High prices dent California home sales – where could this happen next?
The median home sale price in Southern California hit a new high in June, and this coincided with the slowest pace of sales in the region in four years, suggesting that high prices are finally starting to dent demand.
Data released Tuesday by CoreLogic showed that a total of 22,706 new and existing houses and condos were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in June 2018. This number is down 1.1% month over month and 11.8% year over year.
In June 2018, sales of newly built homes (detached houses and condos combined) were 47% below the June average since 1988, while June 2018 resales (detached houses and condos combined) were 10.3% below the long-term June average.
The median price for all Southern California homes sold in June 2018 was a record $536,250, up 1.2% month over month and up 7.3% year over year. June 2018 marked the 75th consecutive month in which Southern California experienced a year-over-year increase in the median sale price.
Of note, adjusted for inflation, the median sale price adjusted for inflation in June is 9.5% below its July 2007 peak, which occurred shortly before the housing bubble burst.
“Affordability and inventory constraints are likely the main culprits in last month’s sales slowdown,” CoreLogic analyst Andrew LePage said, adding that “Price growth is only part of the problem for homebuyers trying to get a foothold in Southern California’s housing market. The median price paid for a home last month was up 7.3% year over year, but the principal-and-interest mortgage payment on that median-priced home was up more than twice as much – around 16% – because of the rise in mortgage rates over the past year.”
Across the country, new home sales decreased in June, the Commerce Department reported Wednesday, while inventories built up and home prices dropped, signaling a potential weakness in the housing market.
Purchases of newly built single-family homes fell to an annual rate of 631,000 in June – below the 669,000 economists polled by The Wall Street Journal expected. New home sales represent a small slice of all U.S. home sales and can be choppy month-to-month.
According to LendingTree chief economist Tendayi Kapfidze, the three-month average of new home sales is the preferred measure to follow, to balance out volatility. Kapfidze added, “The three-month average of 646,000 is at the weakest level since February and coupled with weakness in existing home sales may be signaling a peak in home sales.”
The S&P/Case-Shiller home price index showed that home prices in 20 major U.S. metro areas rose 0.8% in April compared to March. Areas with the steepest increases included: Seattle, Las Vegas, and San Francisco. Case-Shiller will release their May home price index on July 31.