17.5% reduction coupled with first price retreat in county since January
San Diego County home sales dropped 17.5 percent to the lowest level in 11 years for a September in the first significant sign of a slowdown in the market, real estate tracker CoreLogic reported Tuesday.
Last month, 2,942 homes sold in the county, down from 3,568 sales a year ago. It was the lowest number of sales for a September since just before the Great Recession when 2,152 sold in September 2007. Also, last month’s median home price dropped to $575,000 — the first decrease since January — after hitting an all-time high of $583,000 in August.
Most experts attributed the slowdown to a rise in mortgage interest rates, and the sale price reduction to potential buyers balking at higher monthly payments.
“Mortgage rates (are) another thing that is going to add cost and temper demand,” said Cheryl Young, senior economist at Trulia. “Rates are hovering around a seven-year high so people are really, possibly, taking a step back before they jump into home buying.”
The mortgage rate for a 30-year, fixed-rate loan was 4.78 percent at the end of September, said Mortgage News Daily, up from 3.99 percent at the same time last year. That would make the monthly cost of a San Diego County median-priced home go up by $268 a month.
Young also said home price growth has been outpacing wage increases for a long time, so it was inevitable that would also affect sales. Trulia research shows 26.4 percent of listings in the San Diego metropolitan area had at least one price reduction in August, the most of the 100 metros studied.
San Diego was not isolated in a sales drop in September, with some of the highest-priced markets seeing the biggest sales drops.
Rising home prices throughout the year have been largely attributed to a strong economy mixed with strong competition for a limited number of homes for sale. However, the home inventory in September was one of its highest in years, said data from the Greater San Diego Association of Realtors.
There were 7,824 homes for sale in September, up from 5,678 in September 2017; 6,597 in 2016; and 7,134 in 2015.
Real estate agent Michael Chandler, based in Kensington, said inventory is still low, historically speaking, and rising mortgage interest rates aren’t making the decision to buy easier.
“In their payment, they can be looking at $300 to $500 a month compared to what they were looking at two to three months ago,” he said. “So, buyers are reluctant. It’s getting more expensive to actually pull the trigger on their options.”
Chandler said buyers should begin to feel more empowered because they have more leverage after years of facing a sellers’ market.
Other reports released Tuesday also signaled a slowing market. The closely watched S&P CoreLogic Case-Shiller Indices showed the resale home market in the San Diego metropolitan area losing momentum.
In metropolitan San Diego, resale single-family home prices in August increased 4.8 percent in a year, the fifth lowest out of the 20 cities studied. Las Vegas prices went up the most, 10.6 percent, and San Francisco the second highest at 10.6 percent.
The nationwide yearly price increase was 5.8 percent, the first time it fell below 6 percent in 12 months.
David Blitzer, managing director of the index, wrote in the report that a repeat of the housing crash is unlikely because default rates are low for mortgages.
“Without a collapse in housing finance like the one seen 12 years ago,” he wrote, “a crash in home prices is unlikely.”
The indices evaluate home prices by more than just price, tracking repeat sales of identical single-family houses as they turn over through the years. It is a favorite of economists, who use it to get a more complete view of the market instead of just the median home price.
The CoreLogic report showed that all types of housing in the county had a price reduction and sales drop in September. There were 255 newly built homes sold for a median price of $702,500. Condos had one of the biggest drops in sales, 867, which was its lowest since February. The median home price for condos, the fastest rising in the resale market this year, was $427,500 in September, down from the all-time high of $432,000 in July.
Resale single-family homes are typically seen as the biggest indicator of the market because they make up the largest portion. There were 1,820 sales, the lowest since February. Also, the median was $615,000 — down from the peak of $630,000 reached in June and July.
Investors seem to have little noticeable concern about the market. Absentee buyers, typically investors who don’t intend on living in the home as a primary residence, made up 21.1 percent of sales in September. That’s up from 20.7 percent at the same time last year.
In areas with at least 10 sales, La Mesa (91941) had the biggest price increase — 34.3 percent — in a year for a resale single-family home for a median of $705,000. For condos, the Rancho Bernardo (92127) median of $397,550 was a yearly increase of 34.8 percent.
Sales were down year-over-year across Southern California. Orange County had the biggest reduction in sales with a 23.6 percent drop from last year. It was followed by Los Angeles County, down 19.3 percent; San Diego County, down 17.5 percent; Ventura County, down 17.2 percent; San Bernardino County, down 16.4 percent; and Riverside County, down by 10.1 percent.
San Diego Union-Tribune