The pace of home sales in Southern California has been significantly impacted, experiencing a major slowdown in the past year. According to the California Association of Realtors, sales in the region totaled 271,800 homes in the year leading up to August, marking a 32 percent decrease compared to the previous 12 months. This figure is also 38 percent below the 33-year average, making it the slowest period of home purchases since data was first recorded in January 1990.
One of the main reasons for this decline in home sales is the combination of high interest rates and persistently high home prices. With the median home price reaching $859,800 last month, which is the third-highest on record, potential buyers are finding it difficult to enter the market. The rising interest rates, aimed at curbing inflation, further deter buyers and have contributed to the slowdown in sales.
Notably, Southern California is not the only region experiencing a decline in home sales. The Bay Area, Central Valley, and Central Coast have also seen a 30 percent decrease in sales, while the northernmost counties of the state have experienced a 29 percent decrease.
The reduced number of buyers in the market has created a smaller pool of potential purchasers, as many existing homeowners are hesitant to sell their homes and upgrade due to the prospect of higher interest rates. As a result, the supply of homes for sale in California is currently equal to only 2.4 months of sales, which is significantly lower than the 33-year average.
The affordability index for the second quarter of this year shows that only 16 percent of households in California can afford to buy a typical single-family home. Furthermore, mortgage rates have increased over the past year, with the 30-year fixed-rate mortgage averaging 7.1 percent in August, compared to 5.2 percent during the same period a year earlier.
Overall, the slowdown in Southern California home sales can be attributed to a combination of high interest rates, soaring home prices, and a limited supply of affordable homes. As potential buyers are finding it increasingly challenging to enter the market, the real estate landscape in the region continues to face significant challenges.
Sources:
– California Association of Realtors
– Los Angeles Daily News