Rising home mortgage rates have poured sand into the tank of Southern California home prices and sales.
Total home sales dropped 47 percent last year across the six-county region, with the median price falling 1 percent, the Orange County Register reported, citing CoreLogic figures.
Home sales fell to a 14-year low of 211,046 transactions in 2022, compared to an average of 277,500 deals a year, according to CoreLogic. Just three of the past 35 years had fewer sales.
A decade-long climb in home prices peaked and fell, with overall values dropping $76,000 in seven months.
High prices and the swift rise in mortgage rates were at the heart of the big shift, choking off demand as house payments soared out of reach for many buyers, Jordan Levine, chief economist at the California Association of Realtors, told the Register.
“It was kind of the one-two punch,” Levine said. “Higher rates and the fact that prices have grown by roughly 35 percent since 2020 … contributed to the slowdown.”
Take December, when the median price of a Southern California home fell from the month before for the seventh time in a row, dropping to $686,000 from a peak of $760,000 last spring.
December’s median was up 0.7 percent from the year before, following a 20-month stretch of 10 percent to 20 percent annual gains that lasted through June.
Sales last month fell to 12,751 transactions, down 46.6 percent year-over-year to the smallest December tally on record.
“The surge in mortgage rates from 3 percent to 7 percent took a huge bite out of homebuyers’ purchase power, reducing it as much as 30 percent,” Selma Hepp, CoreLogic’s chief economist, said in a statement. “That means that a family … that could afford a home priced at about $770,000 at 3 percent, can now afford a home priced at about $540,000 at 7 percent.”
It now takes five to six weeks to sell a Southern California home, compared with less than two weeks a year ago, according to Zillow. At the same time, more than a quarter of last month’s home sales sold for more than the seller’s asking price, compared with 59 percent a year earlier, according to Redfin.
Although mortgage rates have dipped in recent weeks, real estate experts expect 2023 to be a challenge for the housing market.
Buyer demand will remain soft due to high prices and mortgage rates averaging about 6 percent, said Levine, the Realtor economist. Owners will be reluctant to sell since moving would mean giving up a “sweetheart mortgage rate” from the pandemic era.
In December, the median price for a home in Los Angeles County fell 3.1 percent to $775,000, with sales down 47.8 percent to 3,984 transactions, according to the Register.
In Orange County, the median price fell 0.5 percent to $933,500, with sales down 39.9 percent to 1,788 transactions.
In Riverside County, the median price rose 2.4 percent to $549,000, with sales down 47.6 percent to 2,589 transactions. In San Bernardino County, the median price rose 3.2 percent to $490,000, with sales down 47.5 percent to 1,800 transactions.
And in Ventura County, the median price fell 2.9 percent to $738,000, with sales down 51.2 percent to 471 transactions.
— Dana Bartholomew