Southern California home prices near record high despite sales plunge

Southern California’s home-price paradox persisted into July, with a scarcity of listings driving up prices, even as demand and sales fell to one of the lowest levels on record.

Home prices in the region have been rising steadily since January following nine months of drops or zero gains.

But the highest mortgage interest rates in two decades put a damper both on listings and demand, causing year-over-year sales drops for a 20th straight month.

The median price of a Southern California home — or the price at the midpoint of all sales — hit $743,000 in July, rising for the fifth time in six months, real estate data firm CoreLogic reported Tuesday, Aug. 29.

That’s a gain of $73,000 this year and comes within $7,000 of the all-time high of $750,000 reached in April 2022.

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Prices in three of the region’s six counties set records last month. In Orange County, the median price for all houses, townhomes and condos hit an all-time high of $1.075 million in July.

Ventura County’s median hit a record high of $813,000, and San Diego County’s rose to a record $850,000.

Sales, meanwhile, took a dive.

CoreLogic reported that 13,998 homes traded hands, the lowest tally for a July in records dating back 35 years.

For the year as a whole, sales fell to a record low of 97,197 transactions, or 38% below the January through July average.

“While home prices have remained strong in 2023, elevated mortgage rates complicate the situation,” CoreLogic Chief Economist Selma Hepp said in a statement Monday.

Here are highlights from July’s housing market results:

— With most U.S. borrowers paying less than 4% on their current mortgages, they have little incentive to sell their home and buy another at a significantly higher mortgage rate. As a result, active listings in Southern California are hovering close to record lows.

According to Redfin, the region had 41,866 homes on the market last month, the lowest number for a July in more than a decade. Southern California has averaged almost 64,000 homes for sale since March 2012, Redfin numbers show.

“The lack of housing inventory for sale led to a nearly 20% drop in home sales in Southern California and pushed prices up for the region overall,” CoreLogic Principal Economist Molly Boesel said in a statement Monday.

— The average rate for the popular 30-year fixed mortgage rose to 6.8% in July, versus 5.4% a year earlier and 2.9% in July 2021, according to Freddie Mac. (Rates hit 7.2% last week, the highest in 22 years.)

Rising prices and higher rates combined to push the region’s typical monthly house payment to $3,891, up more than $1,600 over the past two years.

— As house payments rose, home shoppers’ buying power shrank.

For example, the buyer of a $743,000 median-priced home last month could have bought an $865,000 home in July 2022 and a $1.17 million home in July 2021 with that same $3,891 mortgage payment. Today’s median-price home shopper lost $122,000 in purchasing power over the past year and more than $430,000 in purchasing power over the past two years.

— Lost purchasing power curbed overall buyer demand. U.S. demand fell 7% in the past year, according to Redfin’s Homebuyer Demand Index, which measures requests for home tours and services from Redfin agents. The Mortgage Banker’s Association reported US mortgage purchase applications were down 30% from last year as of Aug. 18.

— Industry insiders who rely on transaction volume — from termite inspectors to real estate and mortgage brokers — are suffering the worst from decreased sales. Assuming an average commission rate of 5.5%, July’s sales drop resulted in Southern California real estate brokers earning almost $116 million less in commissions compared with July 2022.

Most of the nation’s largest mortgage lenders have instituted at least one round of layoffs this year, according to HousingWire.

— Cash buyers — or those buying without a mortgage — continued to account for more than a fourth of U.S. homebuyers, avoiding the pain of rising mortgage rates, the National Association of Realtors reported this month. Cash buyers accounted for fewer than a fifth of all buyers prior to the pandemic.

Here’s a county-by-county breakdown of median home prices and sales, showing year-over-year percentage changes:

—Los Angeles County’s median decreased 0.6% to $830,000; sales were down 21.4% to 4,418 transactions. January-to-July price change: 9%, vs. an average of 7.9%.

—Orange County’s median rose 7.5% to a record high of $1.075 million; sales were down 8.5% to 2,078 transactions. January-to-July price change: 13%, vs. an average of 7.1%.

—Riverside County’s median fell 2.1% to $551,250; sales were down 21.8% to 2,641 transactions. January-to-July price change: 2%, vs. an average of 5.6%.

—San Bernardino County’s median fell 4.0% to $480,000; sales were down 22.5% to 1,900 transactions. January-to-July price change: 7%, vs. an average of 5.9%.

—San Diego County’s median rose 6.9% to a record high of $850,000; sales were down 12.5% to 2,435 transactions. January-to-July price change: 13%, vs. an average of 6.9%.

—Ventura County’s median rose 0.9% to a record high of $813,000; sales were down 29.7% to 526 transactions. January-to-July price change: 11%, vs. an average of 7.2%.

Southern California News Group business columnist Jonathan Lansner contributed to this report.