Southern California home prices kept rising in August, but sales fell as questions grow over whether the torrid housing market is finally cooling.
The median sales price in the six-county region rose to $535,000, up 1% from July, research firm CoreLogic said Wednesday. The median — the point at which half the homes sold for more and half for less — was up 7% from a year earlier and just shy of the all-time high of $537,000 reached in June.
Sales, however, fell 8% from August 2017. The drop-off came even though more homes were on the market, an indication that sky-high prices and rising mortgage rates are crimping demand.
Real estate agents said buyers seem to be pulling back, but it’s difficult to tell whether there’s a true shift in the market or whether it’s more of a typical seasonal slowdown. Demand often tapers off in late summer and fall and doesn’t pick up again until spring, a time when it’s easier for families to find a home and move before their kids have to return to school.
Furthermore, during the six-year climb in prices, there have been moments when the market paused, even in spring, and then accelerated again.
“There is a lot of talk of, ‘Is the market softening?’” said Anselm Clinard, a real estate agent who specializes in northeast Los Angeles. “I think it is a little too early to tell.”
For now, some real estate agents said they are dealing with more supply and less demand.
Tregg Rustad, an agent who specializes in Los Angeles County’s Westside, said the dynamic is most noticeable on the high end — particularly for homes whose sellers are trying for what he called aspirational pricing. He said a house he listed in Santa Monica for $3 million has sat for two months with no serious bids.
“In the past, it might have sold,” Rustad said.
Agent Kim Ho, who finds fixer-uppers in more affordable communities in and around Downey for investors, said those investors are passing on more deals because the homes they have renovated are taking longer to sell.
“I have seen them be a lot more cautious in the past couple of months,” Ho said.
One reason for a softening could be that people simply have less buying power. The average rate for a 30-year fixed mortgage is 4.65%, up nearly a percentage point from a year ago, according to Freddie Mac. The rise would’ve added about $200 a month to what previously would’ve been a $2,666 monthly mortgage payment for a $535,000 house.
There also are more homes for sale, though inventory remains extremely tight.
Overall, the number of homes on the market in Southern California at the end of August was up 7% from a year earlier, according to Redfin. The number of listings was up 4.8% in July and 3.3% in June, two months when most of the August sales would have opened escrow.
As inventory grows, price cuts are becoming more common in all six Southern California counties compared with a year earlier, Zillow data show, indicating more than seasonal factors could be at play.
In Los Angeles County, 15.9% of listings had at least one price cut in August, compared with 10.6% a year earlier. The share of listings with price cuts rose in Orange County to 19.2% from 12.7%; in Riverside County to 19.8% from 13.4%, in San Bernardino County to 17.5% from 12.6%, in Ventura County to 18.9% from 13.8%, and in San Diego County to 22.9% from 12.9%.
More price cuts don’t mean the bottom is dropping out of the market.
The last big increase in price reductions started in summer 2013, after a sudden increase in mortgage rates that occurred when the Federal Reserve signaled it would slow bond purchases. That “taper tantrum” was blamed for cooling the housing market and helping halt an explosive run of double-digit price gains.
Annual price appreciation in Los Angeles and Orange counties slowed to 4.9% in October 2014, down from a high of 22.1% a year earlier, according to the Case-Shiller Index, viewed as one of the most reliable gauges of home prices.
Home-price gains then hovered in the 5% and 6% range for the next three years before accelerating to a high of 8.2% in April. Gains have since slowed, reaching an annual rise of 6.4% in July, the latest month for which data are available.
A clearer picture on the market’s trajectory should emerge next spring during the typically busy buying season. Economists have said that although price growth may slow, home values are unlikely to decline unless there’s a recession.
In large part, that’s because California’s housing shortage is too great, experts say.
The effects of the shortage can be seen in gentrifying neighborhoods such as Leimert Park.
In recent years, the South L.A. neighborhood has seen an influx of buyers from the Westside, many of them white, who have scooped up less-expensive Spanish-style houses in the largely middle-class African American neighborhood.
As a result, prices have skyrocketed, as have fears that the black community may lose its foothold in the neighborhood — which would be particularly painful because the neighborhood once was legally restricted to whites and African Americans fought to be part of it.
Real estate agent Heather Presha, who lives nearby, said buyers’ interest in the neighborhood hasn’t cooled. Real estate agents from outside the area, she said, are still engaging in an “intrusive” practice she doesn’t use: knocking on doors and urging older residents to sell their homes.
Those door knocks often end with an angry “No,” but when homes do go on sale, bidding wars are common and properties “fly off the shelves,” she said.
“Nothing is slowing down over here,” Presha said.