Six-county region was mostly flat year over year, CoreLogic reports
The Southern California median home price dipped slightly in March from a year earlier, the first annual decrease since 2012 and a sign of a downshift from the once-sizzling regional housing market.
The 0.1 percent drop, reported Friday by CoreLogic, means prices for the six-county region were essentially flat year-over-year. But given a pullback in previous months, prices are $18,500 off their June 2018 peak, and that raises the possibility of a sustained decline in months ahead.
The median price for new and resale houses and condos — the point where half the homes sold for more and half for less — was $518,500 in March, $500 less than a year ago and off the all-time high of $537,000 reached in June.
The dip from March 2018 doesn’t mean values declined across the board. In fact, when broken down by county, the median only dropped in Orange County, while remaining areas — including San Diego County — still posted a slight or modest increase compared with a year earlier.
Sales, however, continued their declines across the board and have now dropped in each county for at least eight consecutive months. Sales for the region fell 14.1 percent in March.
If prices follow and enter into a tailspin, many buyers struggling to afford a home would rejoice — provided it wasn’t accompanied by an economic downturn and return to high joblessness.
Many economists say either scenario is unlikely. Today, there is still lots of demand to live in a state where developers can’t easily ramp up construction. Unemployment in California is 4.3 percent, near a record low and a far cry from a height of 12.3 percent in the wake of the Great Recession.
Experts say it is more likely the market is pausing and, while prices may turn negative for a time, a crash the likes of last decade isn’t in the offing.
“What we are going through is a market adjustment,” said Skylar Olsen, director of economic research with Zillow. “Home prices were outpacing incomes at an unsustainable rate.”
Predicting a downturn is always fraught. But factors that led to previous housing busts aren’t readily evident today.
In the early 1990s, defense cutbacks hammered the local economy. Last decade, risky — and sometimes fraudulent lending — inflated a bubble to unsustainable heights.
Today, lending is tighter and recession fears lately have eased. Experts generally predict slower, but continued, growth.
Open houses have also been increasingly busy as the opening of the traditional spring buying season coincides with a drop in mortgage rates, some agents said. Any upsurge in demand wouldn’t fully be captured by March data.
“I don’t see any kind of crash anytime soon,” said Steven Thomas, who tracks the Southern California market at Reports on Housing. Absent an unexpected economic downturn or surge in mortgage rates, he predicted prices would be flat or increase slightly over the next year.
Real estate agent Simone Poingsett said she’s seeing more interest as rates have dropped from a height of nearly 5 percent in November to 4.2 percent this week. But buyer psychology hasn’t returned to that of previous springs.
Home shoppers are pickier, and sellers are seeing fewer multiple offers. Poingsett said shoppers are coming to one of her listings, a Sherman Oaks condo, and finding carpet when they prefer hardwood floors.
“A year or two ago, they’d overlook that,” Poingsett said, adding the seller is now seeking HOA approval to rip out the carpet. “Little things are stopping them from jumping on something.”
Potential buyers worry about buying at the top, she said. And those who are willing to pull the trigger have more options to choose from.
The latest data show home inventory — the supply of property offered for sale — is rising.
The increases stem largely from homes going unsold, rather than a flood of owners suddenly deciding now is the time to cash in, Olsen said. That indicates the chief culprit of the slowdown is affordability.
Median home prices in San Diego County inched up 0.9 percent in March, going from $550,000 a year ago to $555,000 this year.
But that doesn’t mean San Diego is sidestepping the region’s slowdown. Prices in the biggest piece of San Diego’s housing market — existing home sales — fell 1.5 percent year-over-year in March.
Sales fell 8.6 percent – dipping from 3,527 last March to 3,224 this March.
According to CoreLogic, existing home sales made up 65 percent of housing purchases in San Diego in March. The median price dropped from $609,000 a year ago to $600,000 this March. Prices for existing condos were flat year over year, while new home prices rose 2.3 percent in San Diego County to $634,000.
Here’s how the home price and sales data broke down in other counties:
• In Los Angeles County, the median price rose 2.1 percent to $597,500, while sales dropped 15.5 percent from a year earlier.
• In Orange County, the median price dropped 0.7 percent to $720,000, while sales fell 22.8 percent.
• In Riverside County, the median price rose 3.9 percent to $389,500, while sales fell 11.1 percent.
• In San Bernardino County, the median price rose 2.1 percent to $336,000, while sales fell 9.5 percent.
• In Ventura County, the median price rose 3.3 percent to $583,750, while sales fell 20.4 percent.
On a regional basis, the median ticked up 1.2 percent from February to March, lower than the typical increase seen between those two months.
Helping drive down the overall median from March 2018 was a greater share of sales in the lower-cost Inland Empire, CoreLogic said. And in the five counties that still saw positive price growth last month, the gains were all smaller than last year.
“It’s slowed down a lot from last year,” said Andrew LePage, an analyst with CoreLogic. “That’s more important than whether we are north or south of zero by one-tenth a percentage point.”
Richard Green, director of the USC Lusk Center for Real Estate, said the shift toward lower-priced homes indicates the softening is focused on the top of the market — a dynamic that recent tax changes may be contributing to.
Regional trends, of course, can mask hot markets, particularly cheaper neighborhoods where higher-income individuals are moving because they’ve been priced out elsewhere.
It’s also possible any downturn in prices will be short lived. The sales data CoreLogic released Friday reflect deals that closed in March, meaning many buyers would’ve entered escrow in February and late January — a slower part of the year.
Mortgage rates were also higher. The drop to 4.2 percent this week from 4.94 percent in November, as reported by Freddie Mac, would have saved $176 on a monthly mortgage payment for a $500,000 house.
Green had previously predicted Southern California prices would fall between 5 percent and 10 percent over the next two years. Now that the Federal Reserve has signaled it won’t raise rates again this year, he doesn’t think the decline will be as steep. But he still expects a price change of anywhere from zero to a 5 percent drop.
“Housing costs got beyond their fundamentals,” he said. “It doesn’t surprise me much that this is happening.”
San Diego Union-Tribune