The appreciation in home values in Southern California continue to be a hot topic in real estate news. The median home price in the six-county region made gains again through June, but constraints created by unattainable affordability and limited inventory have stalled the market in such a way that gains are not as significant. Despite the slowdown, market watchers are excited for this return to “normalcy” in the Southern California housing market.
According to the latest report by DataQuick, a La Jolla-based real estate data company, Southern California homes sold at their slowest pace in June over the last three years. A total of 20,654 new and resale homes and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange Counties last month, which was up 5.6 percent from the 19,556 sales in May, but still trailed June 2013 when sales hit 21,608.
Over the last nine months, home sales in Southern California have fallen on a year-over-year basis, indicating that the price gains that were once fueling the strength of the market are now showing signs of weakness.
Meanwhile, home prices in Southern California reached a median value of $415,000. This was a 1.2 percent gain from May’s median value of $410,000 and a 7.8 percent increase on June 2013. While the gain was significant in establishing a record, post-recession high value, it was also the lowest noted gain since June 2012, when prices rose by 2013 percent.
“Pent-up demand, job growth and still-low mortgage rates continue to put pressure on home prices. But they’re climbing at a much slower pace than a year ago. In many markets price appreciation has slipped into the more sustainable single-digit range, compared with gains exceeding 20 percent this time last year. Why the drop-off? The supply of homes for sale, while still low in an historical context, is higher this year, and the decline in affordability serves as gravity for home prices. People can’t stretch with exotic and risky loans the way they could during the last housing boom,” said Andrew LePage, a DataQuick analyst.
Southern California Home Prices Gains Mark Return to ‘Normalcy’
In looking at this data on the surface, some may be concerned that this slowdown will dramatically affect the housing market, it is in fact helping to reduce the likelihood of another housing bubble burst in this housing microcosm. While the hot real estate market in 2013 set the stage for incredible price growth in 2014, the pace that was previously set in a recovery period simply became unsustainable as the market and economy returned to at least semi-normal conditions.
“Many of the market indicators we track continue to ease toward normalcy,” LePage added. “For example, the use of larger, so-called jumbo loans is up significantly this year, as is the use of adjustable-rate mortgages. Distressed property sales are way down and, related to that, investor and cash purchases are trending lower, toward more normal levels.”
As thing return to normal conditions post-recession, Southern California is one of the most exciting real estate markets to watch and be a part of. If you are interested in Southern California real estate, please contact our team of property experts with any questions you may have.