Home Sales Tumble to 9-Year Low
Southern California home sales fell to their lowest level in nine years last month as price appreciation continued to decelerate, data released Tuesday showed.
In July, 22,712 homes closed escrow in the six-county region, a 27% drop from a year earlier. Ventura and Orange counties posted the biggest declines, at 36.9% and 36%, respectively. It was the fewest sales in a July since 1997, according to La Jolla-based research firm DataQuick Information Systems.
Prices rose at their slowest rate in more than six years, gaining 4.9% year over year to $492,000, DataQuick said. Only San Bernardino County, which has the lowest median price in the region, finished in double digits, posting an 11.6% gain.
The figures could rev up the debate over whether the Southland’s housing market will be able to navigate a “soft landing” that produces only moderate price declines, or face a brutal correction.
After six years of torrid appreciation, “one would expect to see price gains level off and slowly decline,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “You want positive home appreciation but at a reasonable pace so affordability doesn’t become a crisis.”
Forecasting the extent of a decline is vexing to even the most veteran of housing stalwarts.
“I don’t know how soft the landing’s going to be,” Eli Broad, Los Angeles philanthropist and founder of giant builder KB Home, told Bloomberg News on Tuesday. “I think we’re in for a period of a year or two years where housing prices are going to go down or stay stable, but certainly not go up.” Broad is no longer involved in running KB Home, but he is developing housing communities in the Sacramento area.
At the very least, “current trends suggest that the market is heading into a lull,” DataQuick analyst Andrew LePage said.
Certainly buyers are taking a breather. Across the region, sales have declined in the last eight months. Between June and July, sales plummeted 22% -- the most for that period since DataQuick started keeping records in 1988.
Prices also eased in the one-month time frame, as the median -- the price at which half of all homes sold for more, half for less -- slipped 0.2% in July from the record of $493,000 set in June.
Flagging demand can be traced to the uptick in mortgage rates over the last year coupled with a rising supply of unsold homes, economists say. Higher rates have made homes less affordable, and more supply has created less urgency among buyers.
By some measures, the inventory of resale homes and condos in Los Angeles and Orange counties doubled in the last year to 39,000. Meanwhile, homes are taking longer to sell.
Those factors are starting to weigh on prices. Since January, Southland home prices have risen just 5%, compared with a 13% run-up in the same year-earlier period, according to DataQuick.
In Rancho Cucamonga, most of Brock Hubry’s prospective buyers are well aware that appreciation is slowing. Yet the real estate agent makes sure they know just the same.
“When I’m talking to them, I tell them if they’re planning to sell in the next two years that they may not make a profit,” Hubry said.
San Bernardino County’s price gain, to $366,000 from a year earlier, was accompanied by a 21.3% sales downturn, the smallest in the region.
Like most other counties, San Bernardino’s prices have retrenched from their peaks and growth has slowed considerably. Only Los Angeles County, at $520,000, and Ventura County, at $634,000, posted record medians in July, but they did so at their slowest rates in half a decade.
Orange County’s median rose 6.3% to $639,000, and Riverside County’s gained 7.5% to $414,000. As reported last week, San Diego County, once the hottest local housing market, saw prices decline for the second month in a row, edging down 1.8% to $487,000.
Many experts have noted that persistently low mortgage rates in the last few years have encouraged more people to buy homes than there would be otherwise, in effect “stealing” sales from the future. The data now seem to be catching up with that notion.
The trend is evident nationally as well. The National Assn. of Realtors said Tuesday that in addition to California, 27 other states and the District of Columbia reported spring sales declines of resale homes.
Sales in the April-to-June quarter were down 7% from a year earlier to a seasonally adjusted 6.69 million, the association said. The number of unsold homes jumped nearly 40% to 3.73 million units from January to June, representing a 6.8-month supply of homes based on the current sales pace, compared with 4.4 months a year earlier.
Nationally, home buyers are “adopting a wait-and-see attitude because of uncertainty about where the housing market is headed,” said David Seiders, an economist with the National Assn. of Home Builders.
The Washington-based trade group reported Tuesday that U.S. home builder optimism sank for a seventh consecutive month in August to its lowest level in 15 years.
*
(BEGIN TEXT OF INFOBOX)
Weaker demand
Median price and number of new and previously owned homes sold in July, by county and overall in Southern California
*--* % change Median % change Number of from price from Area homes sold year ago (thousands) year ago Ventura 887 -36.9% $634 +9.5% Orange 2,779 -36.0 639 +6.3 San Diego 3,370 -29.3 487 -1.8 Los Angeles 8,040 -24.9 520 +6.6 Riverside 4,420 -23.3 414 +7.5 San Bernardino 3,216 -21.3 366 +11.6 Southern California 22,712 -26.9 492 +4.9
*--*
Source: DataQuick Information Systems
