Southern California home buyers have apparently had their fill of bidding wars, home shortages and double-digit price hikes.
For the third straight month, the median home price across the Southland stayed essentially flat, at $382,000. The September data confirmed expert predictions that waning demand would throw a wet blanket over the white-hot market. The stall is owed to multiple factors: buyer fatigue over skyrocketing prices, higher mortgage rates, an expanding supply of homes and a pullback by investors who had swarmed the market.
The cooling has quelled fears of another housing bubble and signals a welcome return to normality, experts say. The California Assn. of Realtors predicts that year-over-year price increases will return to 6% next year, more in line with historical norms.
The rapid run-up in prices peaked in June — with a whopping 28% year-over-year increase in the median price. Sellers dominated the market, often getting multiple bids for more than the asking price amid heavy demand and scarce supply. But sellers listing their homes now are finding a different, more empowered, class of buyers.
Part of the slowdown is seasonal. Buyer demand tends to slow in the fall as some families are hesitant to move with children back in school and the holidays approaching. But experts believe that larger market forces account for much of the decline in demand.
For now, the pullback has made life easier for buyers.
The housing recovery started last year and kicked into overdrive this year as traditional home buyers and investors — including well-heeled Wall Street firms — rushed into the market, eyeing rock-bottom interest rates and beaten-down home prices. Convinced that the housing crash had finally bottomed out, buyers rushed in. Some even placed bids on houses without touring the homes, agents say — an act of desperation as families battled with all-cash investors amid a historic shortage of homes.
Now prices and mortgage rates have climbed to the point where many buyers have checked out.
Sellers tempted by this year’s price appreciation are increasingly testing the market at the same time that demand is waning. That has caused some sellers to reduce their asking prices — a dose of reality, agents say.
Buyers are also demanding more repairs from sellers — and getting them.
The number of listings rose in September from a month earlier in the Inland Empire, as well as Los Angeles, San Diego, Orange and Ventura counties, according to Realtor.com.
Even as listings rose, sales tumbled. A total of 19,112 houses and condos sold in September throughout the six-county region, a 17.1% drop from August, real estate firm DataQuick reported Wednesday, along with the median price figures.
That’s a far sharper decline than the typical seasonal slowing, an indication that buyers have become priced out or frustrated enough to walk away. Since 1988, when DataQuick starting tracking the market, sales have fallen an average of 9.3% from August to September.
The slowing is not just local but national. The pace of monthly price increases slowed in most of the 20 large metros tracked by July’s Standard & Poor’s/Case-Shiller index, the latest data available. July and August were also the worst months this year for sales of new homes nationally, a more timely indicator based on signed contracts.
Higher prices mean that sellers no longer have all-cash investors flooding them with offers. Absentee buyers — mostly investors — purchased 26.3% of Southland homes sold last month, the lowest level since November 2011.
But inventory remains tight, and experts say the housing recovery continues to move forward. September sales were up 7% from a year before. The median sales price was 21.3% higher, although year-over-year gains are easing as well.
Credit Andrew Khouri – LA Times