Analyst says low interest rates and large inventory make rebound likely
Home sales dropped in February for the 10th month in a row, but there were signs the market might be picking up, real estate tracker CoreLogic reported Wednesday.
February sales were down 8.1 percent compared to the previous year, but that was not as severe as the last few months when sales dropped 10 percent to 22 percent. At the same time, the median home price for the month, $549,000, was up 2.6 percent in a year.
Chris Thornberg, economist and founding partner of Beacon Economics, said it was ridiculous to think home prices would not rebound with lowering interest rates and home inventory at historic lows.
“The market was going to move again, regardless,” he said. “It takes a big mess to cause home prices to fall. I don’t just mean a mess in the housing market. I mean an economic mess.”
Thornberg said the slowdown was caused by rising interest rates and a belief by buyers that prices would go down. He said a strong economy and a shortage of homes for sale throughout California mean prices will continue to rise, and spring will be a busy time for sales.
After months of slowing sales, there are more homes on the market for potential buyers, said the Greater San Diego Association of Realtors. In February, there were 6,362 homes for sale, up from 4,636 at the same time last year and 4,415 in 2016. Still, February’s inventory was smaller than during the recession, when there were more than 9,000 homes for sale through much of 2009.
Dana Kuhn, a director at John Burns Real Estate Consulting, said he didn’t anticipate a heating up of the market like there has been the last few years, mainly because wages have not been increasing as fast as home prices.
He said there will likely be an increase in sales in the typical buying seasons of spring and summer, but it will be modest compared to the past few years and might not last as long.
“There is far less motivation for someone to buy today than a few years ago,” Kuhn said. “Even though (interest) rates have come back down, there is a widespread sense that we are at the end of cycle.”
The average interest rate for a fixed-rate, 30-year loan last year at this time was around 4.5 percent, said Mortgage News Daily . It reached 5.05 percent in November and was back down around 4 percent Wednesday.
All types of housing in San Diego County had declining sales in February:
The resale single-family home median was $595,000, down from the peak of $630,000 reached in June and July. There were 1,576 sales, down 4 percent from the same time last year.
Resale condos continue to be the hardest hit. There were 693 sales, down 14 percent from February 2018. The median price was $408,000, down 4 percent in a year.
A lack of newly built homes has meant very few sales for years. There were 217 sales in February, which includes condos and single-family, down 14.6 percent annually. The median was $587,000, exactly the same as it was in February last year.
All of Southern California experienced similar market conditions in February. Orange County had the biggest annual drop in sales at 17.1 percent.
It was followed by San Bernardino County, down 13.8 percent; Ventura County, down 12 percent; Los Angeles County, down 11.8 percent; Riverside County, down 8.9 percent; and San Diego County, down 8.1 percent.
San Diego Union-Tribune