Southern California house hunters, challenged by a pandemic, bought the fewest homes in any June on record while record-low mortgage rates helped push the median selling price to an all-time high.
DQ News/CoreLogic reported on Wednesday, July 22 that buyers closed purchases of 17,678 residences — existing and newly built — in June in the six-county region. That’s down 15% in a year as sales fell across SoCal. It was the slowest-selling June in a database that dates to 1988 and was the third consecutive monthly record low for local homebuying.
Stubbornly high unemployment, due to “stay at home” orders designed to limit the coronavirus’ spread, has been a drag on the entire economy, including the home-selling businesses. In addition, many homeowners have chosen not to sell — perhaps fearful of the virus or the fate of their finances. Overall, that cut house hunter’s choices, depressed sales and helped nudge up prices.
Here are five things we learned about the local housing market in June, when homebuying and prices went in opposite directions …
1. June’s balloon
As business limitations were loosened throughout the spring — and the real estate industry better adapted to pandemic restrictions — June’s sales improved 44% from May.
That’s the largest May-to-June gain on record and the eighth-largest one-month jump for any month since 1988.
Recent pending sales stats from Zillow show newly opened escrows in Los Angeles and Orange counties were close to year-ago levels as of July 11, with the Inland Empire up 10%. This suggests closings could be back to normal levels later this summer.
“I would argue that we’ve already seen plenty of evidence of a rebound in closed sales consistent with the uptick in pending sales since mid-April,” said Jordan Levine, the California Association of Realtors’ deputy chief economist. “We still have a long way to go to reach full recovery, but the market certainly clawed back a significant chunk of April and May’s lost ground.”
2. Record prices
June’s successful homebuyer paid more to win what’s been a rare find: Homes to buy.
In mid-July, for example, the number of existing homes listed for sale was down 27% in a year in Los Angeles and Orange counties and down 26% in Riverside and San Bernardino counties, according to Zillow.
That short supply was a key reason why the region’s median selling price hit an all-time high of $555,500 in June, according to DQ News — up 2.9% over 12 months. That broke March’s all-time high of $550,000 as record highs were also set in Los Angeles, Orange and San Diego counties.
“It’s likely true that unemployment has knocked some would-be buyers out of the running, but home shoppers are combing over a very limited set of options,” said Jeff Tucker, a Zillow economist.
Do not forget that cheap money is helping the housing market. Mortgage rates, pushed lower in an attempt to stimulate a depressed economy, have fallen from an average 3.7% in December to 3.2% in June.
And this month the 30-year rate fell below 3% for the first time.
3. Builders benefit
Local builders fared relatively well in June, selling 1,692 new homes, down just 7% in a year. Builders got a $558,000 median price — essentially flat in a year.
Having a supply of unsold new home inventory boosted builders’ share of sales in the region to 9.6% vs. 8.7% a year earlier.
Meanwhile, the resale market for existing homes suffered.
Sales of single-family houses totaled 12,472, down 15% in a year. The median selling price was $590,000 — a 3.7% increase over 12 months. Condos fared worse with 3,514 sales, down 18% over 12 months. Median? $470,000 — a 2.8% increase in a year.
4. Coastal challenge
The sales slump was decidedly deeper by the coast where prices tend to be higher.
Los Angeles County was hit hardest with 5,063 sales, down 24.3% over 12 months. The L.A.median price was $643,000 — up 4% in a year. Ventura County’s 781 sales were down 23.9%. The median of $600,000 — was up 3.5%. Orange County’s 2,447 sales were down 22% as the median price rose 4% to $765,000.
Breaking that trend was San Diego County. Its 3,557 sales were off only 2.4%, the region’s smallest dip, as its median of $600,250 was up 1.7%.
Prices rose sharply in the Inland Empire, the region’s housing bargain.
San Bernardino County had the second-smallest homebuying decline: 2,501 sales, down 3%. It’s SoCal’s cheapest spot with a median of $365,000 — after a 7.4% increase. Riverside County had 3,329 sales, down 12%. Its median of $430,000 — was up 7.8%.
5. Resurgent doubt
Acting fast seems to be common advice in a summertime market with limited choices and folks looking the cash in on cheap mortgages.
As of July, an existing L.A.-O.C. home went into escrow after just 19 days after listing – nine days faster than the same time last year. In the Inland Empire, it took 21 days — 11 days faster than the same time last year.
But the virus still has its say on the economy, and a recent surge in cases, hospitalizations and deaths — and the state’s ensuing U-turn on business reopenings — leaves room for doubt.
“There is certainly concern among some of the potential home buyers about the outcome of the COVID-19 crisis, however there still remains a solid buyer demand which is reflected in the further push of home prices,” said Selma Hepp, deputy chief economist at CoreLogic. Her firm recently forecast what would be the first drop in local home prices in eight years.
“Resurgence of the pandemic in the Southern California region will likely put a damper on future demand and will cause further uncertainty among buyers,” she said.
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