population: More people, more housing demand. Between 1990 and 2016, California averaged adding 360,000 new residents a year. But over the last seven years, the state’s growth has been essentially zero.

Bottom line

Think about California’s homebuying nadirs during the past third of a century – 1991, 2007 and 2023 – compared with the state’s population.

The first low equaled 10 homes sold per thousand California residents.

The infamous 2007 bottom was 8 per 1,000.

And 2023 sales ran at 6.6 per 1,000.

Like I said, can California homebuying get any slower?

Some homework

Do you think California homebuying will have a 2024 revival?

Try our 12-question online quiz that will help you forecast the odds that California home sales gets out of its funk. Go to bit.ly/salesrebound24 to review how key real estate and economic forces may impact homebuying next year.

By the way, this online tool says I’m seeing a 58% chance of California homebuying unfreezing itself in 2024.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com