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Southern California home prices hit more records as rate hikes fail to slow bidding wars

Southern California’s housing market remains overheated, with home prices hitting all-time highs despite soaring inflation and rising mortgage rates.

With price and mortgage hikes pushing many would-be buyers to the sidelines, sales are sagging. Yet, buyer demand continues to outpace the supply of homes for sale.

“There’s so little supply and so much demand, we’re still getting over the asking price, it doesn’t matter where,” said Tami Fleming, an agent for Westcoe Realtors Inc. in Riverside. “(I had) three houses in a row sell for more than 100 grand over the list price.”

The median price of a Southern California home – or price at the midpoint of all sales – hit a record-high $760,000 in April, up $109,000, or 16.7%, from a year earlier, according to CoreLogic figures released Wednesday, May 18, by data firm DQNews. That’s equivalent to a price hike of almost $2,100 every week for the past year.

Records were set in all six Southern California counties in the DQNews/CoreLogic housing report, with median home prices ranging from $519,000 in San Bernardino County to $1.05 million in Orange County.

April marked the 13th time in the past 15 months that the region’s median hit a record. It was the 21st straight month of annual price gains of 10% or more, vs. a long-term average of 5.5%.

“It’s been a crazy ride,” said Matt Cortez, owner of Good Harbor Real Estate in Huntington Beach. “In my opinion, home prices should only go up 3-4% a year, or just a little bit above inflation. We know (this pace of) home prices is unsustainable. … First-time homebuyers aren’t going to be able to compete with all these cash offers.”

Meanwhile, sales in the region decreased 18.9% to 21,486 transactions last month, DQNews/CoreLogic figures showed. That’s the biggest year-over-year sales drop since the pandemic panic of May 2020, almost two years earlier.

The sales drops reflect affordability challenges caused by the combined impact of higher prices and higher mortgage rates, said Jordan Levine, California Association of Realtors’ chief economist, in a Tuesday press release.

For example, the typical April house payment rose $1,047 a month, or 47%, for a median-priced Southern California home, Freddie Mac figures show.

The market “is moderating … as higher mortgage interest rates and soaring home prices are starting to have an adverse impact on housing demand,” Levine said.

As sales slowed, the number of homes on the market increased slightly after dropping steadily over the past several years, Zillow figures show. Southern California had close to 31,000 homes for sale in April, up from March but still 26% below year-ago levels.

“Inventory rises on the backs of overpriced properties – dogs that aren’t priced like dogs, or houses with inferior locations that were in demand last year,” said Steve Thomas, author of Reports on Housing.

Thomas and others say all this change translates into a market that’s moving toward more balance between buyers and sellers, but not toward a housing crash.

“The sky is not falling,” Thomas said.

Despite rising rates, demand remains robust, said CoreLogic Deputy Chief Economist Selma Hepp. In some cases, rising rates have quickened demand somewhat as buyers rush to lock in rates before they go even higher. Sales also aren’t down as much as they seem, she said. In April 2021, when rates were near all-time lows, sales flourished, hitting the 11th-highest level for that month on record.

“That’s why we are seeing sales declines on a year-over-year basis,” Hepp said. “Strong price growth continues to reflect the imbalance between demand and supply, even if some of the demand has been reduced due to higher rates.”

The slowdown is less apparent in the Inland Empire, where annual sales declines of 14-15% were the smallest in the region.

Fleming, the Riverside agent, speculated that some Inland Empire buyers “have a lot of money in their pocket because they sold their home in L.A. or Orange County, and now they’re buying here.” Fleming said it’s common to see 15 to 20 offers on a home, with one agent in her office recently getting over 50.

“I feel bad for the buyers. For every offer that you accept, you have 15 to 20 that are rejected,” Fleming said. “I hate telling the other agent their buyers didn’t get the house. It actually breaks my heart.”

Here’s a county-by-county breakdown of median home prices and total sales, with percentage changes from last year:

  • Los Angeles County’s median rose 15.3% to $865,000; sales were down 17.1% to 6,999 transactions.
  • Orange County’s median rose 20.6% to $1,050,000; sales were down 27.8% to 3,021 transactions.
  • Riverside County’s median rose 20.4% to $590,000; sales were down 15.1% to 4,027 transactions.
  • San Bernardino County’s median rose 19.9% to $519,000; sales were down 13.7% to 2,874 transactions.
  • San Diego County’s median rose 20.0% to $840,250; sales were down 21.7% to 3,598 transactions.
  • Ventura County’s median rose 15.4% to $815,000; sales were down 20.0% to 967 transactions.
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