Southern California’s housing market hit a big pothole in September, with home sales sinking almost 18 percent from the year before as buyers increasingly grapple with rising mortgage rates, higher prices and deteriorating affordability, Irvine-based housing tracker CoreLogic reported Tuesday, Oct. 30.
It’s the biggest sales drop in nearly eight years. And despite rising home prices, gains are shrinking, prompting one market watcher to say the torrid seller’s market of the past few years appears to have ended.
Agents throughout the region say homes are sitting longer, listings are rising and showings are growing scarcer.
“I don’t think it’s time to panic. I don’t think it’s a bloodbath,” said Jordan Levine, a senior economist for the California Association of Realtors, which last week reported similar sales drops in the region. “But I do think it’s significant that sales are dropping. Affordability has deteriorated significantly with the price growth we’ve seen in the last few years, and that’s being compounded by rising interest rates.”
In all, 17,369 homes changed hands last month in the six-county region, or 3,700 fewer than in September 2017. That’s the lowest number of transactions for September since 2007, CoreLogic numbers show.
Sales drops were more pronounced in Los Angeles and Orange counties.
Transactions fell 23.6 percent in Orange County and were off 19.3 percent in L.A. County.
The Inland Empire, by comparison, had drops of 10.1 percent in Riverside County and 16.4 percent in San Bernardino County – less severe but still in the double digits.
San Diego and Ventura counties both saw sales fall by more than 17 percent.
One reason for the declines: September had one fewer business day than a year ago. But that only accounts for part of the decrease.
The region had an average of 868 transactions per day last month, down 13.6 percent — the biggest drop in four years.
Meanwhile, the median price of a Southern California home – or price at the midpoint of all sales – was $523,000, up 3.6 percent from September 2017’s median. That’s the smallest price gain in 3.3 years.
“Price growth is moderating amid slower sales and more listings in many markets,” said CoreLogic analyst Andrew LePage.
Agents throughout the region say they are seeing the slowdown.
“Houses are staying on the market longer,” said Liliana Alfonso, an agent with Rodeo Realty in Studio City. “I think buyers are having a lot of trouble. … There’s a big gap there between what the cost of housing is and what people can afford.”
In Cypress, just southeast of L.A. County, Berkshire Hathaway’s Nancy Huang sees homes taking longer to sell, probably due to a 0.8-point rise in the 30-year mortgage rate.
“Because it used to be a hot seller’s market, (sellers) are expecting to get top dollar for their homes,” Huang said. But, she added, “buyers are seeing homes sit a bit longer, so (buyers) have more leverage. … They can negotiate more on the price.”
Levine, the Realtor economist, said buyers remember the 2007 market crash and are holding off, waiting for prices to drop.
“Folks are worried that prices are at a peak,” Levine said.
While 2018 will go down as the year a 6-year-long hot housing run came to a run, it’s not yet a buyer’s market, said Steve Thomas, of Reports on Housing.
“It is a balanced market,” he wrote in his latest report. Nonetheless, listings are up 31 percent from a year ago, with much of them coming on the market in the last six months.
California home prices were 98.5 percent below seller’s asking prices in September, the lowest level in 20 months, the state Realtor association reported last month.
Richard Green, director of USC’s Lusk Center for Real Estate, said he expects to see sale prices drop 5-10 percent in L.A. and Orange counties over the next two years.
The slowdown has prompted Riverside agent Mike Brusca to caution clients not to cut their price when their homes take longer to sell.
“A lot of times, if the home doesn’t sell in the first month, they panic,” said Brusca of Westcoe Realtors.
Some agents say they’re still seeing multiple offers and quick sales on homes in good condition, in good locations with reasonable prices – especially for homes at the low end of the price range.
“My under-$1 million properties are still selling. My million-dollar properties are taking longer,” said Addora Beall, a broker associate with Coldwell Banker Hallmark Realty in Glendale. “It depends on which market you’re in. The upper end is slowing, but the middle and lower markets are still very active.”
But home prices still are up year over year in all six Southern California counties.
And Orange and Riverside counties saw prices hit their highest level since the Great Recession.
Orange County’s median rose 4.2 percent to $740,000 in September, which tied the county’s all-time high reached in May. Riverside County’s median rose 8.1 percent to $389,000, the highest median since August 2007.
That’s still discouraging for buyers struggling to afford the monthly payment, which is up 14.2 percent in September after taking mortgage rate hikes into account.
“Fewer bidding wars. That’s where we are,” said El Segundo broker Moses Dennis. “Buyers are balking, and that’s why houses are not moving as fast.”
Article courtesy of OCRegister.com