Southland Housing Market Cools Off
Southern California’s housing market continued to lose steam last month as the pace of sales declined and the rate of price appreciation leveled off, data released Tuesday showed.
Rising inventories, higher interest rates and growing buyer wariness are working to temper the region’s hot real estate market, experts said.
“There is a bit of a slowdown,” said real estate agent Jon Strum, who sells homes on the Westside of Los Angeles for Boardwalk Realty. “There is more caution among buyers.”
The median price paid for a house in the six-county region was $473,000 last month, up 15.4% from a year earlier, according to DataQuick Information Systems, a La Jolla-based real estate research firm.
Yet the price was down slightly from September’s median of $475,000 and August’s $476,000, which was the record for Southern California.
“Prices may be zeroing in on an overall plateau,” said John Karevoll, DataQuick’s chief analyst.
The number of homes that changed hands in October declined 10% to 28,489 from the month before and was flat compared with a year ago, DataQuick said.
The trend is expected to continue, at least in the near term. The number of home-purchase contracts signed last month declined 14% compared with a year before, according to a survey of large West Coast real estate brokerages. Contracts signed represent pending sales that are expected to close over the next 30 to 60 days.
“I believe consumers have reached a point where they are stuffed with housing,” said Steve Murray, president of Real Trends, a Littleton, Colo.-based consulting firm that surveyed 80 brokerages. “And in the West that’s because of prices.”
Nationwide, Murray found that the number of signed contracts dropped 8% last month, suggesting that the real estate boom -- which many have characterized as a bubble -- may be cooling in other parts of the country as well.
“We’re moving back to a normal marketplace,” Murray said.
That said, three Southern California counties posted price records last month, including San Diego, where the median price rose 4.9% to $513,000, clearing the half-million-dollar mark for the first time.
Riverside and San Bernardino counties also reached new highs -- $391,000 and $354,000, respectively -- with San Bernardino leading the region in year-over-year price growth at 33.1%. Riverside’s median rose 15.3%.
The median home price rose 20.3% to $492,000 in Los Angeles County and gained 15.1% to $596,000 in Ventura County. As usual, Orange County had the highest median at $606,000, up 13.9% from a year ago.
The median price is the point at which half of all homes sell for more, half for less.
Despite its new price benchmark, however, San Diego also posted a sales drop of 12.7% in October on a year-over-year basis -- the county’s 16th consecutive month of declines.
San Diego is viewed by many as a bellwether for the Southland’s housing market because it was the first county to see price appreciation zoom into double digits and the first to face a slowdown. Its rate of home-price growth has already hit a plateau, Karevoll said, hovering in the mid-single digits since May.
“Basically, the rest of the region is following in San Diego’s footsteps,” Karevoll said. Other counties’ price “increases are becoming incrementally smaller, which is what happened in San Diego.”
San Diego also has seen the supply of homes for sale grow fivefold over the last year, which is helping to slow price increases. Realtors report more than 15,000 listings on the market, compared with about 3,000 in mid-2004.
Strum, the Westside real estate agent, said inventories in his region were swelling as well. For instance, in the community of Westchester there are about 60 homes on the market, compared with 30 a month ago.
With more properties for sale, he said, prospective buyers have more room to negotiate.
“It’s not quite a buyer’s market,” Strum said, “but the pendulum is moving in that direction.”
Strum attributes some of the change to the recent rise in interest rates. With the average rate on a 30-year fixed-rate mortgage passing 6% in recent weeks, buyers are growing more wary about settling for a seller’s asking price.
“The rising rates tend to have a chilling effect,” Strum said.
The housing market typically slows in the fall, and Karevoll noted that sales were still well above the average for this time of year. He said October’s sales volume was 20% above the average for all Octobers going back 18 years.
Such statistics continue to give experts pause. Many, including Karevoll, were predicting six months ago that the rate of home-price appreciation would be closer to 10% on a year-over-year basis by now, instead of the 15.4% posted last month.
Karevoll is forecasting that Southland home prices could set a new record in December, before moderating next year.
“We’re coming in for a landing,” he said. “We just haven’t landed yet.”
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Home prices
Median price in October of new and resold homes overall and by county
*--* Median % change price from Area (thousands) year ago San Bernardino $354 33.1% Los Angeles $492 20.3% Riverside $391 15.3% Ventura $596 15.1% Orange County $606 13.9% San Diego $513 4.9% S. California $473 15.4%
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Source: DataQuick Information Systems
