Southern California region home sales plunged in November from a year earlier, while year over year prices increased at the slowest pace in three years amid a housing market slowdown, reported Los Angeles Times.
The 12% decline in November sales from a year earlier was the fourth consecutive monthly drop for the eight southern counties, including Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura.
The decline in sales for 2018 is still less pronounced than in 2014. Across the eight counties, year over year, lagging median price is still rising — 3.5% from November 2017, to $522,750, but the trend is starting to plateau.
Some housing markets experts are not convinced that a housing bust is materializing. “The housing market is slowing, but… a slowdown does not mean the sky is falling,” said Aaron Terrazas, an economist with Zillow.
LA Times noted if volatility in the stock market and Washington significantly affects consumer confidence and business investment decisions in 2019, the housing market could be due for significant correction into 2020. However, for now, Terrazas and other economists believe the factors that have led to past housing market crashes in Southern California are not visible.
While some economists do not expect a crash, Bank of America rang the proverbial bell on the broader US real estate market in September, warning existing home sales have peaked, reflecting declining affordability, greater price reductions and deteriorating housing sentiment.
“Call your realtor,” the BofA note proclaimed: “We are calling it: existing home sales have peaked.”
Richard K. Green, director of the USC Lusk Center for Real Estate, told the LA Times, he is very pessimistic about the housing situation in Southern California.
Green warns prices could plunge 5% to 10% into 2020, even with the current level of economic growth. He argues a similar tune that was said in BofA’s recent housing note: the affordability crisis is topping out the market.
Here are other factors pushing homes further out of reach of Americans: “The tax law President Trump signed last year limited the amount of deductions for property tax and mortgage interest. Meanwhile, mortgage rates are elevated. The average rate for a 30-year fixed mortgage was 4.55% this week, according to Freddie Mac. That’s down from a recent high of 4.94%, but it’s far higher than the 3.99% level of a year ago,” LA Times said.
There are signs across Southern California that suggest buyers are holding back.
In Los Angeles County, the median time on the market increased from 41 days in November 2017 to 45 days last month, according to online brokerage Redfin. Moreover, the number of listings with price reductions jumped from 15.9% to 22.2%.
Real estate agents have said buyers have been concern about buying a home as many see the housing market shifting in real time.
“People are sidelining themselves,” said San Fernando Valley real estate agent Jaswant Singh.
On Thursday, more evidence showed a downward shift in the market. Real estate firm CoreLogic reported a 12% decline in November sales, with the annual rise in the median price coming in at the slowest pace since 2015.
Southern California median price slipped 0.4% from October and is now $14,250 below the all-time high reached from summer. Inventory is now flooding the market as S&P CoreLogic Case-Shiller index shows a sharp deceleration in price appreciation.
These are the markings of a turning point in the Southern California real estate market. What comes next you might ask? Well, the start of downward momentum in prices – likely to start in 2019 as the US economy is expected to rapidly slow.