The price decrease ends an 83-month streak of steadily rising home prices, CoreLogic reported.
By JEFF COLLINS
Southern California home prices dropped $500 in March from the year before, the first annual price drop in the region in seven years, real estate data firm CoreLogic reported Friday, April 26.
But that doesn’t mean the sky is falling for the housing market, economists and market watchers warned.
The main reason for last month’s price dip was fewer sales at the high end of the market, skewing the statistics downward, CoreLogic reported. For example, high-cost Orange County and pricier new homes both made up a smaller proportion of total sales.
Despite a year-long sales slump, Southern California home prices likely will resume rising the rest of the year, albeit at a much slower pace than in the past, economists and market watchers predicted.
“It’s a mix issue — that’s all it is,” said Christopher Thornberg, founding partner of Beacon Economics. “The stock market’s back. Interest rates are down. The economy’s still growing … prices always fall in the face of severe economic circumstances. Right now we don’t have that.”
The median price of a Southern California home, or the price at the midpoint of all sales, was $518,500 last month, down 0.1% from March 2018’s median of $519,000.
That slight decrease marks the end of an 83-month streak of continuously rising home values.
Prices were up in five of the six counties in the region, although gains were smaller than in the past. Orange County, which saw its second price drop in a row, was the sole area with a price decrease.
Sales, meanwhile, continued to be depressed.
CoreLogic reported 17,960 houses, condos and townhomes changed hands in March, down 14.1% from nearly 21,000 in March 2018. Last month’s sales tally was the second-weakest for a March since the economic recovery began in 2009.
Southern California home sales have fallen in 12 of the past 13 months.
Market watchers attribute weaker appreciation and slower sales to fewer buyers able to afford today’s home prices or buyers holding back because they fear the market is at a peak, with price drops around the corner.
“The prices have gotten to the point where there’s speculation about whether they’ll continue to rise as opposed to dropping a little,” said agent Lisa Osterman, director of operations for the Rivera Group, a team with G.E. Dean and Associates in Long Beach. “We’re pushing affordability.”
Home prices have softened across the board as sales slackened. For example, home price gains averaged 6% to 9% last year in Southern California counties, compared to March, when price changes ranged from a dip of -0.7% to a gain of 3.9%.
As a result, more home sellers are cutting their prices. Zillow reported that 15.5% of listings in Los Angeles and Orange counties had price cuts last month, vs. 11.6% in March 2018. In the Inland Empire, 15.9% of sellers reduced asking prices last month, compared with 13.6% a year earlier.
“The elephant in the room is affordability. Not many people can afford $500,000 for a home,” said Ralph McLaughlin, CoreLogic’s deputy chief economist. And in parts of West Los Angeles, “you really can’t get anything for under $1 million. Southern California is expensive.”
Inland Empire broker Nazar Kalayji noted sales in his region are stronger than in coastal counties because homes there are more affordable. He closed on the sale of an Ontario house, for example, that went into escrow in three weeks and ended up closing at the asking price of $550,000. The average time to sell a home has been closer to two months, he said.
“The price point was low to begin with, and that helps,” said Kalayji, an agent with Provident Real Estate in Eastvale.
“Populations in L.A. and Orange counties have just stopped growing. Essentially all the growth is in the Inland Empire,” added Richard Green, director of USC’s Lusk Center for Real Estate, citing 2018 U.S. Census data released recently. “I’m not surprised the overall median dropped. The center of gravity is moving east … because homes are so much cheaper than on the Pacific Ocean.”
Agents, meanwhile have reported the usual seasonal increase in buyer activity, with both sales and prices rebounding from the winter lull that takes hold around the December holidays. Some report a return of bidding wars as escrows rise and the number of homes on the market decreases.
A return to lower mortgage rates also boosted activity. Average rates for the 30-year, fixed-rate loan fell almost a full percentage point from mid-November through March.
“It’s not that we’re having a super robust spring. It’s just better than it was earlier in the year because interest rates came down,” said Steve Thomas of Reports on Housing.
McLaughlin said CoreLogic’s Home Price Index, which is less susceptible to changes in the mix of homes selling, shows home prices falling below the rate of inflation for a few months in some Southern California counties, then picking back up later in the year.
“The Southern California economy doesn’t show any signs of weakening. The national economy doesn’t show any signs of weakening,” McLaughlin said. “You combine a healthy regional economy and a healthy national economy in an environment where homes are hard to find … that’s an indicator prices will continue going up.”
Here is a breakdown of medians and sales totals by county:
- Los Angeles: $597,500, up 2.1%; 5,749, down 15.5%
- Orange: $720,000, down 0.7% (the second-straight month of price drops); 2,531, down 22.8%
- Riverside: $389,500, up 3.9%; 3,347, down 11.1%
- San Bernardino: $336,000, up 2.1%; 2,397, down 9.5%
- San Diego: $555,000, up 0.9%; 3,224, down 8.6%
- Ventura: $583,750, up 3.3%; 712, down 20.4%