Hot, hot, hot ... warm: SoCal home values hit new record, but price rises are slowing
Southern California home prices set another record last month, but the market is cooling despite the all-time price high.
The region’s six-county median sales price — the point at which half the homes sold for more and half for less — climbed 1.3% from August to $688,500 in September, according to data released Wednesday from real estate firm DQNews.
Although that’s a record number and up 12.9% from a year earlier, the annual price appreciation was the smallest since January. The number of homes sold was essentially flat, rising just 0.6% from September 2020.
Heath Clendenning, an L.A.-area agent at Highland Premiere Real Estate, said that though the market isn’t quite as hot as earlier this year, it’s still decidedly a seller’s market and multiple offers are common.
“People were buying homes sight unseen,” he said. “People are at least seeing the homes now for the most part.”
The white-hot market of spring and early summer stemmed from rock-bottom mortgage rates and a desire for more space during the pandemic, as well as millennials who are increasingly looking to buy their first homes.
COVID-19 unleashed new demand for homes, made the well-off wealthier, and fueled extreme bidding wars. The result? The $1-million home is everywhere.
But lately, some buyers have put off their home searches, burnt out after constantly ending up on the losing end of bidding wars, according to agents. Economists have also been anticipating lower price appreciation, because incomes haven’t risen enough to continue to support price increases at the 20% levels seen earlier this year.
The slight rise in home sales last month was also the lowest figure since sales fell in June 2020.
“People are hitting the affordability threshold,” said Richard Green, director of the USC Lusk Center for Real Estate.
In some corners of the Southland, sales fell compared with a year earlier, though prices rose in all counties.
- In Los Angeles County, the median home price rose 12% to tie a record of $795,000, while sales climbed 6.2%.
- In Orange County, the median home prices rose 13.4% to $890,000, while sales fell 7.8%.
- In Riverside County, the median home price rose 18% to a record $527,000, while sales rose 3.2%.
- In San Bernardino County, the median home price rose 16.8% to $463,000, while sales rose 1.5%.
- In San Diego County, the median home price rose 13.8% to $740,000, while sales fell 3.9%.
- In Ventura County, the median home price rose 9% to $725,000, while sales fell 2.3%.
Although home prices are at an all-time high, in some ways homes are more affordable to a larger group of people than during the bubble years preceding the Great Recession. That’s because mortgage rates have plunged to historic lows, and incomes have risen as well.
Assuming a 20% down payment, 23% of California households in the second quarter could afford the median-priced house in the state, according to the California Assn. of Realtors. That’s still a clear minority, though a larger one than the 11% who could afford the median-value home with a 20% down payment in 2007.
Homes are flying off the market at a record pace thanks to a perfect storm: pandemic-induced demand for more space, low supply, and apps that make it easier to view, bid for and buy houses — all with a few swipes and clicks.
Ed Pinto, director of the American Enterprise Institute’s Housing Center, recently told The Times that if mortgage rates rise to 4.5%, which they did in 2018, prices probably would decline 10% to 15% in L.A. County, because people simply couldn’t afford what they’ve been paying.
According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage was 3.05% last week. Green of USC said he doesn’t think rates will change that much going forward and thus expects prices to remain “kind of flat for a while.”
His prediction is in line with a forecast from real estate firm CoreLogic, which expects that in August 2022, home prices will have risen 1.6% from a year earlier.