Buying a Southern California home in late summer has become an even greater challenge. Prospective buyers are faced with high prices, increased mortgage rates, and fierce competition for a limited number of available properties, according to new housing data.
While bidding wars are still present, they are not as prevalent as they were in 2021 when mortgage rates were lower. Approximately half of all homes are now sold above their asking price, compared to nearly two-thirds two years ago. However, despite this, the typical house payment has reached an all-time high, resulting in a reduced buying power of hundreds of thousands of dollars.
In summary, the housing market still favors sellers, but there is a smaller pool of buyers. There are fewer individuals able to afford homes, and the number of homes available for sale continues to shrink.
Russell Morgan, founder and broker of HomeWay, an Orange County real estate brokerage, acknowledges that there are still enough buyers in the market to maintain high prices. However, he points out that the middle class is feeling the squeeze and that homeownership has become more difficult.
In August, the median price of a Southern California home dipped to $735,000, a slight decrease from the previous month. However, it is still 2% higher than the previous year. It is important to note that prices typically stabilize between July and August as potential buyers shift their focus to other activities.
Despite these figures, home sales have continued to decline. August saw a 16.3% decrease in sales compared to the previous year, marking the 21st consecutive month of year-over-year declines. So far this year, Southern California has recorded just under 113,000 home sales, making it the slowest year on record since 1988.
Selma Hepp, Chief Economist at CoreLogic, attributes the continued decline in home sales to the rising mortgage rates and a lack of available inventory. Mortgage rates increased over the past three months, with the average rate for a 30-year fixed mortgage reaching 7.07% in August. This has significantly impacted the buying power of potential homebuyers.
Natalie Wycoff, owner of Raymond Hill Realty, shares a story of a couple who saw a decline in their lender approval due to higher mortgage rates. They initially had approval to pay $1.4 million in 2021 but, after taking a break from house hunting, their approval dropped to $1 million. This decline represents a $400,000 reduction in their buying power.
Despite the challenges faced by homebuyers, Wycoff mentions one positive aspect: the decrease in the number of offers on homes. In 2021, it was not uncommon to see 30 offers on a single property, whereas now, buyers are seeing half as many offers.
High interest rates not only limit buyers’ purchasing power but also discourage potential sellers from listing their homes for sale. With over 86% of California borrowers having rates of 5% or less, there are already fewer homes on the market. In August, Southern California had just over 42,700 homes listed for sale, a 28% decrease compared to the previous year.
Orange County is one exception to the trend, with the median home price reaching an all-time high of $1.086 million in August. Agents attribute this increase to the county’s desirable lifestyle and strong demand.
Overall, most counties in Southern California saw small annual price gains in August, with Riverside County experiencing a slight decrease in the median price. The housing market continues to be volatile, with high-demand markets seeing rising prices and more affordable markets struggling due to higher mortgage rates.
For a detailed breakdown of prices and sales in each county, see the table below:
– Los Angeles County: Median price rose 1.2% to $830,000; sales were down 11.5%.
– Orange County: Median price rose 10.3% to $1.086 million; sales were down 12.4%.
– Riverside County: Median price decreased 0.5% to $560,000; sales were down 20.8%.
– San Bernardino County: Median price rose 2.1% to $495,000; sales were down 15.6%.
– San Diego County: Median price rose 5.1% to $840,000; sales were down 21.2%.
– Ventura County: Median price rose 5.1% to $818,500; sales were down 24.7%.
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