‘It’s still not easy’: SoCal home-buying frenzy cools — a bit
Southern California’s cutthroat housing market has cooled in recent months, with some home shoppers — tired of losing bidding wars — putting their search on hold. Price drops became more common.
But the slowdown is minor. For potential buyers, the message from the market, and Realtors, is not entirely reassuring: Expect slightly less pain.
“You are not seeing 20 offers on a property, you are maybe seeing four,” said Meegan Bevere, a Los Angeles-area agent with Berkshire Hathaway HomeServices. “It’s still not easy.”
In October, home prices in the six-county Southern California region rose 14% from a year earlier to a record-high median of $690,000, according to data from real estate firm DQNews. Sales declined 6.6%, the first drop since June 2020.
California maintains its reign as the most expensive state in the U.S. for home buyers, with 89 of the nation’s 127 priciest ZIP Codes, a new study finds.
Selma Hepp, an economist with CoreLogic, said the report is in line with expectations of a slowing but still competitive market. Last month’s 14% pop is slightly higher than September’s year-over-year increase in the median home price, but — in the wider view — it’s lower than the 20% range of earlier this year.
Home prices were rising faster than they had for years for a variety of factors: low inventory, record-low mortgage rates and an influx of millennials into the market. The pandemic has also driven more people — those with more disposable income — to seek out more space, and first-time buyers left pricey city rentals in search of a house.
Many economists predict price increases will get smaller from here on out. People simply don’t earn enough to consistently pay so much more for housing, they argue, particularly as mortgage rates are expected to rise.
“We were expecting at some point this buyer frenzy is going to cool off. We are seeing that now,” Hepp said, citing the decline in sales as one supporting data point.
A sustained decline in sales often precedes a drop in home prices, but few experts currently expect that to happen. Hepp said the sales decline in October is more a reflection of how busy the market was this time last year than of a collapse in demand.
Although price drops are more common now, most homes still sell above their list price, according to data from Redfin. And to be successful, many buyers still find they must waive contingencies that would let them back out of a deal if a house needs repairs, or if the appraisal comes in low.
“If I told first-time buyers all the stuff they have to do to get a house, they are not going to believe me,” said Bevere, the L.A.-area agent.
Come September 2022, CoreLogic expects L.A. County home prices will have risen 1.6% from September 2021, while San Diego County will have seen a 6.5% increase.
Forecasting is a fraught business, of course. And for now, prices across Southern California are rising much faster than what CoreLogic predicts will come next year.
- In Los Angeles County, the median home price rose 10.5% from a year earlier to $790,000, while sales fell 0.9%.
- In Orange County, the median home price rose 15.7% to $920,000, while sales fell 13.6%.
- In Riverside County, the median home price rose 20.2% to $535,000, while sales fell 6%.
- In San Bernardino County, the median home price rose 16.3% to $465,000, while sales fell 5.3%.
- In San Diego County, the median home price rose 13.8% to $740,000, while sales fell 12.4%.
- In Ventura County, the median home price rose 10.7% to $725,000, while sales fell 6.5%.