The Southern California median home price fell slightly in July from a month earlier, an indication home values may have peaked and will head lower from here.
The six-county region’s median sales price clocked in at $740,000 last month, 1.3% below June’s level, according to data released Wednesday by real estate firm DQNews.
Although the median can fluctuate month to month, July’s numbers mark the third straight month prices failed to increase amid a broad housing slowdown sparked by rising mortgage interest rates.
Home sales are plunging and many sellers are cutting their asking prices to get a deal done.
In July, DQNews data show sales fell nearly 35% from a year earlier and that the median was $20,000, or 2.6%, below the all-time peak this spring.
“You can get a home [for] less than it was four months ago,” said Keith Hernandez, a real estate agent with Realty One Group Synergy in Whittier. “It’s turning into a buyer’s market.”
For those able to afford today’s mortgage rates, Hernandez said they will also find sellers more willing to extend the length of contingencies and pay for repairs than they had been to start 2022.
Don’t expect dramatic discounts, however.
Given strong demand before rates jumped, the median sales price in July remains 8.8% higher than a year earlier. Those year-over-year increases have grown smaller in recent months, but there’s no assurance they’ll turn negative.
Hernandez said he’s seeing more buyers visit open houses as they accept that mortgage rates — currently in the low 5% range — aren’t returning to the sub-3% levels of last year.
Some economists think that by this time next year, Southern California prices will be up from today, but by a smaller amount than they have been rising during the pandemic.
Others, in part because they expect a recession, predict prices will be lower in 2023, with year-over-year declines in the single digits.
Home prices and sales in six Southern California
In July, home prices and sales declined in each of Southern California’s six counties.
Los Angeles County: The median price was $840,000, down 2.3% from June and up 5.7% from last year. Sales dropped 33% from July 2021.
Orange County: The median price was $1,000,000, down 2.4% from June and up 10.5% from last year. Sales dropped 38% from July 2021.
Riverside County: The median price was $579,500, down 2.5% from June and up 10.4% from last year. Sales dropped 32.5% from July 2021.
San Bernardino County: The median price was $515,000, down 1% from June and up 13.2% from last year. Sales dropped 31.5% from July 2021.
Ventura County: The median price was $805,000, down 0.6% from June and up 10% from last year. Sales dropped 35.5% from July 2021.
San Diego County: The median price was $800,000, down 2.9% from June and up 9.5% from last year. Sales dropped 39.8% from July 2021.
Jordan Levine, chief economist with the California Assn. of Realtors, said July’s numbers from DQNews are consistent with a scenario in which the median home price falls around 7% in 2023.
The median is the point where half of homes sold for more and half for less. The 7% figure somewhat overstates the expected drop in overall values, Levine said, since it reflects a sharper decline in luxury home sales, but values of all homes should still fall next year.
What Levine and other economists don’t expect are declines similar to those that occurred after the housing bubble burst in 2008.
That’s because many homeowners don’t like to sell in a slowing market if they don’t have to. What tanked values during the Great Recession was a wave of forced selling through foreclosures.
This time, most economists expect any upcoming recession to be relatively mild, with today’s tighter lending standards limiting foreclosures in the case of a job loss.
For now, the economy is still adding jobs and many homeowners are waiting out the housing slowdown.
Derek Oie, a real estate agent in the Inland Empire, said the number of homeowners who contact his brokerage to sell is about 40% below normal. But he thinks that’ll change as more people accept that the pandemic boom is in the past.
“They will sell at some point,” the founder of Movement Real Estate said. “Just need to hear from multiple sources their home is not worth what they think it is.”