The housing market’s chill grew colder in December, as sales plunged across Southern California and home prices barely rose.
The number of closed deals fell 20.3% compared with a year earlier, hitting the lowest level for a December since the start of the Great Recession and marking the sharpest percentage drop since 2010, according to a report out Wednesday from CoreLogic.
The six-county region’s median price, meanwhile, inched up 1.1% from a year earlier, to $515,000.
The 12-month price increase is the smallest since prices started their steady upward climb in April 2012, after declining slightly a month earlier. And December’s median price is now $22,000 below June’s all-time of $537,000.
While the median — the point at which half the homes sold for more and half for less — can fluctuate month to month, Wednesday’s report is the latest indication of a substantial market shift as buyers balk at the high cost of housing.
The SP CoreLogic Case-Shiller index, for example, provides a delayed look at home prices, but is widely considered to be the gold standard of measurements. On Tuesday, data for November were released, showing prices in Los Angeles and Orange counties rose 4.4% in November — also the lowest rise since 2012.
The slowdown has multiple causes, agents and economists say. Some potential buyers can simply no longer afford a home after years of steady price hikes. Others can still swing a mortgage at today’s prices but worry about buying at the top.
Economists generally don’t expect a housing market crash coupled with plunging prices, pointing to strong job growth and a rate of home building that’s below historical levels.
Some experts, however, do think values could dip under current economic conditions, arguing home prices have simply outpaced incomes for too long.
Sales fell in all six Southern California counties last month compared with a year earlier, ranging from a 13.5% drop in Ventura County to a 26% decline in Orange County. Still, there was enough demand to send prices a bit higher in all counties.
In Los Angeles County, the median rose 2% to $581,500; Orange County, 1.6% to $708,500; Riverside County, 4.1% to $380,000; San Bernardino County, 2.1% to $329,750; San Diego County, 1.9% to $550,000; and Ventura County, 2.1% to $575,000.
Many first-time buyers would be thrilled to see declines, not just slowing price appreciation. But it’s unclear if that will happen.
A clearer picture should emerge in the traditional spring buying season. And some agents say demand is already seeing a bit of a boost, following a recent pullback in mortgage rates.
December’s report, with its large sales decline and meager price appreciation, reflects sales that closed escrow in December. That means many buyers signed contracts in October and November when rates for a 30-year fixed mortgage were at a recent high. Since the peak, rates for a 30-year fixed mortgage have fallen by 0.5 percentage point to an average 4.46% last week, according to Freddie Mac.
CoreLogic analyst Andrew LePage also said one reason for the weak December median-price gains was a smaller share of high-end deals, which may indicate a volatile stock market spooked wealthy investors.
Tregg Rustad, a Rodeo Realty agent, said buyers are still willing to pull the trigger if a home isn’t significantly overpriced, at least by Los Angeles standards.
For example, in mid-January he listed a five-bedroom house in Mid-City for $1.76 million and said it’s now in escrow for about 3% above that amount. A year ago, he and the seller may have set the list price even higher, knowing there was a good shot home seekers would bite.
“Buyers are going to be careful” this year, he said. “They are tired of paying for more than a house is worth.”
Tribune Content Agency