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SoCal Housing Market Cools with Slow Sales and Declining Prices

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SoCal Housing Market Cools with Slow Sales and Declining Prices
The number of homes sold since last June has dropped 21 percent as mortgage rates rise—but the effects aren’t felt in all counties
By Laurenz Busch -July 20, 2022
The California housing market has further cooled in June, dropping a remarkable 21 percent in units sold since the same time last year.

The market also saw an eight percent drop in units sold since May, when California’s median home price was pushed to a record-high of $900,170 according to the California Association of Realtors. June’s statewide median dropped four percent, to $863,790.

“Excluding the three-month pandemic lockdown period in 2020, June’s sales level was the lowest since April 2008,” the association’s Vice President and Chief Economist Jordan Levine said in its report. “With inflation remaining high and interest rates expected to climb further in the coming months, the market will normalize further in the second half of the year with softer sales and more moderate price growth.”

Levine added that sales can be expected to continue to slow in the coming months.

The fact that the housing market has been lethargic is not surprising, considering that mortgage rates increased. However, as the Los Angeles Times reports, the fact that the market saw a four percent decrease during peak season from May to June, is surprising—since 2010 was the last time that median home prices fell from May to June.

The C.A.R study uses a “seasonally adjusted annualized rate,” or the amount of homes expected to be sold in 2022 based on June’s numbers to assess the market. That number is currently 344,970, down roughly 30,000 units from May.

Across the state, fewer homes are being sold and home values are decreasing, but it’s not as drastic in all parts of the state. Although the market in SoCal slowed, it hasn’t affected all counties. Los Angeles and Ventura both saw increases in home prices since May, whereas Orange, Riverside, and San Diego saw drops—San Bernardino remained unchanged. Still, over the past year, the average home price is up 5.4 percent.

“At the regional level, home prices in all major California regions increased in price from last year, with the Central Coast leading the way at a 10.1 percent increase, followed by Central Valley (10.0 percent) and Southern California at 8.4 percent,” the report states.

Santa Barbara even saw home prices increase 38.9 percent since May, an anomaly only Del Norte County has even come close to at 25 percent.

Despite rising mortgage rates, the news could potentially benefit homebuyers who may have missed out on the highly competitive markets. As the Times reports, 29.6 percent of all homes on the market in the L.A. metro area had price cuts in June, which is more than double the 12.6 percent rate of June 2021 and higher than in dozens of other cities, including San Francisco, Boston, Detroit and St. Louis.

“California’s housing market continues to moderate from the frenzied levels seen in the past two years, which is creating favorable conditions for buyers who lost offers or sat out during the fiercely competitive market,” said C.A.R President Otto Catrina. “With interest rates moving sideways in recent weeks and fewer homes now selling above listing price, prospective buyers have the rare opportunity to see more listings coming onto the market and face less competition that could force them to engage in a bidding war.”