The Southern California housing market continued to mellow out in May, with price gains slowing down and sales still running low.
The typical house in the six-county region sold for $410,000 in May, according to figures from San Diego-based DataQuick. That's up 1.5% from April and 11.4% from May of 2013, the smallest annual gain in nearly two years.
After fast appreciation last spring, Southland home prices have largely leveled out since interest rates rose last summer and more houses trickled out for sale. But with investors backing out and the stocks of foreclosures and short sales drying up, the market now hinges on regular buyers, and they're facing tight lending, a soft economy and prices that, while still nearly one-fifth below their mid-2000s peaks, now sit well above what they had been the last few years.
"The recent dip in mortgage rates will help fuel demand," said DataQuick analyst Andrew LePage. "But the sort of price spikes we saw this time last year -- annual gains of 20% or more -- are less likely today given affordability constraints, higher inventory and the drop-off in investor purchases."
And the ranks of buyers are still somewhat scarce. Sales volume remains well below its 2013 pace, with sales in May 15.1% below the same month last year. It's the eighth straight month that the number of sales has fallen on an annual basis, DataQuick said.
Absent significant improvements to the economy, it's hard to see demand -- or prices -- picking up any time soon, said Steven Thomas, who heads ReportsOnHousing.com, which analyzes Southland real estate. While it's still a seller's market, buyers are in a better position to be choosy than they have been in some time.
"We're kind of bumping along a ceiling," Thomas said. "I really can't see values going up much more. Buyers are really honing in on trying to pay a fair market value."
Around the region, prices grew fastest in the Inland Empire, up 17.1% to $295,000 in Riverside County and 20.7% to $245,000 in San Bernardino. Los Angeles, San Diego and Ventura Counties notched gains of less than 10% each, with the median in L.A. County hitting $450,000. Sales volume fell by the least in inland areas, too, while dropping fastest in pricey Orange County.
The number of absentee and cash buyers continued to drop, as did the share of distressed sales. Meanwhile adjustable-rate and jumbo loans -- the kind of mortgages favored by traditional buyers -- continued to grow, signs of a Southern California housing market that, after years of wild swings, is returning to something approaching normal.
"A lot of indicators are moving back towards historic averages right now," LePage said. "We're moving back towards a normal state."