Home prices in Southern California jumped 11.4% in January — the largest year-over-year gain in 44 months as the region’s already sizzling housing market got even hotter.
The double-digit rise in the median price put it at $507,000, which was lower than December’s peak of $509,500 when the six-county region surpassed bubble-era highs of $505,000 in 2007, according to a report out Tuesday by research firm CoreLogic.
But that one-month reduction in the median price isn’t expected to spark a trend.
Home prices have been rising each month on a year-over-year basis for more than five years. In addition to an improving economy, low mortgage rates have lifted the market and enabled borrowers to pay more for a house, as long as they can come up with a substantial down payment.
Adjusted for inflation, the region's median is still nearly 13% below the 2007 peak.
Sales in Riverside and San Bernardino counties — the region’s most affordable areas — represented a larger share of all activity in January compared to a year ago, which put downward pressure on the regional median price.
“Affordability drives everything in the Inland Empire,” said analyst Patrick Duffy, principal of MetroIntelligence Real Estate Advisors.
And while mortgage rates remain historically low at about 4.5% for a 30-year fixed loan, they are ticking up, and the increases may be impelling some buyers to sign on the dotted line, Duffy said.
“I’ll bet some people on the fence are saying ‘I am going to pull that trigger,’” he said. “Here’s your chance to jump before prices go higher.”
New home sales in the region were up 26% year-over-year, but overall sales, including resale homes and condominiums, were down a slight 1.5%.
Absentee buyers, mostly investors and vacation-home buyers, bought 24.5% of all homes sold in January, said Andrew LePage, research analyst with CoreLogic. That was up from 23.1% in December and up from 22.5% in January 2017.
High rents in Southern California are motivating investors who want to acquire houses and lease them to tenants, said Los Angeles broker Michael Caldwell of Housing Solutions Realty.
“There seems to be a drive for single-family rentals,” said Caldwell, who has offices in Silver Lake and Palm Springs. “A lack of housing inventory is putting demand on rental rates.”
The share of absentee home buyers peaked in February 2013 at 32.2%, according to CoreLogic. The monthly average since 1988 is about 18%.
Regional sales activity conformed to a regional and national trend.
Data released Tuesday for December 2017 showed that home prices continued their rise across the country over the last 12 months, according to the S&P CoreLogic Case-Shiller Indices, a widely followed measure of U.S. home prices that lags other indicators.
Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with an 11.1% increase and San Francisco with a 9.2% increase. Los Angeles reported a 7.5% increase.