Steeply rising mortgage rates are starting to chill the region’s housing market but not enough to keep prices from hitting all-time highs in all six counties last month.
The median price of a Southern California home – or price at the midpoint of all sales – was $735,000 in March, DQNews reported Wednesday, April 20, using data from Irvine-based real estate research firm CoreLogic.
The region’s median set records in 12 of the past 14 months, rising $105,000, or nearly 17%, since March 2021. That’s an average price hike of $2,019 per week.
Prices were up by double digits in all six counties. In Orange County, the median home price shot up 22% to $1.02 million for all homes, with single-family houses rising 28% to $1.2 million. Steve Thomas of ReportsOnHousing.com reported that six out of every 10 homes on the Orange County market are listed for $1 million or more.
Sales, meanwhile, dipped 8.5% from a year ago, but the region still had the second-highest tally for a March for the past 16 years. In all, 23,225 houses, condos and townhomes changed hands in March, DQ News/CoreLogic figures show.
Rising mortgage rates are making the cost of homebuying more expensive. But that’s been offset by stiff competition for the lowest number of homes for sale in almost two decades.
In addition, rising rates had the counter-intuitive effect of driving even more people to buy before rates go even higher.
“What (rising rates) did was motivate every single buyer to avoid getting priced out of the market,” said Corey Nelson, a broker with Sotheby’s International Realty’s Sunset Strip office in West Hollywood. “It creates an additional scramble. … But that’s a temporary thing. It’s going to cause the market to taper off.”
The March figures reflect deals signed in late January through February when rates for the 30-year fixed mortgage averaged 3.7%. They don’t reflect the impact of last week’s surge to 5%, an 11-year high.
“Home prices you see today are an artifact of what happened 30 to 90 days ago,” said Ralph McLaughlin, chief economist for Kukun, a property technology website for homeowners and investors. “Five percent (rates) will likely slow down the pace at which homes sell. It’s not going to reduce sales by a large margin, but price gains will be more muted.”
McLaughlin said Southern California’s appreciation rate is at a peak that will taper to 10%-15% by June.
But it won’t kill the market or drive home prices down, McLaughlin and other housing economists say.
Freddie Mac Chief Economist Sam Khater issued a quarterly forecast Monday, April 17, projecting the housing market “will remain solid” even as mortgage rates rise. Higher rates will curb the number of existing homeowners refinancing loans. But demand for housing continues to remain high, he said.
Khater predicted the average gain for U.S. home prices will be 10.4% this year and 5% in 2023.
Fannie Mae’s April outlook expects U.S. home sales will drop 7.4% this year and 9.7% in 2023. As for prices, the government-sponsored lender predicted continued gains, but at a smaller pace, slowing from 20% earlier this year to 3.2% by end of 2023.
Spring typically is the busiest season of the year, with 45% of Southern California’s transactions occurring from March through July. But this season will be somewhat cooler than in years past, housing analyst Thomas said in his latest market report.
“Multiple offers are still the norm, and most homes are flying off the market and into escrow just moments after for-sale signs are pounded into the front yard,” Thomas wrote. “Buyers are still frustrated by the lack of available homes to purchase in all price ranges. Sellers remain in the driver’s seat able to call the shots. Nonetheless, trends have surfaced that highlight a cooling marketplace.”
The typical 30-year mortgage payment for a median-priced Southern California home increased to $3,157 last month. Thanks to the double whammy of rising prices and rising rates, that’s up $1,000, or 47%, from a year ago.
Using words like “buyer fatigue” and “sticker shock,” agents say buyers are getting more cautious and are less likely to waive escape clauses like loan and inspection contingencies. More homeowners are backing out of deals after getting caught up in the frenzy of bidding, then recalculating what the monthly payment is going to be.
“Some buyers are getting priced out because of rising rates,” said Myiesha Majors, a sales agent with Berkshire Hathaway in Rancho Cucamonga. “But not as many as some people would think. … This time last year, I would see 30 (offers) easily. Now, it’s five or six. So, it’s drastically reduced but still multiple.”
Houses priced below the median are getting the most attention. In Glendale, where houses typically sell for over $1 million, a two-bedroom, 1,200-square-foot house listed for $998,000 got 46 offers and sold for $1.43 million, said Darin Eppich of Sotheby’s Sunset Strip brokerage.
Listings remain at their lowest number in about 18 years. Zillow figures show the number of homes for sale in the six-county region increased by 2,000 units last month to 28,665 homes for sale. But listings still are down 26.5% from March 2021, and are down 43% from two summers ago.
“Yes, inventory is up if you squint really, really hard at the chart,” McLaughlin said. “We’re seeing inventory move in the right direction, but it still has a long way to go before it’s normal.”
Here’s a county-by-county breakdown of median prices and home sales, with year-over-year percentage changes:
— Los Angeles County’s median rose 12.0% to $840,000; sales were down 5.5% to 7,531 transactions.– Orange County’s median rose 22.2% to $1.02 million; sales were down 18.6% to 3,184 transactions.– Riverside County’s median rose 21.6% to $580,000; sales were down 7.8% to 4,646 transactions.– San Bernardino County’s median rose 15.1% to $495,000; sales were down 4.9% to 3,111 transactions.– San Diego County’s median rose 18.7% to $805,000; sales were down 9.3% to 3,736 transactions.– Ventura County’s median rose 17.5% to $775,000; sales were down 5.8% to 1,017 transactions.
Source: Orange County Register
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