The housing market in Los Angeles and Orange counties saw a 24% decline in homebuying activity over the past year due to high house prices deterring potential buyers.
According to CoreLogic, there were a total of 7,458 sales of houses and condos, both new and existing, in May within the two counties. While this represents a 17% increase from the previous month, it is a 24% decrease compared to the same period last year.
So, just how slow has the market become?
- May recorded the second-lowest sales figures since 1988.
- It ranks as the 47th-smallest sales total for any month in the past 35 years, and only 11% of all months have had slower sales.
- The sales pace in May was 39% below the average for the month since 1988.
- In the last 12 months, there were 112,483 sales, which is 34% below the average.
- This is the lowest 12-month sales count since March 2009.
- Only 2.4% of all 12-month periods have had slower sales.
It has been over a year since the Federal Reserve began raising interest rates to cool down the economy. As a result, homes have become less affordable due to increased mortgage rates, reducing buyers’ purchasing power by 12% over the past year. Additionally, economic uncertainty has also dampened enthusiasm among potential homebuyers.
Looking at the broader Southern California region, sales in the six-county area fell by 26% to a total of 16,350, while the median sales price decreased by 3.8% to $715,000.
The Details
Now, let’s dive into the specifics of the L.A.-O.C. market and analyze May’s sales figures.
In Los Angeles County, there were 5,154 closings, representing an 18% increase from the previous month, but a 24% decrease compared to the previous year. Orange County had 2,304 sales, which is a 16% increase from the previous month, but a 22% decrease compared to the previous year.
Note: On average, May typically sees a 6.1% growth in sales month-over-month in L.A., and a 6% growth in O.C.
Let’s also examine how prices have fluctuated.
In Los Angeles County, the median price remained flat at $800,000 compared to the previous month but has decreased by 6% from the previous year. It is also 7% lower than the record high of $860,000 set in April 2022.
For Orange County, the median price increased by 1.2% to $1 million compared to the previous month but is 4.8% lower than the peak of $1.05 million in May 2022.
Since 1988, May typically sees a 1.1% price increase in L.A. and a 1.7% price increase in O.C.
Affordability Challenges
The decline in sales can be attributed to the higher cost of financing: The average 30-year mortgage rate in May was 6.43%, compared to 5.23% a year earlier.
Based on my calculations, buyers in Los Angeles County faced an estimated monthly house payment that was 7% higher at $4,016 for the $800,000 median-priced home, compared to the $3,764 payment for a $854,000 home a year ago. This assumes a 20% downpayment of $160,000.
In Orange County, buyers had to make an 8% larger payment of $5,020 per month for the $1 million median-priced home, compared to the $4,628 payment for a $1.054 million home a year ago. The downpayment was $200,000 or 20%.
Single-family Homes
Sales: In L.A., there were 3,597 transactions, representing a 15% increase from the previous month but a 24% decrease compared to the previous year. In O.C., there were 1,426 closings, which is a 19% increase from the previous month but a 24% decrease compared to the previous year.
Prices: L.A.’s median price of $865,000 increased by 2% from the previous month but decreased by 7% from the previous year. O.C.’s median price of $1.2 million increased by 4% from the previous month and remained flat compared to the previous year.
Condos
Sales: In L.A., there were 1,263 sold condos, representing a 25% increase from the previous month, but a 26% decrease compared to the previous year. In O.C., there were 714 sold condos, which is a 24% increase from the previous month, but an 18% decrease compared to the previous year.
Prices: L.A.’s median price of condos, at $666,000, increased by 1% from the previous month but decreased by 5% from the previous year. O.C.’s median price of condos, at $724,000, decreased by 1% from the previous month and decreased by 3% from the previous year.
New Homes
Sales: In L.A., there were 206 new home sales, representing a 26% increase from the previous month, but a 27% decrease compared to the previous year. In O.C., there were 163 new home sales, which is a 19% decrease from the previous month and a 25% decrease compared to the previous year.
Prices: L.A.’s median price for new homes, at $858,500, decreased by 13.3% from the previous month but increased by 6% from the previous year. O.C.’s median price for new homes, at $1 million, decreased by 12% from the previous month and decreased by 24% from the previous year.
Builder Share: In L.A., new homes accounted for 4% of all closings last month, compared to 4.2% in the previous year. In O.C., the share of new homes was 7.1% last month, compared to 7.3% in the previous year.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
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