The region’s housing market continued to downshift as buyer demand cools in response to rising mortgage rates.
By JEFF COLLINS | Orange County Register
A cooling trend sparked by rising mortgage rates continued to chill Southern California’s housing market, with home prices and sales dropping at a time when they typically are on the rise.
Despite the cool down, experts say a market crash still appears unlikely.
“We’re still in what we call in the industry ‘a slight seller’s market,’ ” said Geoffrey Tackney, broker and co-owner of GMT Real Estate in Garden Grove. “We’re entering a neutral market, but we’re not in a buyer’s market yet.”
The median price of a Southern California home – or the price at the midpoint of all sales – was $750,000 in June, down $10,000 or 1.3% from May, according to CoreLogic figures provided by DQNews on Tuesday, July 19.
Prices still are high, however, retreating only slightly from price records set from February through May. But price growth is shriveling, with last month’s median up just 10.5% from a year ago. That’s the smallest year-over-year increase in 18 months.
Sales also fell 1.3% from May levels, but were down 25.3% — or by almost 7,000 transactions – from June 2021.
Last month’s sales tally of 20,289 homes was the slowest pace for any June in the last 14 years, apart from when pandemic lockdowns struck in June 2020.
California Association of Realtors figures released Monday, July 18, showed a similar downshift in the Southern California housing market, with prices and sales falling from May to June and shrinking year-over-year price gains.
The statewide median price rose a mere 5.4% from last year for an existing single-family home, CAR figures show, rising to $863,790. That’s the state’s smallest year-over-year price gain in two years.
“California’s housing market continues to moderate from the frenzied levels seen in the past two years,” CAR President Otto Catrina, a Bay Area real estate broker, said in a statement. “With interest rates moving sideways in recent weeks and fewer homes now selling above listing price, prospective buyers … face less competition that could force them to engage in a bidding war.”
About 50% of California homes sold for more than their original asking price, compared with almost 75% selling above asking earlier this year, said CAR Chief Economist Jordan Levine. The median time it takes for a home to sell rose to 11 days in June, compared with eight days in March.
“Upward pressure on home prices has cooled,” Levine said in an email.
The chill stems mainly from a steep jump in mortgage rates since the start of the year. The average rate for the popular 30-year, fixed-rate mortgage jumped from under 3% in 2021 to 5.51% as of Thursday, July 14, according to Freddie Mac.
For buyers who need financing to buy a home, their monthly house payment rose 24% for the three months ending in June. That’s dampening demand — at least among buyers who need a mortgage.
“We are seeing more cash offers,” Garden Grove-based broker Tackney said. “Most of the time, it’s investors.”
A shift in the mix of homes being sold also is skewing the median downward, with more sales at the low end of the market and steep drops in luxury home sales, CAR economists reported. Statewide, the share of million-dollar home sales dipped 8.3% from May to June, CAR figures show, while sales of homes for $2 million and up fell 17.9 percent.
Meanwhile, sales of homes for under $500,000 increased 2.1%.
The cooling trend also boosted the inventory of homes on the market.
The six-county region had 37,604 homes for sale in June, Zillow figures show, up 42% from February, the region’s inventory low point.
Nevertheless, listings remain 24% below the average for the previous four years, according to Zillow.
“Inventory is now at its highest level (statewide) since the start of the pandemic in terms of active listings,” said Levine, adding that the current level “is still far below the long-run average.”
Levine predicted prices will continue dropping in the months ahead with year-over-year drops by next fall.
“We do expect to begin seeing year-to-year price declines late this year as the market continues to normalize,” Levine said.
A breakdown by county shows annual price gains were in the low double digits in three Southern California counties, with 17% year-over-year gains in the Inland Empire and a single-digit rise – 9% — in Los Angeles County, DQNews/CoreLogic figures show.
Sales were down from May everywhere but L.A. and Ventura counties.
Here’s a county-by-county breakdown of median home prices and sales with annual percentage changes:
- Los Angeles County’s median rose 8.9% to $860,000; sales were down 22.9% to 6,628 transactions.
- Orange County’s median rose 13.9% to $1,025,000; sales were down 33.5% to 2,767 transactions.
- Riverside County’s median rose 16.6% to $594,500; sales were down 21.1% to 3,815 transactions.
- San Bernardino County’s median rose 16.9% to $517,750; sales were down 19.5% to 2,866 transactions.
- San Diego County’s median rose 10.1% to $825,000; sales were down 31.8% to 3,275 transactions.
- Ventura County’s median rose 10.1% to $810,000; sales were down 20.9% to 938 transactions.
SCNG Business Columnist Jonathan Lansner contributed to this report.
Source: LA Daily News