Southern California’s housing market weathered the slowest October in seven years, prompting a debate over where the market is headed.
One expert said the market is going through a minor adjustment in response to higher (but still low) mortgage rates. Others are bracing for possible price drops within the next two years.
Home prices, meanwhile, held steady last month, rising 6.1% from October 2017 levels, real estate data firm CoreLogic reported.
The median price of a Southern California home, or price at the midpoint of all sales, was $525,000 — just $12,000 below the all-time high of $537,000 reached in June, CoreLogic figures show.
Coupled with a near 1% gain in 30-year mortgage rates, the monthly house payment for a median-priced Southern California home was up 18.4% from a year ago.
CoreLogic’s October housing report confirmed that a once-fiery housing market is cooling.
Sales were down 7.5 percent in October from year-ago levels, falling for a third consecutive month to 19,193 new and existing home deals in the six-county region.
That’s a smaller decline than in September when sales fell nearly 18% year over year. September’s numbers were skewed by having one less business day than the year before. Last month, it turns out, was one day longer than the year before. Adjusting for that difference, October sales were down almost 12%, CoreLogic reported.
“Rising prices and mortgage rates have priced out some potential buyers while causing others to conclude that waiting to buy could pay off,” said CoreLogic analyst Andrew LePage.
Last month’s sales tally was the lowest for an October since 2011. Sales in the region were down in 10 of the past 12 months, meaning 2018, so far, has had the fewest number of sales since 2014.
“All of a sudden, right now, we have less buyers,” said South Bay agent Ramsey Oliveras of Re/Max Estate Properties in Palos Verdes. And listings are rising, he added.
“There’s some kind of urgency on selling,” he said. “Maybe people are starting to panic a little bit.”
Richard Green, director of USC’s Lusk Center for Real Estate, continues to expect that home prices in Los Angeles and Orange counties will drop from 5% to 10% over the next two years.
Christopher Thornberg, a former UCLA professor of economics and founder of Beacon Economics, disagreed. Barring an unforeseen global economic shock, home prices could keep going up “indefinitely,” provided appreciation remains in line with wage hikes, he said.
“We have no conditions for a bubble, and as such, it’s not going to pop as a bubble,” he said.
Thornberg blamed the sales slump on rising mortgage rates, which averaged 4.8% last week, according to Freddie Mac. That’s up from an average of 3.9% a year ago, but below the 47-year average of 8.1%.
“Interest rates popped, and by definition, when interest rates pop, the market has to regauge a bit,” Thornberg said. “The market is doing what it’s supposed to do. I expect the market to get back on track and things will continue apace.”
There’s no question, however, that the market is adjusting.
Oliveras sold two homes recently on East Double Street in Carson. One sold for $10,000 below the asking price. The other for $100,000 below asking.
“When it was a good market, people were offering full price, (and there’d be) five offers for full price,” said Oliveras, who also is seeing an uptick in homes selling “short” of the amount owed on the mortgage.
“It’s going to be an interesting two or three years in the real estate market,” he said. “Things are changing.”
The state of the market varies greatly by neighborhood, added Glendale agent Estela Samaniego. Houses typically sell within 30 days in Glendale and Eagle Rock, while sales in Pasadena and La Canada are taking longer. A listing she sold last month in Ontario closed for $20,000 below the asking price after sitting on the market for four months.
“Buyers are waiting to see if prices are going to come down,” Samaniego said. “(But) we’re not seeing prices come down.”
Tribune Content Agency