Home values in Southern California were up nearly 16% in November from a year earlier, showing how the market is still ultra-competitive despite a slight slowdown that began to set in several months ago.
Some buyers were on the sidelines of the bidding war after a particularly hectic period last spring, but many others stayed the course, pushing prices to successive new records in recent months.
The region’s six-county median sales price hit an all-time high of $ 693,500 in November, according to data released Thursday by real estate firm DQNews. That’s 0.5% more than the previous month, October, and 15.6% more than in November 2020. Sales were up 1.8% over that period of the previous year.
Some economists expect the home price appreciation to slow to single digits next year, in part because they expect mortgage rates to rise. That’s more likely to happen after the Federal Reserve announced more aggressive plans to fight inflation this past Wednesday, but for now average mortgage interest rates remain in the low 3% range.
In addition to historically low borrowing costs, several other factors continue to drive today’s competitive market with rapidly rising prices. More millennials want to become first-time buyers, and investors are buying more and more homes to rent or sell. Additionally, many white-collar workers did well financially during the pandemic and put some of their burgeoning portfolios of booming stocks into down payments.
Squeezing the market is the supply of homes for sale, which is at historic lows. That causes potential buyers to outbid each other in bidding wars that drive list prices up by even hundreds of thousands of dollars.
Steep price increases are pushing some people to leave their communities in order to buy a home. Many move from Los Angeles to San Bernardino and from San Bernardino directly to other states, such as Arizona.
In November, the largest price increases from the previous year were in the less expensive counties of Riverside and San Bernardino in Southern California, which broke new records for median home prices.
In Los Angeles and Orange counties, November home prices remained below the record levels reached, respectively, in September and October, but were significantly higher than in November 2020.
Many economists and housing policy experts say that Southern California, and the nation as a whole, must build many more houses, both market-priced and subsidized, to make homeownership and rent more affordable. But developers believe restrictive building and zoning rules, particularly in California, have long limited their ability to keep up with demand, and supply chain issues have delayed some projects even further lately.
It remains to be seen if relief for buyers is on the horizon.
In recent months, the market has cooled down a bit, with realtors reporting that bidding wars are less intense, but still common. Competition for homes generally slows in the fall and winter, so it’s difficult to know how much of the slowdown is the result of normal seasonal patterns compared to a market that will be better for long-term buyers.
Selma Hepp, an economist at CoreLogic, expects a further slowdown in sales at this point, noting that transactions generally drop between October and November, but less than normal this year.
The annual median price rise for all of Southern California, 15.6%, is lower than the 20% that was common earlier this year, but is also a few percentage points higher than a recent low of 12.6%, recorded in September.
This slight acceleration in price increases year-over-year in the past two months could indicate that there is a pick-up in price appreciation, but Hepp does not believe that is the case. The rally is likely due to more luxury homes being sold, with the median value increasing slightly, rather than a true price acceleration, he said.
CoreLogic predicts that year-over-year home price gains will slow in 2022, reaching 1.9% in Los Angeles County in November 2022. John Burns Real Estate Consulting also expects a slowdown next year, in the single digits. but high.
A CoreLogic index that seeks a more accurate – albeit lagging – view of prices than the median shows that a slowdown has begun, albeit just barely. According to that index, Los Angeles County prices increased 14.1% in November from a year earlier, compared with a 14.9% year-over-year increase in August.
For now, here is a county breakdown of home prices and sales in November, compared to the prior year, as monitored by DQNews:
- In Los Angeles County, the median sales price increased 12.6% to $ 788,000, and sales grew 7.7%.
- At Orange, the median sales price increased 14.9% to $ 919,000, and sales fell 3.5%.
- In Riverside, the median sales value was up 20.2% to $ 546,750 and sales were up 2.5%.
- In San Bernardino County, the median sales price increased 18.8% to $ 475,000, and sales increased 5.6%.
- In San Diego, the median sales price increased 15.4% to $ 750,000, and sales fell 7%.
- In Ventura County, median sales value was up 14.6% to $ 755,000, and sales were down 0.6%.
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