California home sales moderated in February, while tight housing supply continued to constrain demand, according to a report from the California Association of Realtors (CAR). The association blamed the cool off on increasing mortgage rates.

February home sales decreased 4.5% from 484,760 in January and were up 9.7% from a year ago, when 421,670 homes were sold on an annualized basis. While still solid, the nearly 10% sales increase was the smallest gain in the past seven months.

Despite lower sales February still set another record, making the month the eighth record year-over-year gain.

“The housing market has been cruising at a robust pace since the second half of 2020 but has encountered some speed bumps recently as rates began to rise,” said CAR President Dave Walsh, vice president and manager of the Compass San Jose office. “While higher rates may slow growth in home sales temporarily, the major roadblock in the long run is a shortage of homes for sale. With inventory dropping more than a half from a year ago, the market will soften in the second half of 2021 if we don’t see enough homes come on the market to meet demand.” 

All 51 counties tracked by CAR reported a gain in median price on a year-over-year basis, with 46 of them increasing more than 10 percent. 

The Unsold Inventory Index (UII) inched up from 1.9 months in January to 2.0 months in February but dropped sharply from a year ago, when there was 3.6 months of housing inventory. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.

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