For the first time since 2012, the usually sizzling hot Southern California housing market is showing a downshift marked by the slight dip in median home prices in March from a year earlier. The 0.1% drop, reported by CoreLogic who tracks housing data, showed that prices for the six counties that make up the SoCal region (Imperial, Los Angeles, Orange, Riverside, San Bernardino and Ventura) were essentially flat year-over-year. But given a reduction in price in previous months, homes are $18,500 off their June 2018 peak, raising the possibility of a sustained decline in the months ahead.
The median price for new and resale houses and condos — the point at which half the homes sold for more and half for less — was $518,500 in March, $500 less than a year earlier and off the all-time high of $537,000 reached in June. However, the decline from March 2018 doesn’t necessarily mean values declined across the board. When broken down by county, the median dropped only in Orange County, while remaining areas — including Los Angeles County — could still boast a slight or modest increase compared with a year earlier.
Sales, however, continued to decline across the board in SoCal, falling 14.1% in March and have now dropped in each county for at least eight consecutive months.
Should this trend continue with prices following suit, many buyers who were once priced out of the market may be able to find an entry, unless this turn of events is accompanied by an economic downturn and return to high joblessness.
Either scenario is unlikely though since there is still a high demand to live in California, where developers can’t easily increase construction; and unemployment in California is 4.3%, a far cry from a height of 12.3% after the Great Recession. What this data more likely means is that the market is pausing and going through a market adjustment. Why? Because factors that led to previous housing busts aren’t readily evident today, notably the defense cutbacks that hammered the local economy in the early 1990s and the risky (and sometimes fraudulent) lending of the last decade that created a real estate bubble that reached unsustainable heights.
Weary from the market crash, lending is tighter today and recession fears have lightened with the near all-time low in unemployment for the State; and experts are predicting slower, but continued growth.
Agents are reporting open houses being increasingly busy since the opening of the traditional spring buying season coincides with a drop in mortgage rates. But also that buyer psychology hasn’t returned to that of previous springs and home shoppers are pickier, and sellers are seeing fewer multiple offers. Potential buyers are now worrying about buying at the top and those who are willing to pull the trigger have more options to choose from.
According to Zillow, home inventory is increasing with 24% more homes for sale in L.A. County last month than in March 2018. In Orange County, listings rose 40%. The increases stem largely from stagnant homes on the market rather than a flood of owners suddenly deciding now is the time to cash in. This indicates that the main reason for the slowdown is affordability.
In Los Angeles County, March’s median price was 85% above 2012 levels, according to CoreLogic. Average weekly earnings over that same time frame rose 27%, according to non-inflation adjusted numbers from the Bureau of Labor Statistics.
For years, inventory has been extremely tight across the state — due to home builders taking less risks after the financial crisis and local restrictions on new development. Also, thanks to Federal Reserve stimulus, buyers were able to take advantage of rock-bottom interest rates. The tide has now turned and buyers may finally be balking.
Here’s the breakdown of home price and sales data by county:
- In Los Angeles County, the median price rose 2.1% to $597,500, while sales dropped 15.5% from a year earlier.
- In Orange County, the median price dropped 0.7% to $720,000, while sales fell 22.8%.
- In Riverside County, the median price rose 3.9% to $389,500, while sales fell 11.1%.
- In San Bernardino County, the median price rose 2.1% to $336,000, while sales fell 9.5%.
- In San Diego County, the median price rose 0.9% to $555,000, while sales fell 8.6%.
- In Ventura County, the median price rose 3.3% to $583,750, while sales fell 20.4%.
So, for those of you who felt like the housing market was beyond your reach before because of sky-high prices, now just may be the time with all of these factors creating a perfect (albeit small) storm for you to double-dutch your way into a real estate deal.