When Christmas lights go up, home sales typically go down as buyers and sellers take a break.
But this past Christmas, Santa delivered a giant lump of coal to Southern California’s housing market, as well as to real estate agents, lenders, escrow officers and anyone else who gets paid by the transaction.
Closed sales this past January — which reflect deals signed during the holiday season — fell to 9,938, the lowest number of transactions in records dating back 35 years, real estate data firm CoreLogic reported Tuesday, Feb. 28.
An average January has about 17,000 closings.
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“It’s always going to be slow (during the holidays). But not that slow,” Compass agent Ken Osborn said Sunday at an open house in Long Beach. “That’s why we go back to the basics. Meeting people. Talking to people. Holding open houses.”
January’s sales tally was down 42.8% from January 2022, when homes were selling twice as fast. Sales have dropped from year-ago levels for 14 consecutive months.
Prices also have been dropping on a monthly basis, falling for eight straight months, CoreLogic figures show.
The median price of a Southern California home — or the price at the midpoint of all sales — fell to $670,000 in January, CoreLogic reported.
That’s down $90,000 from the price peak reached last spring, and down $500 from January 2022.
It was the first year-over-year price drop in almost four years.
A year ago, prices were up almost 13%, and most sellers were getting more than they were asking. Now, most homes are selling below their asking price and averaging more than eight weeks on the market, Redfin numbers show.
The doubling of mortgage rates last year was the key culprit for this housing turnaround.
Even though home prices are lower, the monthly mortgage payment increased 38% over the past year thanks to higher interest rates.
“Southern California housing markets continue to be challenged by high mortgage rates and eroded affordability,” said CoreLogic Chief Economist Selma Hepp. “The challenge is further exacerbated by a standoff between buyers and sellers, with buyers expecting better deals and sellers still expecting to receive last year’s prices.”
It’s all about mortgage rates in the housing market, Reports On Housing author Steve Thomas wrote in his latest report. For example, a buyer able to afford a $1.02 million home when rates were 3.25% could only afford a $741,000 home when rates hit 6%.
“Demand diminishes due to affordability constraints, and any sellers opt to hunker down as they enjoy their underlying, locked-in, low fixed-rate mortgages,” he said.
Meanwhile, the real estate and finance industries have been hard hit, with layoffs, mergers and even bankruptcies affecting brokerages and lenders. Figures from the Mortgage Bankers Association’s purchase mortgage index show loan volume fell 41% in the year ending in January.
“Anytime you got a person working on a commission basis, you feel the hit,” said Debi Peters, an Irvine escrow officer and board member of the California Escrow Association.
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“Yeah, those numbers are scary,” added Dane McClain, a Newport Beach escrow company vice president. “I have seen slow January’s before, but never, never to this actual loss of where we’re at right now.”
Business has been slower than in the past few years, but it’s starting to pick up this month, said Martin Scott, a Signal Hill loan officer for US Bank. Even though there are fewer buyers, prices would be even lower if there were more homes for sale. Inventory levels were 31% below average in January, according to Redfin.
“That’s what’s sustaining the market,” Scott said.
Redlands-based agent Will Quanstrom said 2023 so far has been his best year ever with six sales already. But his experience isn’t typical, he said.
“I know it was a lot different for everyone else,” Quanstrom said. “We had one agent in the office pick up a second job.”
Reports On Housing figures show the number of pending sales contracts signed by the middle of February were down 41% from a year ago.
One shopper, Joshua Adrian of Newport Beach, said the market has improved a little bit for buyers as prices came down. But not enough.
“The prices are lower, but the interest rates are up,” said Adrian, a tech company owner. “Unless you’re a pure cash buyer, it’s almost a wash.”
On a county-by-county basis, sales were down in all six counties. Three of the counties — Los Angeles, San Bernardino and Ventura — also had year-over-year price drops. Here’s a breakdown by county, showing one-year percentage changes:
— Los Angeles County’s median fell 2.9% to $763,000; sales were down 43.6% to 3,097 transactions.
— Orange County’s median was $950,000, unchanged from the year before; sales were down 41.1% to 1,291 transactions.
— Riverside County’s median rose 0.8% to $539,250; sales were down 43.3% to 2,069 transactions.
— San Bernardino County’s median fell 1.1% to $450,000; sales were down 46.5% to 1,457 transactions.
— San Diego County’s median rose 0.1% to $750,750; sales were down 37.5% to 1,682 transactions.
— Ventura County’s median fell 2.1% to $725,000; sales were down 46.4% to 342 transactions.
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