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Tuesday, July 19, 2022

Source: LA Times

The SoCal housing market is cooling. Here’s how far prices have fallen

By Jack FlemmingJuly 19, 2022
A "For Sale" sign is in front of a home.

With more supply and less demand, Southern California’s median home price dropped from May to June.

(Raul Roa / Los Angeles Times)

Southern California home prices and sales edged lower in June from the month before, adding to the pile of evidence that the housing slowdown is starting to pull home values lower.

The data, released Tuesday by DQNews, mark the first month since January that Southern California’s ultra-competitive housing market saw a decline in the median home price. The median is the price at which half the homes sold for more and half for less.

The region’s six-county median sale price was $750,000, down from $760,000 in May. However, a broader view shows that prices are still soaring compared with last June, when the median price was $679,000.

Still, the drop comes as a slight surprise. Although median prices tend to peak in the summer, the average increase from May to June was 1.78% over the last decade, DQNews data show. The last time prices fell from May to June was in 2010.

Home sales, meanwhile, slipped on a month-over-month basis but plunged compared with a year earlier, DQNews said. A total of 20,289 homes were sold in June compared with 27,143 the previous June — a decline of 25.3%.

That follows a slew of other evidence that the housing market has sharply slowed since mortgage rates jumped this year, rising from the low 3% range to the mid-5% range, where they are now.

Real estate agents say bidding wars have become less frequent and inventory is rising. A growing share of home sellers are also being forced to trim their asking prices to find a buyer.

Redfin data indicate that 29.6% of all homes on the market in the Los Angeles metro area had price cuts in June. That’s more than double the 12.6% rate of June 2021 and higher than in dozens of other cities, including San Francisco, Boston, Detroit and St. Louis.

“Price cuts are encouraging. I feel like I have a little more leverage,” said Becky Alvarez, who’s shopping for a house in the San Fernando Valley. “But prices will have to fall way more before I can realistically afford anything.”

Despite waning demand, some analysts say overall home values aren’t likely to decline. Instead, the value of homes will simply rise less than in recent years. However, other economists predict values will fall in 2023.

“It’s not a huge surprise. We’ve been expecting things to turn negative for a while now,” said Scott Wild, senior vice president of consulting at John Burns Real Estate Consulting. “There’s more supply and less competition, so buyers have a few more options than they used to.”

Wild added that as the market becomes less frenetic and more rational, he expects gradual price declines over the next 12 to 18 months.

But in a market with as much demand as Southern California, price drops of 5% or even 10% might not move the needle for many people, and those priced out of buying will be pushed into the increasingly competitive rental market.

Before home values truly fall, they must first slow. And that slowdown appears to be starting.

  • In Los Angeles County, the median sales price was $860,000. That’s 8.9% higher than in June 2021 but unchanged compared with May.

  • In Orange County, the median sales price was $1.025 million. That’s 13.9% higher than in June 2021 but 2.8% lower than in May.

  • In Riverside County, the median sales price was $594,500. That’s 16.6% higher than in June 2021 but 0.7% lower than in May.

  • In San Bernardino County, the median sales price was $517,750. That’s 16.9% higher than in June 2021 but 1% lower than in May.

  • In San Diego County, the median sales price was $825,000. That’s 10.1% higher than in June 2021 but 2.9% lower than in May.

  • Ventura County was the only county where prices increased from May to June. The median sales price was $810,000. That’s 10.1% higher than in June 2021 and 2.2% higher than in May.

California’s median home price dropped to $863,790 in June, a 4% decrease from the revised record high of $900,170 recorded in May. Still, the June price was up 5.4% from a year earlier. The group noted in its Monday report that the price moderation was in part due to a change in the mix of sales in June, “as the high-end market started pulling back.”

Statewide sales totaled a seasonally adjusted annualized rate of 344,970 in June, the association said, representing what the total number of homes sold during 2022 would be if sales maintained the June pace for an entire year. June sales fell 8.4% from a month earlier and 20.9% from a year earlier.

June’s sales pace was the lowest since April 2008, excluding the three-month pandemic lockdown period in 2020, the group said.

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